What Is a Bankruptcy Exemption?
When a debtor is considering filing for bankruptcy, they may think that they will need to give up their assets as part of the process. In most cases, this is not true, because of bankruptcy exemptions, which are legal protections that allow debtors to keep certain property or portion thereof despite filing for bankruptcy. This can include a personal residence, car, household goods, retirement accounts, or even a potential settlement from a personal injury lawsuit. The value of an exemption refers to the equity a debtor holds in the property, meaning the portion of the property’s value that is not subject to a lien or loan. For married couples filing jointly, the exemption amounts are doubled. See 11 U.S.C. § 522(m).
For individuals filing for bankruptcy, states can choose whether to allow the use of their own exemption statutes or those within the federal bankruptcy code. New York is among the states that has opted to allow use of the federal exemptions, meaning debtors in New York may choose between New York and the federal exemptions, whichever is more favorable for their case. However, debtors must choose one set of exemptions and cannot combine exemptions between the two.
Starting April 1, 2025, individuals filing for bankruptcy in states that allow the use of federal bankruptcy exemptions, including New York, will benefit from higher exemption limits. These changes are part of the routine inflation-based adjustment required every three years under the Bankruptcy Code. See 11 U.S.C. § 104(b).
New Federal Bankruptcy Exemption Amounts (Effective April 1, 2025)
The following is a breakdown of the most important updated federal exemption amounts under the Bankruptcy Code:
- Homestead Exemption – § 522(d)(1): $31,575
- Motor Vehicle Exemption – § 522(d)(2): $5,025
- Household Goods – § 522(d)(3):
- Per Item Limit: $800
- Aggregate Limit: $16,850
- Jewelry – § 522(d)(4): $2,125
- Wildcard Exemption – § 522(d)(5):
- Any property: $1,675
- Unused homestead amount: Up to $15,800
- Tools of the Trade – § 522(d)(6): $3,175
- Unmatured Life Insurance – § 522(d)(8): $16,850
- Personal Injury Claims – § 522(d)(11)(D): $31,575
- Qualified Retirement Accounts – § 522(n): $1,711,975
Why This Matters for Bankruptcy Filers
These updated exemption amounts give filers the ability to protect more of their assets in a bankruptcy case. With these higher limits, more consumers will be able to retain their property and emerge from bankruptcy with greater financial stability.
What About Homeowners in New York?
Since 2011, when New York opted to allow use of the federal exemptions, most New Yorkers filing for bankruptcy choose the federal exemptions (with its wildcard exemption) except for those debtors who need to use New York State’s more generous homestead exemption to protect their primary residence. In New York, debtors can protect $204,825 of equity in a primary residence in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, or Putnam counties under the New York State exemptions. With the significant increase in home values over the last number of years, this exemption became critical to protecting home equity in bankruptcy.
Contact the Law Offices of David I. Pankin, P.C.
The April 2025 increase in federal bankruptcy exemptions is welcome news for debtors. Whether you’re considering filing Chapter 7 or Chapter 13, these changes make it more likely that you can keep your essential assets and be able to start fresh financially.
If you are in contemplation of filing for bankruptcy, you should consult with a bankruptcy attorney to evaluate whether the federal or state exemptions will offer better protection for your specific situation. At the Law Offices of David I. Pankin, P.C. we have over 28 years of experience helping debtors obtain a fresh start through bankruptcy. Contact us today to arrange a free consultation by calling (888) 529-9600 or by using our easy online contact form.
