What is exempt property in bankruptcy and what qualifies as exempt?

Full question:

What does exempt property mean and what property is exempt?

• Category: Bankruptcy
• Date: 04/07/2025
• State: Alabama

Answer:

Exempt property refers to assets that do not become part of a debtor's bankruptcy estate when they file for bankruptcy. Instead, these assets are retained by the debtor and are not used to pay off unsecured creditors. Examples of exempt property include:

• The debtor's interest, up to $15,000, in real or personal property used as a residence, in a cooperative residence, or in a burial plot for the debtor or their dependents.
• One motor vehicle, with an interest not exceeding $2,400.
• Household furnishings, goods, and personal items, with an interest not exceeding $400 per item or $8,000 in total.
• Jewelry, with a total interest not exceeding $1,000.
• Any property, with a total value not exceeding $800 plus any unused exemption amount of up to $7,500 from the real or personal property exemption.
• Tools, professional books, or implements of trade, with an interest not exceeding $1,500.
• Unmatured life insurance contracts owned by the debtor, excluding credit life insurance.
• Accrued dividends or interest from life insurance contracts, with a value not exceeding $8,000 minus any transferred estate property.
• Professionally prescribed health aids for the debtor or their dependents.
• The right to receive benefits such as social security, unemployment compensation, veterans' benefits, and certain pension payments necessary for the support of the debtor and dependents.
• Payments related to crime victim reparations, wrongful death, personal bodily injury (up to $15,000), or loss of future earnings, to the extent necessary for support.