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The maze of bankruptcy exemptions

The maze of bankruptcy exemptions

Many residents of Vancouver who decided to seek protection under the federal Bankruptcy Act do not realize that they can designate certain assets as "exempt" from seizure. The problem for most people is choosing between the exemptions provided under Washington state law and the Bankruptcy Act. Both lists are exclusive, that is, a debtor cannot pick some state exemptions and then choose other federal exemptions.

Federal bankruptcy exemptions include the following: up to $15,000 in value of the family home; up to $2,400 in value of a motor vehicle; up to $8,000 in value in household goods, clothing and the like; up to $1,000 in jewelry; up to $1,500 in implements or tools of the debtor's trade; the debtor's right to receive a Social Security or veterans' benefit; and other financial interests in retirement plans. The federal list of exemptions contains many other valuable assets that are not usually claimed but are nevertheless important to some debtors.

Exemptions available under Washington state statutes include up to $40,000 in the equity of a homestead; appliances, household goods and clothing up to $2,700; up to $1,500 in books; food and fuel for comfort and maintenance; annuity contracts; fire insurance proceeds in lieu of exemption; life insurance proceeds; pensions and government benefits; child support; 75% of unpaid wages; and tools and materials used in a trade. The Washington list of exemptions, like the federal list, contains many items not included in the list above.

Choosing which list of exemptions to use can be a difficult task. Anyone contemplating filing a bankruptcy petition may wish to consult a knowledgeable bankruptcy attorney for assistance in deciding which list of exemptions provides the greater benefits.

Source: Legal Information Institute, "11 U.S. Code § 522 - Exemptions," accessed on May 13, 2018