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Bankruptcy Exemptions

What Is a Bankruptcy Exemption?

An exemption in bankruptcy allows a debtor to keep certain property or assets even after bankruptcy is filed. The exemptions are defined by statute, and exempt property cannot be seized or sold to satisfy the debts of the person filing for bankruptcy.

Exemptions play a vital role in both Chapter 7 and Chapter 13 bankruptcy.

  • Chapter 7: In Chapter 7 bankruptcy, exemptions help determine which property you get to keep after the bankruptcy discharge has been granted. This is how bankruptcy exemptions help you protect your property after a bankruptcy.
  • Chapter 13: In Chapter 13 bankruptcy, exemptions help determine how much you will have to pay to your unsecured creditors, which can mean the difference between getting your plan confirmed and getting knocked out of Chapter 13.

Who Can File a Bankruptcy Exemption?

Any individual who files for bankruptcy can file for bankruptcy exemptions. These exemptions are available for both chapter 7 and chapter 13 bankruptcy filings, but the exact exemptions that one can file for vary from state to state. To determine what property you will get to keep if you file for Chapter 7 bankruptcy, start by making an inventory of your property, and also list each property's replacement value. Then compare the value to your state's exemption for that type of property. If your state offers a choice between systems, do this for each system to determine which one allows you to keep the property that matters to you.

Do All States Have the Same Exemptions?

No. Federal bankruptcy law gives discretion to each state to determine which assets a debtor is allowed to keep when a bankruptcy case is filed. A state can allow a debtor to choose between federally-created exemptions, as defined in 11 U.S.C. 522, or state-created exemptions, or a state may limit a debtor to only the state-created exemptions. A debtor is allowed to use the exemptions from only one statute, either the federal or the state, but not both. For states that provide more than one exemption statute or system, the debtor is allowed to use the exemptions from only one statute.

Which Exemption System Can I Use?

The answer to this question depends on the laws of the state that you live in. Most states prohibit their residents from taking advantage of the federal law exemption system. If you live in the state that prohibits the use of federal law exemptions, you must then use your own state's exemption system. However, some states allow their residents to have a choice in using either the state exemption system or the federal exemption system.

What Is a Bankruptcy Exemption Limit?

An exemption limit applies to any equity you have in property and limits the amount of equity that is exempt. Equity is the difference between the fair market value of the property and the unpaid balance on the property. For example, a home valued at $500,000 with a loan of $450,000 has an equity value of $50,000. If the state's homestead exemption is $50,000 or greater, the debtor would be exempt from liquidating the $50,000 equity in the home to pay off the debts.

Other factors may affect what your limit will be, depending on where you live. Marriage may allow couples in some states to double their exemption limits. Filing with “head of household” status or having a number of dependents may also increase some exemption amounts.  In some states, senior citizens may have a higher exemption limit on homestead, personal property, or other items. Disability may also raise your exemption limit, especially for motor vehicles.

How New York Bankruptcy Exemptions Work

You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt property—things not covered by an exemption—differently.

  • In Chapter 7 bankruptcy, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors.
    In Chapter 13 bankruptcy, you keep everything you own. However, you must pay the value of the nonexempt property equity in your repayment plan, or your disposable income, whichever is more.

The different approaches ensure that creditors receive the same amount regardless of the chapter filed.

When You Can Use New York Bankruptcy Exemptions

You can file for bankruptcy in New York after living there for more than 180 days. However, you must live in New York much longer before using New York exemptions—at least 730 days before filing, to be exact. Otherwise, you'd use the previous state's exemptions.

But suppose you weren't living in any particular state during the two years before filing for bankruptcy. In that case, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).)

Choosing the Best Exemption System

New York is one of the handfuls of states that let you choose between the state exemption list and the federal bankruptcy exemption scheme. You won't be able to select exemptions from each list—you must pick the system that will work best. If you choose the New York exemptions, you can also use the federal nonbankruptcy exemptions.

Common New York Bankruptcy Exemptions

Here are some of the most commonly used New York exemptions. Keep in mind that married couples filing together in a joint bankruptcy can double most exemption amounts if both spouses have an ownership interest in the exempt property.

New York Homestead Exemption

A debtor can protect the equity in a house, condominium, co-op, or mobile home used as a residence up to the following values:

  • $179,950 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and, Putnam counties.
  • $149,975 in Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties, and
  • $89,975 in all remaining counties.

New York Motor Vehicle Exemption

A filer can exempt the equity in one motor vehicle up to $4,825 in value or up to $11,975 if the vehicle is equipped for use by a disabled debtor. Find out about protecting cars in bankruptcy and how the motor vehicle exemption works in a Chapter 7 case.

If you have more vehicle equity than you can exempt, and you don't use the homestead exemption, you can add the wildcard exemption and protect an additional amount. (CPLR §§ 5205 (a)(8).)

New York Wildcard Exemption

The New York wildcard exemption allows you to protect any personal property of your choice (not real estate) or cash up to a value of $1,175 if you don't use the homestead exemption. (CPLR §§ 5205 (a) (9).)

Other New York Exemptions

You can protect up to $11,975 of the following items under CPLR § 5205:

  • Stoves and heating equipment for use in your home and fuel for 120 days; sewing machine, religious texts, family photos and portraits, school books; other books up to $600 in value; seat or pew used for religious worship; domestic animals and food for you and your family for 120 days up to $1,175 per person; clothing, furniture, refrigerator, radio, television, computer, cell phone, kitchenware, prescribed health aids; wedding ring; watch/jewelry/art up to $1,175 in value.
  • Property or damages arising from the loss or damage to exempt personal property, for up to one year after collection of proceeds. For example, an insurance claim for a damaged vehicle or a cause of action against someone who vandalized your home.
  • All property held in a spendthrift trust for a debtor if the trust was created by or proceeded from someone other than the debtor.
  • Uniforms, arms, and equipment used in military service and pensions and awards awarded for military service.
  • Cash and banking account balances to $6,000.

Other Personal Property

  • CPLR § 5205 - Security deposits held for rental real estate or utilities; service animals; necessary medical and dental accessories; New York State college choice tuition savings program trust fund payments for the benefit of a minor or up to $11,375 of value if you own the account; cash surrender value of insurance policies.
  • CPLR § 5206 - Burial plot no larger than 1/4 acre with no building or structure (other than headstone or monument) on it.

Tools of the Trade

  • CPLR § 5205 - Tools necessary for your profession up to $3,575 in value.

Wages and Income

  • CPLR § 5205 - 90% of income received within 60 days before filing bankruptcy; 90% of earnings from the sale of milk on your farm; 100% of pay to a noncommissioned officer, private, or musician in the armed forces of the U.S. or N.Y.
  • CPLR § 5205; Debt – Court-ordered alimony, maintenance or child support to the extent reasonably needed for support.

Pensions and Public Benefits

  • § 5205, Debtor & Creditor § 282 – IRA, 401(k), Keogh, or another qualified retirement plan; Social Security, unemployment, disability, public assistance, workers' compensation or veterans' benefits.
  • Debtor & Creditor § 282 – Benefits from crime victim's reparations laws.
  • Debtor & Creditor § 282 - Aid to blind, aged, disabled, crime victim's compensation, home relief, local public assistance, Social Security benefits, unemployment compensation, veterans' benefits, workers' compensation.

Qualified retirement accounts are exempt under the federal rules and can be used in every state, regardless of the exemption scheme used. 

Lawsuit Awards and Settlements

  • $9,000 in damages compensating you for a personal injury if your settlement or lawsuit award must state that the money is compensation for bodily injury; otherwise, the trustee may argue that the exemption does not apply. This law does not protect lawsuit money that you receive for pain and suffering. (Debtor & Creditor § 282(3)(iii).)
  • Lawsuit money for stolen, lost, or damaged property if you could have exempted the property you're your bankruptcy filing is within one year from the date you received the funds. (NYCPLR § 5205(b).)
  • Lost future earnings that compensate you or someone upon whom you depend for support and compensation for the wrongful death of someone you relied on for support is exempt up to an amount reasonably necessary to support you and your dependents. (Debtor & Creditor § 282(3)(ii),(iv).)

Avoiding Exemption Issues in New York

If you don't exempt your property carefully, you could lose it. Answers to these common questions might help you steer clear of common issues.

Do I automatically get to keep exempt property? Generally, no. In most cases, you can exempt property needed to maintain a job and household, such as furnishings, clothing, and some vehicle equity. You'll select the New York exemption set that best protects your property, list your assets on Schedule C: The Property You Claim as Exempt, and file it along with other required paperwork.

Will someone check my exemptions? The bankruptcy trustee—the court-appointed official tasked with managing your case—will review Schedule C to ensure that you have the right to protect the claimed property. A trustee who disagrees with your exemptions will file an objection with the court. The judge will decide whether you can keep the property.

Example. Jeff owns a rare, classic car worth $15,000, but the state vehicle exemption won't adequately protect it. Believing that the car qualifies as art—at least in his mind—Jeff exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C, disagrees with Jeff's characterization, and files an objection with the court. After consideration, the judge will likely side with the trustee, determining that the vehicle doesn't qualify as a piece of art.

What if I make a mistake? Most trustees won't file an objection unless it's clear that the debtor is trying to pull something over on the court. At least not without trying to resolve the issue first. If there's a minor exemption problem, the trustee will likely call you to work out the issue informally.

It's worth noting that it's not a good idea to finesse exemptions. Not only do you have an obligation to supply correct information on your bankruptcy forms, purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Confirming New York Bankruptcy Exemptions

Unless indicated otherwise, all references are to the New York Code Civil Practice Law and Rules (NYCPLR), and New York's laws on the New York State Senate website.

You should be aware that additional exemptions exist and New York's exemption amounts adjust every three years (the last adjustment occurred on April 1, 2021). While you can read the statutes on the New York State Senate website, you'll find the most recent figures on New York's Department of Financial Services website (search for "Exemption from Application to the Satisfaction of Money Judgments") or by consulting with a local bankruptcy lawyer.

When You Can Use Florida's Bankruptcy Exemptions

Although you can file for bankruptcy in Florida after living there for over 180 days (or the greater portion of 180 days before filing), you must live in Florida much longer before using Florida's exemptions. Specifically, you need to live in Florida for 730 days before filing the bankruptcy petition. Otherwise, you'd use the previous state's exemptions. Suppose you weren't living in any one state during the two years before filing for bankruptcy. In that case, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).)

How Florida's Bankruptcy Exemptions Work

You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt property—things not covered by an exemption—differently.

  • In Chapter 7 bankruptcy, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors.
    In Chapter 13 bankruptcy, you keep everything you own. However, you must pay the value of the nonexempt property equity in your repayment plan, or your disposable income, whichever is more.

Also, spouses can double the exemption amount if they both own the property for all exemptions other than the homestead exemption. And you can use exemptions on the federal nonbankruptcy exemption list, as well as protect stimulus payments, tax credits, and child credits in bankruptcy with the federal COVID-19 recovery rebate exemption.

Florida's Homestead Exemption

Florida has one of the most generous homestead exemptions in the country. You can exempt an unlimited amount of equity in your home or other property covered by the homestead exemption as long as the property isn't larger than half an acre in a municipality or 160 acres elsewhere.

Before claiming the homestead exemption in Florida, you must have owned the property for at least 1,215 days before the bankruptcy filing. If you can't meet this requirement, your homestead exemption is limited by federal law. (Fla. Stat. Ann. § 222.01-02)

Florida Personal Property Exemptions

The following categories of personal property (anything other than real estate) are exempt:

  • Personal property up to $1,000. Personal property can include items like furniture, art, and electronics, and $4,000 if the homestead exemption isn't used (see the wildcard exemption below). (Art. 10 Sec. 4, Fl. Constitution)
  • Education savings, health savings, and hurricane savings. (Fla. Stat. Ann. § 222.22)
  • Prescribed health aids. (Fla. Stat. Ann. § 222.25)
  • Prepaid medical savings account and health savings account deposits (Fla. Stat. Ann. § 222.22(2))
  • Tax credits and refunds (Fla. Stat. Ann. § 222.25(3))
  • Funeral costs per Florida's Preneed Funeral Contract Consumer Protection Trust Fund (Fla. Stat. Ann. § 497.456)
  • Particular partnership property (Fla. Stat. Ann. §§ 620.153, 620.8307)

Florida Motor Vehicle Exemption

You can exempt up to $1,000 in motor vehicle equity. This amount increases if you're married and filing jointly. (Fla. Stat. Ann. § 222.25(1).) Learn more about the motor vehicle exemption and protecting cars in bankruptcy.

Exemptions for Wages in Florida

Wages of the head of the family are entirely exempt up to $750 per week, or the greater of 75% or 30 times the federal minimum wage. This applies to paid and unpaid wages, as well as wages deposited in a bank account during the last six months. (Fla. Stat. Ann. § 222.11.) Earnings of a person other than the head of the family are protected as follows: 75% or 30 times the federal minimum wage, whichever is greater.

Federal government employees' pension payments needed for support and were received up to three months before the bankruptcy are also exempt. (Fla. Stat. Ann. § 222.21.)

The Florida Wildcard Exemption

A debtor can claim up to $4,000 of personal property if the debtor doesn't use the homestead exemption. (Fla. Stat. Ann. § 222.25.) 

Exemptions for Pensions in Florida

The following types of pensions and retirement funds are exempt in Florida:

  • Tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans and traditional and Roth IRAs to $1,512,350 per person are fully exempt (valid for bankruptcy cases filed between April 1, 2022, and April 1, 2025). (11 U.S.C. 522(b)(3)(C); (n); Fla. Stat. Ann. § 222.21.) 
  • Public employee retirement benefits. (Fla. Stat. Ann. §§ 121.131, 121.055(6)(e).)
  • State and County officer and employee retirement system benefits. (Fla. Stat. Ann. § 122.15.)
  • Firefighter pensions. (Fla. Stat. Ann. § 175.241.)
  • Municipal police pensions. (Fla. Stat. Ann. § 185.25.)
  • Teachers' retirement benefits. (Fla. Stat. Ann. § 238.15.)

Exemptions for Public Benefits

You can exempt the following public benefits:

  • Veterans benefits, social security benefits, reemployment assistance, and local public assistance benefits. (Fla. Stat. Ann. § 222.201)
  • Workers compensation and unemployment compensation benefits are exempt. (Fl. Stat. §§ 222.201, 443.052, 440.22.)
  • Crime victims' compensation benefits are exempt unless the debtor seeks to discharge debt for treatment of a related injury. (Fla. Stat. Ann. § 960.14.)

Alimony and Child Support Exemptions

Alimony and child support, to the extent reasonably necessary for the debtor's support (the bankruptcy filer) and any dependent of the debtor, are exempt. (Fla. Stat. Ann. § 222.201.)

Exemptions for Insurance Policies and Annuities

You can exempt the following:

  • The proceeds of a life insurance policy payable to a specific beneficiary. (Fla. Stat. Ann. § 222.13.)
  • The cash surrender value of a life insurance policy and the proceeds of an annuity contract; however, annuity proceeds resulting from lottery winnings aren't exempt. (Fla. Stat. Ann. § 222.14.)
  • Disability income benefits. (Fla. Stat. Ann. § 222.18.)
  • Fraternal benefit society benefits. (Fla. Stat. Ann. § 632.619.)

Personal Injury and Lawsuit Exemptions

Damages (money) for an employee's injuries or death that occurred while working in a hazardous occupation are exempt. (Fla. Stat. Ann. § 769.05.) However, any other proceeds received from a lawsuit or pending legal claim belongs to the bankruptcy estate, and you'll have to use another exemption, such as the wildcard exemption, to protect the recovery.

Also, if you haven't resolved the lawsuit when you file for bankruptcy, the bankruptcy trustee can decide whether to retain an attorney and proceed on your behalf. The trustee will then decide whether to settle the case or proceed to trial.

Example. In your paperwork, you disclose the minor rear-end accident you were involved in six months before. Even though you weren't at fault, you didn't bother pursuing it because your injuries resolved quickly. The bankruptcy trustee has the option of pursuing the claim on your behalf against the driver at fault.

Other Exemptions

Above are some of the most commonly used exemptions in Florida. There could be other exemptions that apply to your situation. You'll want to ensure that you're declaring all of the exemptions you're entitled to by reviewing the Florida Statutes, the Florida Constitution, and the Bankruptcy Code. Or, talk to a local bankruptcy attorney.

Do I Need a Bankruptcy Attorney?

Bankruptcy is a very complicated process and it is vital to know each state's bankruptcy law. Each state allows different exemptions and filing an exemption incorrectly can lead to that property being seized, even if the property would have been exempt had the exemption been done correctly. A bankruptcy lawyer knows the ins and outs of filing for bankruptcy, and can recommend what chapter of bankruptcy is right for you. A bankruptcy lawyer can also ensure that your exemptions are filed correctly.