When you file for bankruptcy, you have certain exemptions. What this essentially means is that the legal system allows a certain amount of your assets to remain untouched, thereby giving you the ability to start over again without getting caught in the debt trap. When a bankruptcy exemption says “home exempted up to X dollars” it means that if your home is exempt up to $25,000, then anything above that value, you will have to sell to clear your debt.

If for example your state homestead exemption is $20,000 and your home equity is $100,000, you would then be forced to file for bankruptcy under Chapter 13 or you would have to sell your home. In the sale, you will be able to keep $15,000 and the rest will go towards clearing your debt. There are some states that allow you to federal exemption. There are

1 Arkansas
2 Connecticut
3 Washington D.C. 
4 Hawaii
5 Massachusetts
6 Michigan
7 Minnesota
8 New Hampshire
9 New Jersey
10 New Mexico
11 Pennsylvania
12 Rhode Island
13 Texas
14 Vermont
15 Washington
16 Wisconsin

The states that can be considered as having the best bankruptcy exemption systems are Texas, Florida, South Dakota, Iowa, Oklahoma, and Arkansas. Married couples filing for bankruptcy can double their exemptions. The value of the exemptions is changed every three years on April 1st to match current Consumer Price Index.

There are some federal non-bankruptcy exemptions as well and these can be filed under only your own state’s exemptions. They cover pensions of the likes of Civil service employees, Foreign Service employees, Military Medal of Honor, Military service employees and Railroad workers. They also include a range of public benefits like death and disability benefits of government employees. The same with longshoremen and harbor workers, social security, veteran’s benefits and so on.

There are also exemptions on homestead sales or lease proceeds in the case of Indian lands. Klamath Indian tribe benefits for those in Oregon State, military deposits if you are stationed permanently out of the country, seaman’s clothing and insurance as well as railroad workers unemployment insurance.

These exemptions are in some cases only and it should be taken for granted that you will automatically be eligible for them. In most cases you may not be.


Debbie Joneta also writes about Bankruptcy and Credit issues including File Personal Bankruptcy and Types of Bankruptcy


Get more information about Personal Bankruptcy at Types of Bankruptcy friendster blogs and Cost of Bankruptcy shoutwire Bookmarkings.

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