Federal Bankruptcy Exemptions

During bankruptcy proceedings, it is common to hand over rights to property and assets for liquidation; however, depending on what state you live in, you may be exempt from handing over certain items. It’s important to know what the federal bankruptcy rules of exemption are for your state so that as you go through the bankruptcy proceedings you’ll know what you do and don’t have to hand over for liquidation.

What Does Liquidation Mean?

In bankruptcy proceedings, liquidation simply means that your property and assets are sold by the bankruptcy trustee in order to pay off your creditors for the debts that you have been cleared of. Usually, most of your property is up for grabs in this process; however, in certain states, some items are not eligible to be sold for liquidation.

Property Exemptions / States of Exemption

The following states follow special federal bankruptcy rules of exemption: Arkansas, Connecticut, District of Columbia, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.

Some of their exemptions include:

  • Real Property: Real property, co-op or mobile home up to $16.150.
  • Personal Property: Health aides; animals, appliances, books, clothing, crops, furnishings, household goods and musical instruments up to $425 each and totaling up to $8,625; burial plots; jewelry up to $1,075; motor vehicle up to $2,575; personal injury recoveries up to $16,050 (not including pain and suffering or pecuniary loss); wrongful death recoveries – amount needed for support; lost earnings payment – amount needed for support; implements, books and tools of trade up to $1,625.
  • Insurance / Annuities: life insurance proceeds; disability/illness/unemployment benefits.
  • Pensions / Retirement Plans: Retirement benefits – amount needed for support.
  • Public Benefits / Entitlements: Social Security – unlimited amount; unemployment compensation – unlimited amount; public assistance – unlimited amount; veteran’s benefits – unlimited amount.
  • Miscellaneous: Alimony and child support – amount needed for support; any property up to $850; any property up to $8,075 of the unused portion of real estate exemption.
Make Your Money Work Better for You

It’s good to note that there are no exemptions for wages.

If your state is not listed above, it is suggested that you check with your state specifically to determine what property is exempt. However, if the above federal bankruptcy rules of exemption apply to you then your knowledge in your bankruptcy proceedings will take you a long way.


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