Bankruptcy: List of Property Claimed as Exempt

Debtors can claim the interest in their houses in bankruptcy.

The federal and state exemptions used in bankruptcy were created to help the debtor maintain a certain standard of living. Exemptions prevent the bankruptcy trustee from taking all of the debtor's property and other types of assets in order to pay off debts. When debtors file for bankruptcy, they can get some form of debt relief and don't have to worry about being left destitute upon completion of the bankruptcy process.

Homestead

Debtors tend to apply the homestead exemption to the interest they have in their houses. Homestead exemptions can also be applied to condos, and mobile homes. If the debtor has equity in the property, the homestead exemption prevents the trustee from trying to use any anticipated proceeds from the sale of the property to pay creditors. The federal and state homestead exemption amounts vary. Check the homestead exemption within the state where the bankruptcy case is filed to make sure the exemption is being used in the most advantageous way.

Motor Vehicle

The bankruptcy court knows how important a vehicle is as a means of transportation for most people. A motor vehicle exemption allows each debtor to keep one vehicle. Many people would be greatly inconvenienced if they were not able to use their car to get to work and run basic errands throughout the day. The motor vehicle exemption for some states may be greater or smaller than the federal exemptions.

Household Goods

Debtors are allowed to keep their furniture. As of 2010, the federal law states that $11,525 worth of household goods is exempt. Household goods include furniture, clothes, books, and appliances, among other things. Items within the home which are used for personal use by the debtor and other family members are usually applicable under this exemption. The state exemption limit may be quite lower than the federal exemption limit because the average income and cost of living within each state vary. Some states can have a lower exemption limit, and it is suitable for most of its citizens.

Retirement

Planning for the future is important. Many people have spent years contributing to their retirement funds to ensure they can maintain a certain standard of living after retirement. The federal law allows debtors to keep their retirement funds and pensions. As the future of Social Security becomes more uncertain, the ability for people to keep the retirement money obtained through employment benefit plans such as ERISA is crucial.

References

• Cornell University Law School: §522 Exemptions
• BankruptcyAction.com: Bankruptcy Exemptions
• U.S. Courts: Bankruptcy Basics