Bankruptcy Lawyers

How Do Bankruptcy Exemptions Impact Me?

When you are applying for bankruptcy, inevitably you will come across the term exemptions. When you are filing bankruptcy, the things which you are allowed to keep from the creditors are what is known as exemptions. In terms of bankruptcy exemptions, there are states that have their own set of exemptions to supersede the federal ones. You have a choice of using the federal or the state’s exemptions when you are filing for bankruptcy. You can lawfully claim your assets as exempt, which means that neither the bankruptcy court nor the creditors can take the assets for liquidation.

As if the distinction between federal exemptions and state exemptions is not complex enough, the exemptions also vary from state to state. A car can be exempted differently between the states. While Florida allows you an exemption of $1,000 for the car, you can have $30,000 in exemption for the same car in Texas. As you can form the car exemption example, the exemptions can actually make a huge difference at the end of the bankruptcy process. Besides making a difference to you as the bankruptcy filer, it also matters to the creditors since what they can collect from you depend on the state you are applying bankruptcy with.

Bankruptcy exemptions get even difficult with some states allowing you to have a “wildcard” to be applied to any asset. The easiest way to explain this “wildcard” is to use an example. If the state that you live in allows you to take an exemption for car worth $3,000 but your car is only worth $2,000, there is a difference of $1,000. Some states allow you to apply this $1,000 as a “wildcard” exemption that you can use any other property you want to keep. You can use this $1,000 to keep the lawn tractor you want to keep, or use the $1,000 exemption on your ATV.

To throw in further wrinkles to the bankruptcy exemptions, Congress changed the bankruptcy law in 2005 to discourage people from moving to different state for favorable bankruptcy exemptions. If you have lived in the state for the past 2 years, then you can use the state’s exemption when filing bankruptcy under the new bankruptcy law passed in 2005. If you don’t qualify under the 2 year rule for your state’s exemption, you have to use the state where you have lived for at least 180 days during the past 2 years. If you cannot qualify for any state exemptions, you will be relegated to using the federal exemptions.

Given that the exemptions of the bankruptcy law are quite convoluted, as it varies from state to state, you will be better served to seek the advice of a certified bankruptcy attorney. A certified bankruptcy lawyer can help you keep the assets that you wouldn’t normally know you can. Unless you are in the legal profession, leave the legal affairs to the bankruptcy lawyer. If you want additional information on bankruptcy, please visit our website at

Bankruptcy law is quite difficult to understand in one go and due to the fact that each state its own set laws that have to be adhered to accordingly, it takes a lot of time to complete the proceedings related to it, so much so that even the Bankruptcy Lawyer has a tough time in arranging all the documents based on the debtors and their possessions.

Nicole Hennig
Nicole Hennig is a freelance writer, content writer, blogger, and also a photographer. She graduated from the University of Caloocan in Johannesburg, South Africa in 2015.

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