A lot of people who are contemplating bankruptcy wonder which assets are exempt in a bankruptcy filing and which are not. Because the law changed a handful of years ago to make it more difficult to abuse the bankruptcy system and because the Occupy Wall Street movement has called for bankruptcy reform to allow U.S. citizens to be able to include more types of debt in their bankruptcies; it’s not surprising that trying to separate bankruptcy fact from bankruptcy fiction can be very confusing at times.
State vs Federal Exemptions
There are actually two different types of exemption. There is federal exemption, which are those exemptions determined by the federal government and there are state exemptions set in place by individual states. Additionally, those filing for exemption in the state of Texas may apply either the Texas bankruptcy exemption guidelines or the federal exemption guidelines.
Several types of exemptions are the same for both state and federal exemptions. What varies slightly is the dollar amount of those exemptions. For the most part, personal property up to a certain amount, jewelry up to a certain amount, and items necessary for earning a living such as tools, equipment, or books may be exempted. Texas exemptions also allow for the inclusion of work-related benefits such as insurance and pension as well as public assistance benefits. Other states have established their own exemption guidelines that also detail what may or may not be exempted.
Those who are interested in exemptions for their state should consult a local bankruptcy attorney for more details about what may or may not be included in a bankruptcy.