What Is Exempt Property?

Learn how the law allows you to protect certain property from creditors.

Exemption laws allow you to keep a portion of your property away from your creditors when you can’t pay a bill. Each state chooses the assets that its residents can exempt (protect) if a creditor attempts to collect a debt or if you file for bankruptcy. The protected property is known as “exempt property.” You’ll find a listing of exempt property in your state’s exemption statutes.

In general, exempt property will include the things that an individual will need to maintain a job and household. Here are a few examples of commonly-included assets.

  • Homestead exemption. A particular amount of equity in your primary residence.
  • Household goods and furnishings. Furniture, dishes, bedding, garden tools, and the like.
  • Wearing apparel. Clothing for yourself and your family.
  • Jewelry. An amount that covers a standard wedding set.
  • Motor vehicle. A small amount of equity in a vehicle, such as an automobile or motorcycle.
  • Tools of the trade. The items that you need in your business or profession.
  • ERISA-qualified retirement plan. Tax-exempt retirement plans are protected from creditors.

Not all states offer all of these protections. However, most provide additional exemptions, too. The type, amount, and conditions associated with each exemption varies by state.

(To find out what you’ll be able to keep, go to Nolo’s Bankruptcy Exemptions by State topic page.)

Some states give residents an additional choice. Specifically, they allow residents to choose between the state exemption list and the federal bankruptcy exemptions. The list that will be best for you will depend on the type of property that you own.

Although you can’t mix and match the two lists (you must choose one or the other), if you use your state bankruptcy exemptions, you’ll be able to use the federal nonbankruptcy exemptions, as well.

(You can find out more by reading the articles on the Bankruptcy Exemptions topic page.)

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