In addition to the bankruptcy exemptions, you may be able to take advantage of certain other exemptions found outside the bankruptcy code to help you protect your property when you file for bankruptcy.  Since these exemptions exist outside the bankruptcy code, they are called the federal nonbankruptcy exemptions.  Read on to learn what the federal nonbankruptcy exemptions are and how they can help you save your assets in bankruptcy.

How Are Nonbankruptcy Exemptions Different From Bankruptcy Exemptions?

The federal nonbankruptcy exemptions are just like the bankruptcy exemptions in that they help you to prevent certain assets from being taken by the bankruptcy trustee and sold to pay your creditors. But unlike bankruptcy exemptions, they are harder to qualify for and use because they usually require you to be part of a certain occupation or other specialized group.   

Do I Qualify To Use The Federal Nonbankruptcy Exemptions?

You can only use the federal nonbankruptcy exemptions if you choose to use your state’s exemption system in bankruptcy (federal nonbankruptcy exemptions are allowed in addition to your state exemptions).  So the first step in determining if you are allowed to use the federal nonbankruptcy exemptions is to find out whether your state allows you to choose between the federal bankruptcy exemptions and its own state exemption system. 

Many states actually require you to use their own exemption laws and disallow the use of federal bankruptcy exemptions altogether.  So if you live in one of these states, then you know you can use the federal nonbankruptcy exemptions.  If your state gives you a choice between its state exemptions and the federal exemptions and you choose the federal exemptions, then you may not use the federal nonbankruptcy exemptions.  Also, even if you are using your state exemption system, you must still satisfy the specialized eligibility requirements under each nonbankruptcy exemption you wish to use.

What Assets Are Exempt Under The Federal Nonbankruptcy Exemptions?

Below are some of the most important federal nonbankruptcy exemptions.  Unless specified in the exemption, there is no dollar limit to how much you can exempt.

Retirement Benefits

Your retirement benefits are fully exempt if you are one of the following:

• Civil, foreign, or military service employee.
• Railroad worker.
• CIA employee.
• Veteran.
• Military Medal of Honor Roll.
• Social Security benefit recipient.

Death and Disability Benefits

Your death and disability benefits are fully exempt if you are a longshoreman, harbor worker, or government employee.  Also, if you have received benefits for risk, hazard, injury, or death resulting from war, that compensation is exempt.

Survivor’s Benefits

Survivor’s benefits are also fully exempt for lighthouse workers, certain judicial employees (judges, center directors, and Supreme Court Chief Justice administrative assistants), and those in the military service. 

Miscellaneous Nonbankruptcy Exemptions

• Military group life insurance.
• Deposits to savings accounts by military while on permanent duty outside the U.S.
• 75% of earned but unpaid wages or 30 times the federal minimum hourly wage, whichever is greater.  (Judges have discretion to grant more, usually for low income debtors)
• Indian lands and homestead sale or lease proceeds.
• Klamath Indian benefits for Indians living in Oregon.
• Railroad worker unemployment benefits.
• Seamen’s clothing.
• Debts incurred by a seaman while on a voyage.
• Wages of a seaman except if used for spousal or child support.

Learn more about bankruptcy in Nolo's Bankruptcy Center.