Federal Bankruptcy Exemptions

Find out if you can use the federal bankruptcy exemptions and what property they protect.

March 13, 2019

The federal bankruptcy exemptions protect a certain amount of your property when you file for bankruptcy. If you can “exempt” property in a Chapter 7 bankruptcy, the Chapter 7 trustee cannot sell it to pay your creditors. In a Chapter 13, you don’t have to pay your creditors through your bankruptcy plan to keep exempt property—you pay only the value of property that you can’t protect with a bankruptcy exemption.

Read on to learn whether you can use the federal bankruptcy exemptions, and if you can’t, how you’ll still have the federal nonbankruptcy exemptions available to you.

Can I Use The Federal Bankruptcy Exemptions?

Each state has its own set of state bankruptcy exemptions, and many states require their citizens to use their own state exemption system. Some states allow bankruptcy filers a choice between their state exemption system and the federal exemptions. If you live in one of these states you must choose the system that will work best for you—you can’t mix and match from both lists.

Currently, the following states offer you a choice and allow you to use federal exemptions: Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin. If you don’t live in these states, then you cannot use the federal bankruptcy exemptions.

Find out which exemptions you’ll use if you’ve moved to a new state.

How Much Property Can I Protect?

Listed below are the current federal bankruptcy exemption amounts for different types of property. These amounts are updated every three years. The figures in this article reflect the April 1, 2019, adjustment.

Married couples filing a joint bankruptcy get to double all federal exemption amounts (so you get twice the amounts listed below). If an amount isn’t listed, the entire property or asset is exempt. Learn what happens if the trustee or someone else objects to your exemptions.

The Homestead Exemption

The federal homestead exemption protects the equity in your home. Currently, the federal homestead exemption is $25,150. Learn more about homestead exemptions.

Personal Property Exemptions

Personal property is any property you own other than real estate. The federal exemptions relating to personal property are as follows:

  • $4,000 for a motor vehicle
  • $1,700 for jewelry
  • $13,400 in aggregate ($625 for each individual item) for household goods and furnishings, appliances, clothing, books, animals, crops, or musical instruments
  • $2,525 for professional books, implements, or tools of trade
  • professionally prescribed health aids, and
  • $13,400 in accrued interest, dividend, or loan value of a life insurance contract.

Benefit and Support Exemptions

The following exemptions protect the money you receive as a benefit or support:

  • alimony, support, or maintenance reasonably necessary for your support
  • payments under the life insurance of someone you were a dependent of reasonably necessary for your support, and
  • Social security benefits, unemployment compensation and benefits, veteran’s benefits, public assistance, and disability or illness benefits.

Injury Recovery Exemptions

  • $25,150 for personal injury recovery not including pain and suffering or pecuniary loss
  • compensation for loss of future earnings necessary for support
  • payment for the wrongful death of a person you depended on necessary for support, and
  • compensation as a crime victim.

Wildcard Exemption

The wildcard exemption can be used for any type of property. This exemption is $1,325 plus $12,575 of any unused portion of your homestead exemption. Find out more about using wildcard exemptions.

Retirement Accounts

  • retirement accounts exempt from taxation (these generally include all legitimate retirement accounts), and
  • $1,362,800 for IRAs and Roth IRAs.

What If I Can’t Use The Federal Bankruptcy Exemptions?

If you live in a state that doesn’t allow you to use the federal bankruptcy exemptions, then you must use your state’s exemption system. Some states have more generous exemptions, but it varies widely.

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 particular occupation, be a government employee, or have other special circumstances in order to take advantage of them. As a result, filers don’t use them as often.

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’re required to), then you can also use the federal nonbankruptcy exemptions in addition to your state exemptions.

The only time you can’t use the federal nonbankruptcy exemptions (assuming you qualify otherwise) is if you live in a state that allows you to use the federal bankruptcy exemption system.

What Can I Exempt With Nonbankruptcy Exemptions?

Listed below are the current federal nonbankruptcy exemptions. A specific dollar amount isn’t 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 can approve more, especially for low-income debtors).
  • Native American 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.

Get tips on things to avoid before filing for Chapter 7 bankruptcy.

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