BANKRUPTCY EXEMPTIONS – KEEP YOUR THINGS

One question that I am commonly asked is, “Will I lose any of my property or assets if I file a bankruptcy?” Almost always, the answer is, “No! You’ll be able to keep your home, vehicles, and all of your personal property.”

Under the Bankruptcy Code, there are many bankruptcy exemptions, which allow people to exempt (“keep”) their home and personal property such as vehicles, home furnishings, clothing, jewelry, and retirement accounts, ect. Exempt assets are not part of the bankruptcy estate; therefore, claiming bankruptcy exemptions is a very important part of the bankruptcy case.

Bankruptcy exemptions are found in 11 U.S.C. §522 and can be used by anyone who is qualified to file bankruptcy in a state that allows its residents to use the federal exemptions, or by anyone who doesn’t qualify under residency requirements to use state exemptions. Pennsylvania is one of many states that will allow you to use the federal exemptions, if you so choose.

The value allowed under each bankruptcy exemption is updated for inflation every 3 years, ending on April 1. The below-mentioned federal bankruptcy exemptions represent the current dollar amounts that are allowed to be taken for each of the listed types of property.

If you are married and filing jointly, you may double all of the federal bankruptcy exemptions. For example, you may claim a homestead exemption of $47,350 (which is double the listed homestead exemption amount of $23,675).

All code references are to 11 U.S.C. (Title 11 of the United States Code).

Homestead

522(d)(1), (5) – Real property, including mobile homes and co-ops, or burial plots up to $23,675. Unused portion of homestead, up to $11,850 may be used for other property.

Personal Property

522(d)(2) – Motor vehicle up to $3,775.

522(d)(3) – Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $600 per item, and up to $12,625 total.

522(d)(4) – Jewelry up to $1,600.

522(d)(9) – Health aids.

522(d)(11)(B) – Wrongful death recovery for person you depended upon.

522(d)(11)(D) – Personal injury recovery up to $23,675 except for pain and suffering or for pecuniary loss.

522(d)(11)(E) – Lost earnings payments.

Pensions

522(b)(3)(C) – Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).

522(b)(3)(C)(n) – IRAS and Roth IRAs to $1,283,025.

Public Benefits

522(d)(10)(A) – Public assistance, Social Security, Veteran’s benefits, Unemployment Compensation.

522(d)(11)(A) – Crime victim’s compensation.

Tools of Trade

522(d)(6) – Implements, books and tools of trade, up to $2,375.

Alimony and Child Support

522(d)(10)(D) – Alimony and child support needed for support.

Insurance

522(d)(7) – Unmatured life insurance policy except credit insurance.

522(d)(8) – Life insurance policy with loan value up to $12,625.

522(d)(10)( C ) – Disability, unemployment or illness benefits.

522(d)(11)( C ) – Life insurance payments for a person you depended on, which you need for support.

Wildcard

522(d)(5) – $1,250 of any property, and unused portion of homestead up to $11,850.

*If a dollar amount does not accompany a listed piece of property, the entire value of the property is exempt.