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.

March 14, 2019

When you file for bankruptcy, you're allowed to use bankruptcy exemptions to protect property you'll need to work and maintain a home, such as a modest car, household belongings, clothing, and a small number of tools for your business or profession.

A wildcard exemption comes in handy because it allows you to save property that you wouldn't be able to protect otherwise. For instance, you might use it on sentimental yet valuable property, such as your grandmother's player piano, or your childhood collection of baseball cards.

In this article, you'll learn how the wildcard exemption works to save the property that's important to you.

(Not sure which bankruptcy chapter to file? Start with What Are the Differences Between Chapter 7 and Chapter 13 Bankruptcy?)

How Bankruptcy Exemptions Work

Each state has a set of state exemptions. Some states provide a choice between the state and the federal exemptions, but you can't mix and match between the sets.

Most exemptions protect particular property. For example, if your state has a motor vehicle exemption, you'll be able to use the amount of that exemption towards your car or another motor vehicle, but not another asset type. For instance, you couldn't use your leftover motor vehicle exemption to exempt money in your bank account.

Here are a few federal bankruptcy exemptions (check your state exemption laws):

  • $25,150 of equity in a residence (11 U.S.C. § 522(d)(1))
  • $4,000 in a car or motorcycle (11 U.S.C. § 522(d)(2))
  • $13,400 total in household goods (furnishings, appliances, bedding, clothing, garden tools, and the like) with a cap of $625 per item (11 U.S.C. § 522(d)(3)), and
  • $2,525 for tools that you need in your business or profession. (11 U.S.C. § 522(d)(6).) (These amounts are valid as of April 1, 2019, and will change in 2022.)

What will happen to property you can't exempt? It will depend on the bankruptcy chapter you file.

  • Chapter 7 bankruptcy. You'd typically be required to relinquish the property to the Chapter 7 bankruptcy trustee—the person responsible for overseeing your case—to be sold for the benefit of your creditors.
  • Chapter 13 bankruptcy. You can keep all of your property, but you'll have to pay at least the value of your nonexempt property in your three- to five-year Chapter 13 repayment plan.

(Find out more in Bankruptcy Exemptions.)

A Wildcard Exemption Lets You Choose the Property You Protect

A true wildcard exemption isn't limited to a specific property type. You can use it to exempt any property of your choosing. For instance, you'll decide whether to use it on your car, money in the bank, expensive artwork, or any other asset you own. You can also split it between multiple assets, or combine it with other exemptions.

Example. Your state has a $3,000 motor vehicle exemption and a $5,000 wildcard exemption. If you own two cars worth a total of $8,000, you can use the motor vehicle exemption to exempt $3,000 of one car, and the wildcard exemption to exempt the remaining $5,000 in equity. Without the wildcard, the Chapter 7 trustee would likely sell both vehicles, pay you the $3,000 exemption amount, and use the balance to pay creditors. In a Chapter 13 case, you would have to pay for the nonexempt portion in your repayment plan.

How Much Is the Wildcard Exemption?

Not all states have wildcard exemptions, but for those that do, the value will vary. You'll find a wildcard in the federal bankruptcy exemption scheme, too.

  • Federal wildcard exemption. As of April 1, 2019, the federal wildcard exemption is $1,325 plus up to $12,575 of any unused portion of the federal homestead exemption. (If you're married and filing a joint bankruptcy, you can double these amounts.) Residents of Alaska, Arkansas, Connecticut, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, Wisconsin, and the District of Columbia can use the federal bankruptcy exemptions instead of your state exemptions. Residents of other states cannot.
  • State wildcard exemptions. You'll need to check your state exemption statutes to determine whether your state has a wildcard exemption and if it does, how much you can protect. Some states have additional rules, too. For instance, you might be able to apply the unused portion of your homestead to any property (which essentially acts as a wildcard exemption).

Talk to a Bankruptcy Attorney

One of the most costly bankruptcy mistakes you can make is not understanding what will happen to your property. If you aren't sure, you should consult with a bankruptcy lawyer.

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