Chapter Nine.Exemptions After reading this chapter, you will be able to:

Define of exemptions Understand the concept of exemptions and their

importance to individual debtors in Bankruptcy proceedings

Describe the Code concept of the “opt out” provision Understand which exemptions to select, when a choice

is available Identify how exemptions are claimed by individual

debtors Identify specific exemptions Describe the homestead exemption and how a

homestead is claimed in many jurisdictions Describe how a claim of exemption is opposed by the

trustee or a creditor

Fresh Start

“Fresh Start” is the phrase most frequently used colloquially to describe the basic elements of debtor relief: Discharge Exemptions Automatic Stay

Exempt

Exemptions are statutorily defined property that an individual debtor may protect from administration by a bankruptcy estate.

Exempt property is not available for liquidation to pay a dividend to creditors; a debtor may keep exempt property.

Exemptions are a primary element of debtor relief.

Homestead Exemption

Homestead is an exemption permitted in an individual debtor’s place of residence.

Section 522(d)(1) of the Bankruptcy Code provides a federal homestead exemption.

State law also provides homestead exemptions.

Summary of Federal Exemptions

Residence of debtor or dependent

Motor vehicle Household goods,

furniture, and wearing apparel

Personal jewelry Any property catch all Tools of trade Unmatured or term

insurance

Cash value of insurance Professionally

prescribed health aids Social Security, welfare,

veterans benefits, alimony, disability, or unemployment

Certain personal injury claims

Retirement accounts

Debt Immune from a Debtor’s Claim of Exemptions These types of debt include:

Consensual liens Tax liens Domestic support obligation Student financial aid obligations that were

fraudulently obtained

Non-Purchase Money Security Interest A security interest in collateral where the

purpose of the loan is other than to purchase the collateral