The purpose of the Bankruptcy Code is to give honest but unfortunate debtors a fresh start while treating creditors fairly at the same time. In drafting the Bankruptcy Code, Congress sought to ensure that a debtor and a debtor's family was able to maintain at least a minimum level of financial well-being; thus, it exempted specified types and amount of personal property that were free from the grasps of creditors. Both the federal Bankruptcy Code and state law provide exemptions, but a debtor must chose to whether to apply either the federal or the state exemption scheme. Usually, the federal exemptions are more generous and comprehensive.
The federal exemptions are as follows:
$20,200 of real property, including co-op or mobile home, or burial plot. The unused portion of the homestead exemption can be used for any property, up to $10,125.
The following personal property may be exempt, either wholly or up to the dollar amount given:
- $20,200 of personal injury lawsuit awards (not to include pain & suffering or pecuniary loss)
- $3,225 for vehicle
- $1,350 of jewelry
- Health aids
- Wrongful death lawsuit awards for person the filer depended on
- The following personal property may be exempt to a per-item limit of $525 and an aggregate total of $10,775: Animals, Appliances, Books, Crops, Clothing, Furnishings, Household goods, Musical Instruments
- $10,775 of life insurance policy with loan value, in accrued dividends or interest
- Disability, illness or unemployment benefits
- Life insurance payments from policy for person filer depended on, needed for support
- Unmatured life insurance contract, except credit insurance policy
- Tax-exempt retirement accounts such as 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs and defined benefit plans.
- $1,095,000 per person of IRAs and Roth IRAs
- Crime victims' compensation
- Public assistance