The United States Constitution vests the federal government with sole authority to regulate bankruptcy:

"The Congress shall have power to establish a uniform rule ... on the subject of bankruptcies throughout the United States." (Article 1, Section 8, Clause 4)

While the federal government technically enjoys complete dominion over the subject of bankruptcy, it long ago gave the states the power to determine what property should and should not be subject to exemption.

Today's post will briefly survey the subject of bankruptcy exemptions, a very interesting yet somewhat complex area of bankruptcy law.

What are exemptions?

Exemptions are laws designed to protect your property from both creditors and bankruptcy trustees.

To illustrate, if you are in need of a fresh financial start and decide to file for Chapter 7 bankruptcy, you may have to sell/liquidate property in order to settle your debts with creditors. However, exemptions will prevent some of your property (your home, car or personal possessions, etc.) from being sold to pay off your debts.

Does a person have the option of choosing between state or federal exemptions?

Yes. Some states grant debtors the right to choose between using either the state exemptions or the federal exemptions, while other states have created their own set of exemptions that must be used (i.e., no federal exemptions are permitted).

The following states allow a debtor to choose between state and federal exemptions:

• Arkansas
• Connecticut
• District of Columbia
• Hawaii
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New Mexico
• Pennsylvania
• Rhode Island
• South Carolina
• Texas
• Vermont
• Washington
• Wisconsin 

Future posts will continue to survey this fascinating area of bankruptcy law and take a closer look at the available exemptions (state and federal) under Texas law.

The following post was for informational purposes only and is not to be construed as legal advice. Contact an experienced legal professional to learn more about your bankruptcy or debt relief options.

Related Resources:
  
• An Introduction to Bankruptcy Exemptions (FreeAdvice.com)
• Bankruptcy: An Overview (Cornell University Law School)