The Wildcard Exemption in Bankruptcy

Federal law and some states offer a "wildcard" exemption in Bankruptcy that can protect any property you choose from creditors.

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The wildcard exemption, which is found in the federal bankruptcy exemptions and many state exemption systems, can help you save property that you would not otherwise be able to protect in bankruptcy. Exemptions are designed to protect come of your property and assets when you file for bankruptcy. Which exemptions are available to you depends on which state you live in.

Read on to find out how the wildcard exemption works and how it can help you.

(To learn more about exemptions, including which ones you can use and the specific role they play in Chapter 7 and Chapter 13 bankruptcy, see our Bankruptcy Exemptions area.)

What Is the Wildcard Exemption?

Most exemptions in bankruptcy are specific to a type of property and can only be used to protect that property. The wildcard exemption  is different -- it can be used to exempt any type of property. 

For example, if your state has a motor vehicle exemption then you can only use the amount of that exemption towards your car or other motor vehicle.  If you have no car or the exemption amount is much greater than the value of your car, you cannot apply that exemption towards any other type of asset.  So you could not use your leftover motor vehicle exemption to exempt money in your bank account. 

With the wildcard exemption, you are not limited to any specific type of property. You can use it to save your car, money in the bank, expensive artwork, or any other asset you own.

How Much Is My Wildcard Exemption?

Depending on which state you live in, you may or may not be able to take advantage of a wildcard exemption. 

Federal wildcard exemption. The federal wildcard exemption is currently $1,225 plus any unused portion of the federal homestead exemption up to $12,250 (if you are married and filing a joint bankruptcy these amounts are doubled).  So for a single filer who does not have any home equity, the federal wildcard exemption is $12,725.  However, whether you can use the federal wildcard exemption depends on your state. Some states allow you to use the federal bankruptcy exemptions instead of your state exemptions, other states do not. 

State wildcard exemptions. Many states also have wildcard exemptions. The amount varies from state to state. Others allow you to apply the unused portion of your homestead to any type of property (this is essentially a wildcard exemption). And some states do not have a wildcard exemption at all. (To find your state's wildcard exemption, visit the Bankruptcy Exemptions section of Nolo's Bankruptcy Site.)

How Does the Wildcard Exemption Work?

You use the wildcard exemption just like your other exemptions to protect the equity in your various assets.  However, since the wildcard exemption is not limited to a particular type of property you can use it on any asset and you can combine it with other exemptions.

For example, let’s say that your state has a $3,000 motor vehicle exemption and a $5,000 wildcard exemption.  If you own two cars, both worth $4,000 each, then you can use the motor vehicle exemption to exempt $3,000 of one car.  If the wildcard exemption did not exist, then you would be left with $1,000 worth of nonexempt equity in one car and another car that is completely nonexempt.  In this case, the trustee would likely sell both of your cars to pay your creditors (after paying you $3,000 for your exemption).  However, with the benefit of the wildcard exemption, you can use $1,000 of it to fully exempt your first car and use the rest to fully exempt your second car. In this way, you can keep both cars.

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