Bankruptcy exemptions play a big role during
bankruptcy proceedings and they have different effects on each chapter filed. In
short, they help you protect property and assets, while helping to keep
repayment plan payments affordable. Each state has exemptions at different
levels and they are available at the federal level to provide additional
If you want to know how you are able to keep possessions such as your house,
vehicle, jewelry, bank accounts, retirement funds, and other assets, consider
the following points on
how exemptions help protect such items from creditors.
- Some state exemptions may provide protection up to a certain amount. A
federal exemption may be able to provide full protection or help protect
something that was not fully covered at the state level (also referred
to as a wildcard exemption).
- Some states may not have federal exemptions available to them, but instead
have what is called federal non-bankruptcy exemptions. It’s an option
available outside of the bankruptcy code that can help protect assets
for those in unique situations.
- There are specific exemptions available by the state to help protect assets
such as your home and vehicle. For instance, equity in your home may be
protected using the homestead exemption. Your vehicle may be protected
using the motor vehicle exemption.
- Most often you have to use one set of exemptions either at the federal
level or the state level. You may have the option to choose but qualifications
may depend on how long you have been a resident of the state.
- Exemptions help determine if your property can be exempt from creditors. In
Chapter 7 bankruptcy, if property is considered exempt it cannot be used to satisfy creditors. In
Chapter 13 bankruptcy exemptions may help determine how much you pay to creditors, but they
help keep payments low.