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Exemptions
LAWDOG is intended to assist in the understanding of basic concepts. See Disclaimer. Always obtain legal advice from legal professionals.
State And/Or Federal Exemptions
Federal Exemptions
Liability of Exempt Property
Debtor May Remove Certain Liens Which Impair Exemptions
State And/Or Federal Exemptions
The Bankruptcy Code provides, to individual debtors only, certain property exemptions, which permit the debtor to retain some basic assets to facilitate a fresh start. The Bankruptcy Code allows an individual debtor to take exemptions under either state laws or federal laws, but not both. However, some states have specifically not authorized the federal bankruptcy exemptions, as permitted by Section 522 (b). In those states, individual debtors may be limited to the exemptions allowed under the laws of their state, and other non-bankruptcy federal laws. If the individual debtor fails to make the election, federal exemptions would apply, but only in those states which permit their use. Partnerships or corporations are not qualified for these exemptions. A waiver of any exemption in favor of a creditor is generally unenforceable. See Section 522 (b), reproduced here for illustration purposes only.
An individual debtor or dependent may claim federal exemptions pursuant to Section 522 (d), in those states which permit use of these exemptions. These Federal exemptions include up to $15,000 in real or personal property that is used as a residence; up to a value of $2,400 in one motor vehicle; up to $400 in value in any particular item, or $8,000 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for personal, family or household use.
There are many other items which may be claimed as exempt under the Federal Exemptions, where their use is permitted. These include jewelry, up to $1,500 in value in any implements, professional books, or tools, used in trade; certain life insurance, certain retirement benefits, a right to receive a payment, not to exceed $15,000, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual to whom the debtor is a dependent, and many others. See Section 522 (d), reproduced here for illustration purposes only. Actual cases should be discussed with your actual legal advisor or legal department.
Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencement of the case, except certain "nondischargeable" debts under Section 523, and a debt secured by a lien that is not avoided or void under certain sections of the Bankruptcy Act. The exempt property may also be liable for a tax lien, notice of which is properly filed, or certain debts specified in section 523(a)(4) or 523(a)(6) concerning certain Federal depository institution liquidating agents. See Section 522 (c), reproduced here for illustration purposes only.
Debtor May Remove Certain Liens Which Impair Exemptions
It is possible for the debtor to avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled, if such lien is a judicial lien, for other than certain alimony or support, or if such lien is a nonpossessory, nonpurchase-money security interest in household furnishings and goods, or certain tools of the trade of debtor or a dependent. See Section 522 (f), reproduced here for illustration purposes only.
The debtor must file a list of property that the debtor claims as exempt. If the debtor does not file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estate on behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list may be exempt. See Section 522 (l), reproduced here for illustration purposes only.
