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Bankruptcy Property Exemptions

The process of bankruptcy offers debtors a clean slate when they are overwhelmed by financial burdens. Once a bankruptcy case is completed, however, the debtor will still need basic possessions and assets to move their life forward. Fortunately, the Bankruptcy Code recognizes these basic needs and provides a variety of property exemptions for debtors. If property is exempt, it will not be subject to the seizure of creditors.

Under new bankruptcy law, a debtor will be required to submit a schedule or list of exempt property when they file the bankruptcy petition. The schedule should include a description of the property, specifying the law authorizing the exemption, and list the value of the exemption and its market value. This information allows parties involved in the case to evaluate the exemption claim and submit any legitimate objections within 30 days from the meeting of the creditors. If someone objects, they must prove that the exemption has been improperly claimed.

Every bankruptcy case is evaluated separately but in most cases the debtor does not have to give up their property or necessary possessions. During and after the closing of the case, the exempted property is protected by law. In fact, not only are you allowed to keep the exempted property, but also the equity, if any, that one may have on the property. Equity is the difference between the value of the exempted property and the remaining debt.


Homestead Exemption

The homestead exemption applies to property used as a residence. Current law limits a homestead exemption to $136,875 if the home was acquired in the 1,215-day period before filing for bankruptcy. Exceptions apply, including when someone upgrades to a more expensive house and transfers equity to the new purchase. The homestead exemption is also limited if it is used to delay, hinder, or defraud a creditor.

Many states have their own exemptions. For example, in California homestead exemptions may be as high as $150,000 depending on your situation. In Louisiana the homestead exemption is $35,000. In other states the exemptions can be much higher or lower than these.



The exemption amount for an automobile under Louisiana Bankruptcy Law is $7,500. The equity in the vehicle is based on its market value less any loans against the car. If the equity is more than $3,225, it is possible to apply exemption amounts from other categories, such as the exemption for tools of the trade. If the trustee sells it, the debtor is entitled to receive the exemption amount. It is also possible to pay the trustee the amount above the exemption and keep the vehicle. Again, state exemptions differ on the value of a car that you are allowed to keep in bankruptcy.


Household Items

Federal and laws provide exemptions for household items of $10,775 and $525 for an individual item. Most state laws are similar. However, these types of items have low resale value and most bankruptcy trustees will not view them as a viable source of assets to use in repaying creditors.


Retirement Assets

Debtors can exempt retirement funds under § 522(d)(12) of the Bankruptcy Code. The exemption applies to pension, profit sharing and stock bonus plans, employee annuities, Individual Retirement Accounts (IRAs), deferred compensation plans such as a 401(k) account, and certain trusts.

If you are seriously considering bankruptcy and you live in Louisiana, you need to consult with a Louisiana bankruptcy attorney. While the process appears complicated, a Louisiana bankruptcy lawyer will be able to help you understand your options and avoid making bad decisions that you could later regret. Kirkpatrick and Associates specializes in bankruptcies. Every day, we help people get out from under debts from $5,000 to $1,000,000 and higher. So far, we’ve wiped out over 100 million dollars in debt. We even created the software that is now used by other leading bankruptcy law firms throughout the country! You need Kirkpatrick and Associates. No other law firm is better qualified to bring you the fastest debt relief and do it right the first time.