An “exemption” is an asset or benefit that is exempt from liquidation and distribution to creditors. In other words, exempt assets are those that you get to keep in the bankruptcy process. When you file bankruptcy in Washington you are allowed to choose between a list of exemptions under federal law or state law. You cannot pick and choose among exempt assets from each list – either you choose the federal exemption list or the Washington state exemption list.
Which list should you choose? The obvious answer is that you should choose the list that results in you getting to keep all or most of your property. The subtle answer is that it is sometimes difficult to determine what kind of exemption may apply to a particular asset and you may get better or worse results in the bankruptcy by considering variables such as whether your are individually or jointly filing. Exemption planning is one of the key reasons to work with an experienced Tacoma Bankruptcy Attorney on your bankruptcy.
Federal Bankruptcy Exemptions
The Federal bankruptcy exemptions are set forth in Title 11 of the United States Code. The exemptions are per debtor (they can therefore be doubled by a husband and wife filing together). This list is current as of January 2012.
Homestead:
11 USC 522(d)(1) Real property, including mobile homes and co-ops, or burial plots up to $21,625 (unused portion of homestead, up to $10,825, may be used for other property)
Personal Property:
11 USC 522(d)(2) – Motor vehicle up to $3,450
11 USC 522(d)(3) – Household furnishings and goods, clothing, appliances, books and musical instruments up to $550 per item, and up to $11,525 total
11 USC 522(d)(4) – Jewelry up to $1,450
11 USC 522(d)(5) – $1,150 of any property, and unused portion of homestead up to $10,825
11 USC 522(d)(9) – Health aids
Pensions:
11 USC 522(d)(12) – Retirement funds in accounts exempt from taxation under section 401, 403, 408, 408A, 414, 457 or 501(a) of the Internal Revenue Code
Benefits: Your right to receive …
11 USC 522(d)(10)(A) – Social security, unemployment compensation or local public assistance benefits
11 USC 522(d)(10)(B) – Veterans’ benefits
11 USC 522(d)(10)(C) – Disability, illness, or unemployment benefits
11 USC 522(d)(10)(D) – Alimony, support, or separate maintenance (to the extent reasonably necessary for support)
11 USC 522(d)(10)(E) – Payments under stock bonus, pension, profitsharing, annuity, or similar plans or contracts on account of illness, disability, death, age, or length of service (to the extent reasonably necessary for support) (exemption does not apply if the plan was established by an insider that employed the debtor at the time the plan or contract arose; payments are on account of age or length of service; and the plan does not qualify under Section 401(a), 403(a), 403(b) or 408 of the Internal Revenue Code)
Compensation: Your right to receive, or property that is traceable to …
11 USC 522(d)(11)(A) – Crime victim’s compensation
11 USC 522(d)(11)(B) – Wrongful death award on the account of the death of an individual you were dependent upon for support (to the extent reasonably necessary for support)
11 USC 522(d)(11)(C) – Life insurance contract payments on the account of the death of an individual you were dependent upon for support (to the extent reasonably necessary)
11 USC 522(d)(11)(D) – Payment for personal bodily injury up to $21,625 (not including pain and suffering or actual pecuniary loss)
11 USC 522(d)(11)(E) – Payment in compensation for loss of future earnings (to the extent reasonably necessary for support)
Tools of Trade:
11 USC 522(d)(6) – Implements, books and tools of trade, up to $2,025
Insurance:
11 USC 522(d)(7) – Unmatured life insurance policy except credit insurance
11 USC 522(d)(8) – Accrued dividends or interest under, or loan value of, any unmatured life insurance policy up to $11,525
Washington Bankruptcy Exemptions
All statutory references are to Revised Code of Washington unless otherwise noted. You can find the Revised Code of Washington here.
Homestead
RCW 6.13.010 and .030 – Real property or mobile home up to $125,000 ($15,000 for other personal property used as a homestead)
Personal Property
RCW 6.15.010(1)(a) -All wearing apparel (except jewelry, furs and personal ornaments are limited to $3,500)
RCW 6.15.010(1)(b) – Private library up to $3,500
RCW 6.15.010(1)(b) – All family pictures and keepsakes
RCW 6.15.010(1)(c) – Household goods, furniture, appliances, home and yard equipment up to $6,500 ($13,000 as to the marital community); no single item may exceed $750
RCW 6.15.010(1)(c) – Other personal property (except personal earnings) up to $3,500 (of which not more than $1,500 may be cash, and of which not more than $200 may be in bank accounts, savings and loan accounts, stocks, bonds, or other securities as to debts to State agencies, or $500 as to all other debts)
RCW 6.15.010(1)(c) – Motor vehicle used for personal transportation up to $3,250 (or for a marital community two motor vehicles used for personal transportation, not to exceed $6,500 in aggregate value)
RCW 6.15.010(1)(c) – Any past due, current, or future child support paid or owed to the debtor, which can be traced
RCW 6.15.010(1)(c) – All professionally prescribed health aids for the debtor or a dependent of the debtor
RCW 6.15.010(1)(c) – The right to or proceeds of a payment not to exceed $20,000 for personal bodily injury (not including pain and suffering or compensation for actual pecuniary loss)
RCW 6.15.010(1)(c) – The right to or proceeds of a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor
Tools of the Trade
RCW 6.15.010(1)(d) – One of the following: (i) tools and materials used in any trade up to $10,000; (ii) library, office furniture, equipment and supplies of a physician, surgeon, attorney, clergyman or other professional up to $10,000; or (iii) farm trucks, tools, equipment, supplies, stock and seed of a farmer up to $10,000
Wages
RCW 6.27.150 – The greater of the following: 30 times the federal hourly minimum wage or minimum of 75% of disposable earnings
Pensions
RCW 6.15.020(3) – The right of a person to a pension, annuity, or retirement allowance or disability allowance, or death benefits, or any optional benefit, or any other right accrued or accruing to any citizen of the state of Washington under any employee benefit plan, and any fund created by such a plan or arrangement (this exemption covers nearly any tax qualified retirement account)
RCW 2.10.180; 2.12.090 – Judges retirement benefits
RCW 41.24.182; 41.24.240; 43.43.310; 41.26.053 – Police and firefighter retirement benefits
RCW 41.28.200; 41.44.240; 41.20.180 – City employees retirement benefits
RCW 41.32.052 – Teachers retirement benefits
RCW 41.40.052 – Public employees and state employees retirement benefits
Trusts
RCW 6.32.250 – Income or proceeds from a trust for the benefit of the debtor if created and funded by another person
Public Benefits
RCW 7.68.033 – Crime victims’ compensation
RCW 50.40.020 – Unemployment compensation
RCW 51.32.040 – Industrial insurance (workers’ compensation)
RCW 74.08.280 – Any benefit received under Title 74 RCW (which covers nearly all public assistance benefits in Washington State)
Insurance and Other Benefits
RCW 6.15.030 – Insurance proceeds for lost, stolen or destroyed exempt property
RCW 48.18.400 – Proceeds and avails of disability insurance contracts
RCW 48.18.410 – Proceeds and avails of life insurance contracts
RCW 46.18.420 – Group life insurance policy or proceeds
RCW 46.18.430 – Annuity contract and proceeds up to $3,000 per month
RCW 48.36A.180 – Fraternal benefit society benefits
Burial Plots
RCW 68.20.120; 68.24.220 – Personal or family burial plots
Other Miscellaneous
RCW 72.65.060 – Earnings from work release
RCW 11.92.060(3) – property of a person declared incompetent
RCW 25.05.200 – Specific partnership property
RCW 26.16.200; 6.15.040 – Separate property of a nondebtor spouse