Federal law sets forth a list of exemptions to be used in bankruptcy, called the federal bankruptcy exemptions. Bankruptcy exemptions allow you to keep a certain amount of property in a Chapter 7 bankruptcy and help determine how much you must pay certain creditors in Chapter 13 bankruptcy. (To learn how exemptions work, see our Bankruptcy Exemptions area.)

Learn whether you can use the federal bankruptcy exemptions, and if you can, what property is exempted. 

Who Can Use the Federal Bankruptcy Exemptions?

The answer depends on which state you live in.  Every state has its own unique set of bankruptcy exemptions.  In contrast, the federal bankruptcy exemptions are found in the federal bankruptcy code and do not differ from state to state. Most states require bankruptcy filers to use the state exemptions. Some states allow debtors to choose between the state exemptions or the federal bankruptcy exemptions. If you have a choice, you must one or the other -- you cannot mix and match between the lists of state and federal exemptions.

Currently, if you live in one of the following states, you can choose to use the federal bankruptcy exemptions.  If not, then you are limited to your state’s exemptions.  These states include Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.

What Property Do the Federal Bankruptcy Exemptions Protect?

The following are some of the current federal exemption amounts.  The amounts are adjusted every three years in April and the last adjustment occurred in 2010.  If there is no dollar amount stated, you can exempt the entire asset regardless of its value.  Also, if you are a married couple filing jointly, you can double the exemption amounts listed below.

Federal Homestead Exemption

The homestead exemption is designed to protect the equity in your principal place of residence.  Keep in mind that you cannot use the homestead exemption on your investment or rental properties.  You can currently protect $21,625 of equity in your home under the federal exemptions. (To learn how this important exemption plays a role in your Chapter 7 or Chapter 13 bankruptcy, see The Homestead Exemption in Bankruptcy.)

Personal Property Exemptions

Personal property includes all property you have other than real estate. The following are some of the most important federal personal property exemptions:

• $3,450 for your motor vehicle
• $1,450 for jewelry
• $11,525 aggregate value ($550 per individual item) on household goods, furnishings and appliances, clothes, books, animals, crops, or musical instruments
• $2,175 for tools of trade including implements and books
• Health aids
• Life insurance policies that have not matured except credit life insurance, and
• $11,525 in loan value of life insurance policy.

Exemptions Relating to Support or Benefits

• Domestic maintenance such as alimony or child support reasonably necessary for your support.
• Life insurance payments that you need for support under policy of someone you were a dependent of.
• Social security, unemployment benefits and compensation, veteran’s benefits, public assistance, and disability or illness benefits.

Exemptions on Recovery Received Due to Injury

• $21,625 for personal injury except pain and suffering or pecuniary loss
• award for loss of future earnings needed for support
• recovery for wrongful death of person you were a dependent of needed for support, and
• compensation received for being a crime victim.

Wildcard Exemption

You can apply the federal wildcard exemption to any property you own.  Currently you are allowed $1,150 plus $10,825 of any unused portion of your homestead exemption to exempt any type of property. (To learn more, see our article on the Wildcard Exemption).

Retirement Account Exemptions

Retirement accounts that are exempt from taxation, which usually include most genuine non-fraudulent retirement accounts, are fully exempt. However there is a cap of $1,171,650 on IRAs and Roth IRAs. (To learn more, see Your Retirement Plan in Bankruptcy.)