Updated: Sep 30, 2020
One of the top questions asked by someone considering bankruptcy is will I lose everything if I file bankruptcy? It is the job of a bankruptcy trustee to review all of your income and assets to determine if your creditors can be paid in any way. The good news is, there are exemptions in place to help protect a portion of these assets.
Exemptions vary from state to state. Be sure to check with the bankruptcy law in your state. Here is a list of bankruptcy exemptions state by state. Some of the exemptions include:
Head of household wages
Annuities and life insurance proceeds and cash surrender value
Homestead (up to 1/2 acre in a city and 160 acres in the county)
Retirement accounts, including Roth IRA, IRA, 401k,
Prepaid College Funding
What is an Exemption?
Exemptions in bankruptcy are part of the bankruptcy code that determine the property and assets that a trustee or your creditors can and can't touch. This allows the trustee to legally take some of the property outside of the exempt property to then repay your debtors. Some examples of property are:
Household items (furnishings, electronics, collectibles, sports equipment, firearms, clothes, and jewelry)
Financial assets (bank, stock, and retirement account balances, business interests, legal claims, tax returns, and other monetary interests)
Any other assets that you may own
Your state will allow a specific exemption for most assets.
The most important thing to remember is to be honest about what you own. Don't try to hide things from the trustee. This never works out in your favor. It is best to consult with a trusted attorney so you are sure to know the best course of action to take with your property.
Most attorneys offer a free consultation where you can ask anything you may have concerns about. They can also help you decide what steps may be best for you.