Filing bankruptcy: will I lose everything? A look at federal exemptions.
If you’re an individual filing for bankruptcy, you are allowed to keep certain items referred to as exemptions. Each state elects to offer state exemptions, federal exemptions or both for the citizens of their state. This tutorial reflects common federal exemptions that debtors may elect when filing
Common Federal ExemptionsThese are the amounts of value you can have in these items. For instance, if you have a house with a mortgage then you are concerned about the value of your property exceeding the mortgage.
522(d)(1) Home: $23,675;
522 (d)(2) Vehicle: $3,775;
522 (d)(3) Household furnishings/goods/clothes: $12,625;
522 (d)(4) Jewelry: $1,600;
522 (d)(5) Wildcard(anything you can't fit in another category but want to keep): $1,250. But if you don't use all of your homestead under (d)(1) you can add up to $11,850 of that unused exemption to the this category;
522 (d)(6) Tools of the trade/Things you use at work: $2,375;
522(d)(7) Life insurance policy: No limit;
522 (d)(8) Whole Life insurance cash value: $12,625;
522 (d)(12) Most Retirement Accounts: No limit;
522 (n) IRAs: $1,283,025.
If the value of your things fall within the above referenced numbers then there is a good chance you don't have a lot to worry about. There are some additional exemptions available but I put up the most commonly used exemptions. To look at this bankruptcy code section in more detail go to: https://www.law.cornell.edu/uscode/text/11/522
Are these really the numbers?The federal exemption numbers listed in the bankruptcy code under 11 U.S. Code ? 522 are updated for inflation every three years in April with the most recent adjustment taking place in April 2016. If you're reading this after April 2019 then these numbers are probably wrong.
Here are the updated numbers in 2016: https://www.federalregister.gov/articles/2016/02/22/2016-03607/revision-of-certain-dollar-amounts-in-the-bankruptcy-code
What should I do now?Hopefully, you're a little more comfortable that you won't lose everything. Oftentimes, your exemptions will cover the value of your assets and if not you may have other options (not within the scope of this guide). It's important that you get all of yours assets listed and that exemptions are probably utilized. It is difficult to get through the process without the expertise of a bankruptcy practitioner. Many bankruptcy attorneys offer a free consultation and now you know a little more about the process when you meet with them.