If you're filing a bankruptcy and decide that you want to liquidate your property using state property exemptions, you will qualify for specific federal non-bankruptcy exemptions. However, it's good to know that federal non-bankruptcy exemptions and federal bankruptcy exemptions cannot be used simultaneously - you must use one or the other. Let's take a closer look at what this means.
Exemptions
When filing a bankruptcy under Chapter 7, a process called liquidation occurs to pay the creditors the debts you owe them. This allows you to be clear and free of any obligation to pay them back out-of-pocket. However, depending on your state, some of your property and assets may be exempt from liquidation.
You may decide to usefederal bankruptcy exemptions for liquidation. However, some prefer to go with their specificstate's exemptions, which means the bankruptcy trustee will use federal non-bankruptcy exemptions to determine what will not be included in the liquidation.
List of Federal Non-Bankruptcy Exemptions
Here is a list of items that make the list:
- Personal Property: Savings account deposits during permanent military duty outside the US - unlimited amount; seaman's clothing - unlimited amount.
- Wages: Up to 75% of wages earned but unpaid can be exempt; seaman wages while on voyage - unlimited amount.
- Pensions: Social Security; veteran's benefits; veteran's Medal of Honor benefits; military honor roll pensions; military service employees; civil service employees; foreign service. All pensions are exempt for unlimited amounts.
- Insurance: Railroad workers unemployment insurance - unlimited amount.
- Benefits: Military service survivor benefits; judges survivor benefits; government employee death and disability benefits; U.S. court director's survivor benefits; war hazard death or injury compensation; military survivor benefits; judicial center director's survivor benefits; Supreme Court Chief Justice Administrator's survivor benefits; lighthouse workers survivor benefits; longshoremen death and disability benefits. All benefits are exempt for unlimited amounts.
- Miscellaneous: Klamath Indian tribe benefits - unlimited amount.
It's good to know that no real estate is exempt under these circumstances.
If you have the option to choose, it's good to compare the list of federal non-bankruptcy exemptions to the standard federal bankruptcy exemption list. This will help the liquidation process that occurs after filing a bankruptcy run that much smoother.
