It is common for those considering filing for personal bankruptcy to worry about their assets. Before you decide to file Chapter 7 (liquidation) or Chapter 13 (reorganization), you should be aware of the exemptions that are offered under each chapter to protect your assets. In bankruptcy, an exemption prevents a specific amount of property from conversion to the bankruptcy estate, thus permitting you to keep that property. 

A knowledgeable bankruptcy attorney will know exactly how to help you protect the assets that you want to keep by using your bankruptcy exemptions properly. Before you file for bankruptcy, you should discuss your assets with your lawyer and how they will be addressed. Your attorney should be able to tell you which chapter of bankruptcy you should file and explain the exemptions that will help you protect your property. 

Understanding the Bankruptcy Estate

When you file your bankruptcy petition at your local courthouse, a legal entity called the bankruptcy estate is established. The paperwork that you fill out and submit to the court includes a financial inventory, which lists your assets, debts, and any exemptions that apply to your situation. The moment you file your petition, the automatic stay initiates, which prevents creditors from attempting to collect any of your debt obligations, and lasts until your bankruptcy proceeding concludes.

The bankruptcy estate is more of a concept than a real entity at the beginning of your bankruptcy proceeding. While your nonexempt assets become the bankruptcy estate, they are not thrown into a storage facility or some other place during your bankruptcy proceeding, but rather remain in your possession until you turn them over to the trustee for liquidation. This transaction, so to speak, will need to take place before your bankruptcy can be discharged.   

How the Bankruptcy Estate is Handled

A bankruptcy trustee will be appointed to your bankruptcy case. This is true for both Chapter 7 and Chapter 13 bankruptcies. The trustee’s main responsibility in Chapter 7 bankruptcy is to liquidate your nonexempt assets and distribute the funds to your creditors. In Chapter 13 bankruptcy, the trustee is responsible for dividing and allocating your bankruptcy repayment plan payments to your creditors. 

What Kinds of Exemptions Can I Use?

There are federal exemptions and state exemptions. If you live in a state that allows you to use federal exemptions in your bankruptcy filing, you will need to decide whether the federal exemptions or your state exemptions help you keep more of your assets. The following states allow bankruptcy filers to use federal exemptions: Alaska, Arkansas, Connecticut, the 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.

Details and specific monetary amounts of exemptions are dictated by individual states, but fall into the following categories:


  • Real estate
  • Personal property
  • Wages
  • Pensions
  • Public benefits
  • Tools of trade
  • Insurance

Some states also offer wildcard exemptions, which allow bankruptcy filers to select a nonexempt asset up to a certain determined amount of money. This is usually not a high amount. For example, the federal wildcard exemption is up to $1,325 and up to an additional $12,575 of any homestead exemption that is not used already.

Getting Help

Since bankruptcy is such a crucial decision that will affect just about every aspect of you and your family’s lives, it is important to know exactly what you will be getting into and how your assets will be affected. When you file your bankruptcy petition with the court, you are going to want to feel confident about your decision. That is why it is crucial to consult with an experienced bankruptcy attorney who can explain everything you need to know about your hard-earned assets, your bankruptcy, and what to expect as the proceeding unfolds. Our attorneys have successfully guided countless families and individuals through the bankruptcy process that helped them obtain the debt relief they so desperately needed.


Are You Considering Filing For Bankruptcy?

If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.

James Roswold
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James Roswold is a Kansas & Missouri personal injury, workers comp, and medical malpractice attorney.