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Bankruptcy Exemptions

Your exemptions determine which property you can keep in a Chapter 7 and how the liquidation test is determined in a Chapter 13.  Exemptions are based on state law, but there are federal exemptions that can be used in certain circumstances. To determine what state’s exemption laws apply, the bankruptcy code requires us to look at whether a person has lived in the same state 730 days (2 years) before the bankruptcy was filed.  If you have not lived in the same state in the 730 days before filing, the question then becomes “what state have you lived in for the majority of the 180 days before the 730 days before you filed bankruptcy?” If this seems confusing, you are not alone. Fortunately, our lawyers cover this analysis with a free consultation to make sure that we use the right exemptions to protect your property.

Since most of our clients use Mississippi Exemptions, we have prepared the short list below of most exemptions, in determining the value of your property, the bankruptcy court looks at how much it would cost to replace the item in its current condition.  This means that for household items, you look at yard sale / thrift store pricing.

  1. Homestead up to $75,000.00 in equity in real property up to 160 acres. §85-3-17  Miss. Code Ann. Example: If your home has a value of $150,000.00 and your mortgage payoff is $100,000.00, then your equity is $50,000.00 and the homestead is exempt or protected.
  2. One (1) mobile home, trailer, manufactured housing, or similar type dwelling owned and occupied as the primary residence by the debtor, not exceeding a value of Thirty Thousand Dollars ($30,000.00); in determining this equity after deducting liens. §85-3-1(d) Miss. Code Ann.
  3. Personal property including the following items up to $10,000.00 in value for an individual and up to $10,000.00 each in value for a husband and wife filling jointly, per §85-3-1(a) Miss. Code Ann. , which include the following:
    1. Household goods, wearing apparel, books, animals, crops, one television, wedding rings and engagement rings (this does not include most electronic equipment and jewelry other than wedding rings unless each item is worth less than $200.00; thus, almost all of our client’s electronic equipment and jewelry can be retained),
    2. Motor vehicles (which in Mississippi is any vehicle or trailer that requires a tag under Mississippi law, but does not include such items as a dirt bike or 4 wheeler that do not require tags),
    3. Implements, professional books or tools of the debtor’s trade ,
    4. Cash on hand (note: this does not include money in bank accounts),
    5. Professionally prescribed health aids , and
    6. Any item worth less than $200.00 (This covers most personal property since personal property typically has a low resale value).
  4. Retirement in multiple forms §85-3-1(b)(i) Miss. Code Ann. , including:
    1. An annuity, pension, or profit-sharing or stock bonus or similar plan established to provide retirement benefits for an officer or employee of a public or private employer or for a self-employed individual;
    2. An annuity, pension, or military retirement pay plan or other retirement plan administered by the United States; and
    3. An individual retirement account.
  5. Income from disability insurance. §85-3-1(b)(ii)  Miss. Code Ann.  (Note: We use this on all social security disability claims, even SSI claims which are not really disability insurance. To obtain SSI (supplemental security income), one must be disabled, but it is a needs basis program and is not insurance. SSI can also be exempt under Federal Law.
  6. Personal injury judgments up to $10,000.00. ( Note: The problem here is that the courts have ruled that a personal injury claim that has not been reduced to a judgment is not exempt.) §85-3-17  Miss. Code Ann.  Thus, this exemption normally cannot be used because when individuals file their bankruptcy petition, they normally have a pending claim, not a judgment.
  7. Worker’s Compensation benefits. §71-3-43  Miss. Code Ann.  100% of worker’s comp benefits are exempt and protected.
  8. Whole life and universal life insurance cash value.  (Note: it appears that the amount is unlimited except that the any amount of cash value placed into the policy within the last 12 months that brings the total cash value to greater than $50,000.00 is not exempt.) §85-3-11 Miss. Code Ann.
  9. Seventy-five (75%) of all wages and 100% of wages due within the next 30 days after service of a writ. §85-3-2 Miss. Code Ann . This exemption is important when a person normally receives a large bonus each year.
  10. A state tax refund up to $5,000.00; a federal tax refund of up to $5,000.00 and earned income credit of up to $5,000.00. A husband and wife filing a joint case can exempt up to $5,000.00 each in each category. §85-3-1(i), (j) & (k) Miss. Code Ann . Most people think of the entire amount they receive as their tax refund. However, most of the time, part of the refund is actually earned income credit and part of it is a refund of taxes withheld the prior year.
  11. Proceeds of insurance and or from the sale of exempt property. This from insurance or the sale of real such as one’s homestead or personal property such as autos or household goods. §85-3-1(b)(i) Miss. Code Ann . This can include payments on a deed of trust on the sale of the debtor’s homestead provided he/she/they were still living there at the time of the sale and they have not purchased a new homestead.  The homestead would have to have been a Mississippi homestead originally exempt under §85-3-21. Miss. Code Ann . If the proceeds have been received it is critical that these funds have never been co-mingled with other funds.
  12. $50,000.00 “Wildcard exemption” for debtors at the age of 70 or above.  This exemption has no limitation on type of property. Thus, if you are 70 or older, you have a $50,000.00 wildcard exemption and if a husband and wife are both 70 or older, then each of them has a $50,000.00 wild card exemption. §85-3-1(h) Miss. Code Ann.
  13. Funds in a health savings account, provided the account was established pursuant to a health savings account program provided in the Health Savings Account Act under Mississippi law. §85-3-1(g)

    Although there are a few other items which may be exempted under the Mississippi Code, most people filing bankruptcy do not own or hold any exempt assets other than those listed above. The most common non-exempt assets that the bankruptcy trustee liquidates in chapter 7 proceedings are real property other than one’s homestead, debts owed to the debtors other than those types of debts listed above, personal injury claims or other potential claims or lawsuits in which the debtor holds an interest, and interest in estates.

  14. Items exempt under Federal Law. There are multiple items which will be exempt in every state.  A few of those are:  Student loan funds or grants, FEMA benefits, crop insurance proceeds for farmers, multiple types of retirement accounts, veteran’s benefits, social security benefits and numerous other types of federal benefits.
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