Apart from the choice between state and federal exemptions available for bankruptcy filers, additional exemptions in the form of federal non-bankruptcy exemptions are available. Individuals who are unable to cope with defaulting on payments and file for bankruptcy can heave a sigh of relief. People can take advantage of exemptions outside the bankruptcy code to help protect their assets when they file for bankruptcy. As these exemptions exists outside bankruptcy code, they are termed as federal non-bankruptcy exemptions. It is therefore important to have a sound understanding of the exemptions under this heading to save your property in rough times.
Difference between Bankruptcy Exemptions and Non-bankruptcy Exemptions
Exemptions, whether state or federal, bankruptcy or non-bankruptcy work for the same shared goal – preventing taking under of certain assets, so as to allow the credit defaulter to start a new life. When you avail any exemption, a certain amount of property is prevented from being sold by the bankruptcy trustee to repay your creditors. However, unlike bankruptcy exemptions, it is harder to qualify or use non-bankruptcy exemptions as you are required to belong to a specific group or part of a certain profession.
Eligibility Criteria for Federal Non-bankruptcy Exemptions
Unlike Sacramento (California), many states in U.S. allow you to choose from state and federal bankruptcy exemptions. If you wish to avail additional exemption under the federal non-bankruptcy exemption, it is important to know whether your state allows you a choice between state and federal bankruptcy exemption or not. Here’s a list of states which offer you this choice:
- Alaska,
- Arkansas,
- Connecticut,
- District of Columbia,
- Hawaii,
- Kentucky,
- Massachusetts,
- Michigan,
- Minnesota,
- New Hampshire,
- New Jersey,
- New Mexico,
- New York,
- Oregon,
- Pennsylvania,
- Rhode Island,
- Texas,
- Vermont,
- Washington, and
- Wisconsin
Apart from those mentioned above, many states allow only state exemption laws. In case you reside in them, you can avail federal non-bankruptcy exemption. This is beneficial as if you reside in one of the states which allows you a choice between state and federal bankruptcy exemption, and you choose the latter, you cannot use the federal non-bankruptcy exemption. Another factor to keep in mind is that choosing state exemption does not automatically make you eligible for federal non-bankruptcy exemption. You have to fulfil the specialised eligibility criteria if you wish to use it.
Exemptions under Federal Non-bankruptcy Exemptions
If you qualify for the federal non-bankruptcy exemption, here’s what you can save apart from state exemptions. It is important to note that unless specified in exemption, there is no dollar limit to what you can exempt.
- Retirement Benefits
If you are a veteran, civil, foreign or military service employee, railroad worker, CIA employee, a military medal of honour roll or a social security benefit recipient, your retirement benefits are entirely exempted.
- Death & Disability Benefits
If you are a harbour worker, longshoreman or a government employee, your death and disability benefits are fully exempted. If you have received any benefits for risk taken, hazards endured, injury sustained or death resulting from war, the compensation is also exempted under federal non-bankruptcy exemption
- Survivor’s Benefit
This exemption is available for people in military service, some judicial employees including judges, Supreme Court Chief Justice administrative assistants, and centre directors as well as for lighthouse workers.
- Miscellaneous Non-bankruptcy Exemptions
As per lawyers from Recovery Law Group, federal non-bankruptcy exemptions include:
- Military group life insurance
- Any deposits made by military personnel to saving accounts when on permanent duty outside U.S.
- 75% of earned but unpaid salaries or 30 times federal minimum hourly wage (whichever is more). Judges can grant more for low income debt defaulters depending on their discretion.
- Seamen’s clothing
- Klamath Indian benefits for those Indians living in Oregon
- Indian lands & their homestead lease or sale earnings
- Unemployment benefits for railroad workers
- Any debts incurred by seaman on voyages
- Wages of seaman except when used for child or spousal support
