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 you wouldn't ordinarily be able to protect. 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:
Keep in mind that each state has a set of state exemptions, but your state might allow you to choose the federal bankruptcy exemptions instead. Reviewing our exemptions by state chart will help you figure out your options.
Most exemptions protect particular property. For example, if your state has a motor vehicle exemption, you'll be able to use the exemption amount to protect 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.
To give you an idea about the property types you'll likely be able to protect, we've listed a few of the federal bankruptcy exemptions. Just remember that not all filers can use federal exemptions. You'll need to check your state exemption laws to determine your exemption options. (These exemption amounts are valid from April 1, 2022, through March 31, 2025.)
You'll use the same exemptions for Chapters 7 or 13, but what happens to property you can't exempt with a bankruptcy exemption depends on the bankruptcy chapter you file.
Find out more about keeping property in bankruptcy using exemptions.
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 $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.
Not all states have wildcard exemptions, but the value will vary for those who do. You'll also find a wildcard in the federal bankruptcy exemptions.
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.
Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated April 1, 2022