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Bankruptcy Property Exemptions


A couple smiling together in front of their homeMany people severely misunderstand how bankruptcy really works. It is commonly thought that if you file for bankruptcy you’ll lose everything you own. Nothing could be further from the truth. The bankruptcy code contains provisions that protect (or exempt) property from your creditors. Exemptions make it possible for individuals to get a fresh start while holding onto their most valued assets.


Exemptions cover homes, vehicles, furniture, computers, tools, clothing, jewelry, cash (in some states) and much more. The following describes how exemptions work to protect various types of assets.


Homestead Exemption

The Homestead Exemption allows individuals to maintain their primary residence, but there are limits on the amount that can be exempted both in terms of total property value as well as equity. Rental property and land can also be protected, with similar limitations. The amount that can be protected varies from state to state, so it’s best to consult with a local attorney to discuss your situation.



During bankruptcy, you are allowed to keep vehicles - as with the homestead exemption, there are limitations based on your state of residence. Vehicle owners can even exempt multiple vehicles as long as combined they remain under the equity limit. Like the Homestead Exemption, state regulations can vary on the amount of equity that can be in an exempted vehicle. Vehicles that have a loan against them can also be maintained through the bankruptcy process by reaffirming on (or essentially resigning) the loan.


Household Items

The provisions for household items allow for an exemption of several household items, including beds, couches, tables and much more. Most household goods are not considered major assets by most bankruptcy trustees because of low resale value. The value of these items is based on what a retail merchant could sell the items for, which is often significantly lower than the original purchase price. This makes protecting household assets fairly straightforward.


Retirement assets


Exemptions also extend to assets such as retirement accounts, 401(k) deferred compensation plans, some trusts, pensions, profit-sharing, some stock options, unpaid wages and workers compensation claims. These exemptions allow people to go through the bankruptcy process with peace of mind knowing that long-term retirement investments are secured.


At-Risk Assets

In addition, bankruptcy pauses and prevents all collection efforts, protecting property that may already be at risk. This provision is called the automatic stay, which not only stops creditor calls, lawsuits and judgments, but also property repossessions and even foreclosure. Bankruptcy court can essentially act as a firewall between your property and your creditors.



Most “toys” are not exempt, such as boats and four-wheelers. Other items that are often non-exempt include fine art, high value instruments and high value exotic pets. These assets may be sold by the bankruptcy trustee to pay back a portion of your debts.


Protect Your Assets

Contact Lincoln Law today at 800-404-0018 to receive a free consultation with an experienced bankruptcy professional. Lincoln Law's experience with a wide variety of financial scenarios ensures that no matter what you’re facing, we can point you in the right direction and help you down the path to financial freedom - assets intact.