Bankruptcy Exemptions

Posted: 25 Jul 2008 | Categories: Bankruptcy

Bankruptcy exemptions are laws written by both the state and federal government to ensure that a debtor’s assets are protected in order to ensure a fresh start after filing for bankruptcy. When filing for bankruptcy, debtors are required to fill out quite a few papers. Among these is the Schedule C form. In this form, a debtor will list the property that he is claiming to be exempt.

The laws that govern bankruptcy exemptions are numerous, but a debtor has two options: choose to follow state exemption laws or federal exemption laws. However, only 15 states and Washington D.C. allow a debtor to choose between federal or state exemption laws. These states are: Arkansas, Connecticut, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.

Defining what kind of property is exempt under federal law

Again, only the 15 states mentioned before and Washington D.C. allow a debtor to use federal exemption laws. Also note that these exemptions can be doubled if a debtor is filing with his spouse.

Real property

Real property, co-op or mobile home up to $16,150.00

Personal Property

Animals, appliances, books, clothing, crops, furnishings, household goods, and musical instruments: up to $425.00 per item, $8,625.00 total.

Vehicles: up to $2,950.00

Jewelry: up to $1,225.00

Tools of trade, i.e. work tools: up to $1,625.00

Health Aides: unlimited

Burial plots: up to $16,500.00

All other property: up to $8,075.00 of ?/p>

Wages and Pensions, Recoveries and Benefits

Personal Injury Funds: up to $16,500.00

Wages: none

Wrongful Death Funds: only amount needed for continuing support

Lost earnings: unlimited

Retirement Benefits: only amount needed for continuing support

Alimony: only amount needed for continuing support

Unemployment Compensation: unlimited

Veteran’s benefits: unlimited

Crime Victim’s Compensation: unlimited

Social Security and Public Assistance: unlimited?/p>

Life and health Insurance

Disability: unlimited

Unemployment compensation: unlimited

Life insurance policy loan and/or dividends or interest: up to $8,625.00

Life insurance proceeds: only amount needed for support

Education Funds

Education funds must be placed in an educational retirement account or a State tuition program at least one year before the bankruptcy filing.?However, there are limits established by the Internal Revenue Code.

Which state exemption laws to use:

The rule of thumb is that if you have lived in a state for 730 days (2 years), then use state exemption laws. However, if you have not lived in a single state within the past previous 2 years, use the state where the majority of the 180 day period preceding the 2 year period was spent.

Daniel Cho is a financial writer for Select Debt Relief specializing in consumer debt and alternatives to bankruptcy. Currently he studies Business and Theatre Performances at the University of California at Berkeley where he is an active member of the Lambda Phi Epsilon Brotherhood- Delta Chapter, and Theatre Rice- Modern Asian American Theatre Performances.

Article Author :Daniel_Cho