Federal Nonbankruptcy Exemptions

If you use state exemptions, you can also use the federal nonbankruptcy exemptions.

by: , Attorney

The federal nonbankruptcy exemptions are named as such because they are found in areas of the law other than the bankruptcy code.  But they can be used in bankruptcy to protect your property.  Below we discuss when you can use the federal nonbankruptcy exemptions and what you can exempt under them. 

What Are Federal Nonbankruptcy Exemptions?

Similar to bankruptcy exemptions, the federal nonbankruptcy exemptions serve to protect certain assets or property in a Chapter 7 bankruptcy and assist in determining how much creditors get paid in a Chapter 13 bankruptcy.   However, these exemptions are usually more specialized in that they require you to have a certain occupation, be a government employee, or have other special circumstances in order to take advantage of them.  As a result, they are not as commonly used as regular bankruptcy exemptions.   

(To learn more about how exemptions work, how they are used in Chapter 7 and Chapter 13 bankruptcy, and when you can use state versus federal exemptions, see the articles in our Bankruptcy Exemptions topic area.)

When Can I Use The Federal Nonbankruptcy Exemptions?

Each state has a set of bankruptcy exemptions in addition to the federal bankruptcy exemptions.  Most states require you to use their state exemptions while some allow bankruptcy filers a choice between their state exemption system and the federal exemptions.  If you choose to use your state’s exemption system (in many cases you are required to) then you can also use the federal nonbankruptcy exemptions in addition to your state exemptions. 

This means that the only time you can’t use the federal nonbankruptcy exemptions (assuming you qualify otherwise) is if you live in a state that allows a choice and you choose to use the federal bankruptcy exemption system. (To learn more about the federal bankruptcy exemptions and what property you can exempt under them, see The Federal Bankruptcy Exemptions.)

What Can I Exempt With Nonbankruptcy Exemptions?

Listed below are the current federal nonbankruptcy exemptions.  There are no specific dollar amounts listed because there is no limit on how much you can exempt unless a percentage amount is stated.

Retirement Benefits

The retirement benefits for the following groups of people are fully exempt under federal nonbankruptcy exemptions: civil service employees, foreign service employees, military service employees, railroad workers, CIA employees, veterans, Military Medal of Honor Roll, and Social Security benefit recipients.

Death and Disability Benefits

Death and disability benefits for longshoremen, harbor workers, and government employees as well as compensation received for risk, hazard, injury, or death due to war are exempt.

Survivor’s Benefits

Survivor’s benefits for military service, lighthouse workers, and judicial employees such as judges, judicial center directors, and administrative assistants of the Supreme Court Chief Justice are also exempt.

Other Miscellaneous Nonbankruptcy Exemptions

Other federal nonbankruptcy exemptions include:

  • Military group life insurance.
  • Deposits made by military to savings accounts while on permanent duty outside the U.S.
  • The greater of 75% of wages that have been earned but have not yet been paid or 30 times the federal minimum hourly wage.  (Judges may approve more, especially for low income debtors).
  • Indian lands and proceeds of a homestead sale or lease.
  • Klamath Indian benefits for those residing in Oregon.
  • Unemployment benefits for railroad workers.
  • Clothing for seamen.
  • Debts incurred by seamen while on a voyage.
  • Wages of a seaman except to the extent they are used for spousal or child support.

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