Bankruptcy Property Exemptions

Brian Reed
December 31, 2010 — 1,453 views  
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The process of bankruptcy offers debtors a clean slate when they are overwhelmed by financial burdens. Once a bankruptcy case is completed, however, the debtor will still need basic possessions and assets to move their life forward. Fortunately, the Bankruptcy Code recognizes these basic needs and provides a variety of property exemptions for debtors. If property is exempt, it will not be subject to the claims of creditors.

Under new bankruptcy law, a debtor will be required to submit a schedule or list of exempt property when they file the bankruptcy petition. The schedule should include a description of the property, specifying the law authorizing the exemption, and list the value of the exemption and its market value. This information allows parties involved in the case to evaluate the exemption claim and submit any legitimate objections within 30 days from the meeting of the creditors. If someone objects, they must prove that the exemption has been improperly claimed.

Every bankruptcy case is evaluated separately but in most cases, the debtor does not have to give up their property or necessary possessions. During and after the closing of the case, the exempted property is protected by law. In fact, not only are you allowed to keep the exempted property, but also the equity, if any, that one may have on the property. Equity is the difference between the value of the exempted property and the remaining debt.

Homestead Exemption

The homestead exemption applies to property used as a residence. Current law limits a homestead exemption to $136,875 if the home was acquired in the 1,215-day period before filing for bankruptcy. Exceptions apply, including when someone upgrades to a more expensive house and transfers equity to the new purchase. The homestead exemption is also limited if it is used to delay, hinder, or defraud a creditor.


The exemption amount for an automobile under the Bankruptcy Code is $3,225. The equity in the vehicle is based on its market value less any loans. If the equity is more than $3,225, it is possible to apply exemption amounts from other categories, such as the exemption for tools of the trade. If the trustee sells it, the debtor is entitled to receive the exemption amount. It is also possible to pay the trustee the amount above the exemption and keep the vehicle.

Household Items

Federal and state laws provide exemptions for household items of $10,775 and $525 for an individual item. However, these types of items have low resale value and most bankruptcy trustees will not view them as a viable source of assets to use in repaying creditors.

Retirement Assets

Debtors can exempt retirement funds under § 522(d)(12) of the Bankruptcy Code. The exemption applies to pension, profit sharing and stock bonus plans, employee annuities, Individual Retirement Accounts (IRAs), deferred compensation plans such as a 401(k) account, and certain trusts.


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Brian Reed. new york bankruptcy lawyers To consult with New York bankruptcy lawyers who specialize solely on bankruptcy, contact the attorneys at Doyaga and Schaefer at 718-488-7500 or 516-656-7500 for a free consultation.

Brian Reed