Choosing Between State and Federal Bankruptcy Exemptions

How does the choice between state and federal exemptions actually work?

When a bankruptcy case is filed, 11 U.S.C. § 541 creates an estate that includes essentially all of your legal and equitable interests in property. Exemptions are how property comes back out of that estate. Section 522(b)(1) says an individual debtor may exempt the property listed in either paragraph (2) or, in the alternative, paragraph (3). Paragraph (2) is the federal list written into § 522(d). Paragraph (3) is state or local law plus any federal exemption outside § 522(d), together with certain tenancy-by-the-entirety interests and retirement funds held in tax-exempt accounts.

The phrase "in the alternative" is the whole game. You take one paragraph or the other. You cannot claim the federal homestead figure and then reach for a more generous state vehicle figure in the same case. The choice is made on Official Form 106C, Schedule C, where you list each item of property you claim as exempt.

• Filing creates an estate under 11 U.S.C. § 541 that starts out holding nearly everything you own.
• Section 522(b)(1) offers two alternative exemption sets, not a menu to combine.
• The election is recorded on Schedule C, and exemptions are not automatic if you leave property off it (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals).

What decides whether federal exemptions are even available to you?

Your state legislature decides. Section 522(b)(2) makes the federal list available "unless the State law that is applicable to the debtor under paragraph (3)(A) specifically does not so authorize." The legislative history to § 522 puts it plainly: the States may, by passing a law, determine whether the federal exemptions will apply as an alternative to state exemptions in bankruptcy cases.

Many states passed exactly that law. Florida provides that residents "shall not be entitled to the federal exemptions provided in s. 522(d)" (Fla. Stat. § 222.20). North Dakota, Mississippi, Indiana, Nebraska, Ohio, Illinois, Arizona, Alabama, and Kansas have comparable opt-out statutes. Others went the other way: Arkansas gives residents "the right to elect either" the state exemptions or those in § 522(d) (Ark. Code Ann. § 16-66-217), and Kentucky and New York authorize the federal list by statute.

So the first question is not which set is better. It is whether your state gave you a choice at all.

What does federal law say about which state's exemptions apply?

Moving recently does not let you pick a friendlier state's exemption list. Section 522(b)(3)(A) applies the exemption law of the place where your domicile has been located for the 730 days immediately preceding the filing date. If your domicile was not in a single state for that whole 730-day period, the statute looks back further: to the place where you were domiciled for the 180 days immediately preceding the 730-day period, or for the longer portion of that 180-day period than in any other place.

That rule also controls whether the federal list is available, because § 522(b)(2) asks whether "the State law that is applicable to the debtor under paragraph (3)(A)" authorizes it. Someone who moved from an opt-out state to an election state last year may still be governed by the old state's opt-out. Section 522(b)(3)(A) is also expressly subject to subsections (o) and (p), which place further limits on certain homestead claims.

• The lookback is 730 days of domicile before the petition date, under 11 U.S.C. § 522(b)(3)(A).
• A broken 730-day period sends the analysis back to a 180-day window before it.
• Domicile drives both which exemptions apply and whether the federal election exists at all.

Where do state and local rules differ most?

The differences are large and they are not uniform in direction. One court's own published comparison illustrates the point: the District of Alaska publishes a side-by-side table showing that debtors filing there may take either state or federal exemptions but not both, and that some categories are more generous federally while others are more generous under state law (U.S. Bankr. Ct. D. Alaska, Exemptions (Schedule C) for Alaska Bankruptcy Cases).

States also structure the choice differently. California does not present a plain state-versus-federal election; Cal. Civ. Proc. Code § 703.140 creates a separate in-lieu-of list inside California law that spouses may elect jointly, with waiver requirements when only one spouse files. Georgia sets its own bankruptcy-specific list in O.C.G.A. § 44-13-100. Arkansas layers statutory bankruptcy exemptions on top of constitutional homestead protections (Ark. Code Ann. § 16-66-218).

We publish verified exemption amounts on the state pages rather than restating them here, because they change and they are the figures people most often get wrong.

• Some categories favor the federal list, others the state list, in the same state.
• A few states use an in-lieu-of alternative rather than a straight federal election.
• Amounts are jurisdiction-specific and are published on the state pages, not here.

What does this look like in practice for a married couple?

Spouses cannot split the difference. Section 522(b)(1) states that in joint cases filed under § 302, and in individual cases filed by or against debtors who are husband and wife whose estates are ordered jointly administered under Rule 1015(b), one debtor may not elect the federal list while the other elects the state list. If the parties cannot agree on the alternative to be elected, they are deemed to elect the federal set, where that election is permitted under the law of the jurisdiction where the case is filed.

California adds its own wrinkle for one-spouse filings: under Cal. Civ. Proc. Code § 703.140(a)(2), both spouses must effectively waive in writing the right to claim the other set before the § 703.140(b) list may be elected, with an exception for a debtor living separate and apart from their spouse on the petition date unless they shared an ownership interest in a potential homestead.

The practical consequence is that the election is a household decision, made once, for the whole case.

• One election per joint case, under 11 U.S.C. § 522(b)(1).
• Disagreement defaults to the federal list where that election is permitted.
• California requires a written waiver in some individual filings by a married person.

What documents and information does the election involve?

The election is made in the schedules, not in a separate motion. You list each item you claim as exempt on Schedule C: The Property You Claim as Exempt (Official Form 106C). Court guidance is blunt about the risk of leaving something off: exemptions are not automatic, and if you do not list the property, the trustee may sell it and pay the proceeds to your creditors (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals).

Value matters as much as the list you choose. Section 522(a)(2) defines "value" as fair market value as of the date the petition is filed, or for property that becomes estate property later, as of the date it becomes estate property. So the relevant number is what the item is worth on the filing date, not what you paid.

Filing fees are separate from exemptions and do not change with the election. A Chapter 7 case carries a $245 filing fee (28 U.S.C. § 1930(a)(1)(A), (f)(1)), a $78 administrative fee, and a $15 trustee surcharge. A Chapter 13 case carries a $235 filing fee (28 U.S.C. § 1930(a)(1)(B)) and a $78 administrative fee.

• Schedule C (Official Form 106C) is where the election and each claimed item appear.
• Fair market value on the petition date is the measuring stick (11 U.S.C. § 522(a)(2)).
• You will need ownership documents, lien balances, and honest valuations for each item.

What should you ask a lawyer about the exemption election?

This is one of the areas where a short conversation with a local bankruptcy attorney tends to pay for itself, because the election is generally made once and is worth getting right the first time. Useful questions are specific to your property and your timeline.

Ask which set your domicile history under § 522(b)(3)(A) makes applicable, and whether any recent move changes it. Ask how each list treats your particular assets side by side, including retirement funds, which § 522(b)(3)(C) addresses through accounts exempt from taxation under sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code. Ask whether lien avoidance under § 522(f) or redemption under 11 U.S.C. § 722 changes the picture for a secured item, since § 722 lets a debtor redeem certain tangible personal property intended primarily for personal, family, or household use if the property is exempted under § 522 or abandoned under § 554.

Also ask how the choice interacts with the chapter you are considering.

• Which state's law applies given my domicile over the last 730 days?
• Item by item, how do the two lists compare for what I actually own?
• Do § 522(f) lien avoidance or § 722 redemption change the analysis for my car or household goods?
• Does the election look different depending on whether I file Chapter 7 or Chapter 13?

How does the exemption choice connect to discharge and to keeping property?

Exemptions decide what property you keep. Discharge decides which debts go away. They are separate questions, and one does not guarantee the other. Section 523 lists categories of debt excepted from discharge, including many taxes, debts obtained by false pretenses or actual fraud, and debts neither listed nor scheduled in your papers.

The two do intersect in one specific place. Section 522(c)(1) provides that dischargeable tax claims may not be collected out of exempt property. The legislative history describes this as a deliberate change from prior law, and notes that nondischargeable taxes continue to be collectible out of exempt property.

Court guidance also cautions that liens on property may still be enforced after discharge, so a creditor may retain the right to foreclose a mortgage or repossess a vehicle even in a case that ends in discharge (Bankr. E.D. La. official guidance — Chapter 7 Form Packet). Exemptions protect equity from the trustee; they are not a general shield against a valid lien.

• Exemptions address property; 11 U.S.C. § 523 addresses which debts survive.
• Dischargeable taxes cannot be collected from exempt property under § 522(c)(1).
• Liens can survive discharge, which is why lien avoidance and redemption come up separately.

Frequently asked questions

Can I mix state and federal exemptions to get the best of both?

No. Section 522(b)(1) frames the two lists as alternatives, so a debtor exempts the property listed in either paragraph (2) or, in the alternative, paragraph (3). You choose one complete set for the case. Some federal exemptions outside § 522(d), such as certain retirement and benefit protections, sit inside the paragraph (3) route rather than being a separate mix-and-match option.

How do I find out whether my state allows the federal exemptions?

Look for a state statute addressing § 522(b) directly, since that is where legislatures record the decision. Opt-out statutes typically say residents "are not entitled to the federal exemptions provided in" § 522(d), as in N.D. Cent. Code § 28-22-17 and Miss. Code Ann. § 85-3-2. Authorizing statutes say the opposite, as in Ark. Code Ann. § 16-66-217. Our state pages track this.

I moved to a new state last year. Which exemptions apply?

Section 522(b)(3)(A) applies the law of the place where your domicile was located for the 730 days immediately preceding the filing date. A move inside that window generally means the earlier state's law still governs. If domicile was not in a single state for the full 730 days, the statute looks to a 180-day period immediately preceding it. Timing questions here are worth a lawyer's review.

What happens if my spouse and I disagree about which set to use?

Section 522(b)(1) resolves it by default. In joint cases and in jointly administered individual cases filed by or against spouses, one debtor may not elect the federal list while the other elects the state list. If the parties cannot agree on the alternative to be elected, they are deemed to elect the federal set, where that election is permitted under the law of the jurisdiction where the case is filed.

Does the exemption choice affect what I pay to file?

No. Filing fees are set by statute and the fee schedule regardless of which exemption list you claim. A Chapter 7 case carries a $245 filing fee, a $78 administrative fee, and a $15 trustee surcharge. A Chapter 13 case carries a $235 filing fee and a $78 administrative fee. Some fee relief exists in Chapter 7 under 28 U.S.C. § 1930(f), subject to conditions.

Are exemptions automatic once I file?

No. Court instructions state directly that exemptions are not automatic, and that to exempt property you must list it on Schedule C: The Property You Claim as Exempt (Official Form 106C). If you do not list the property, the trustee may sell it and pay the proceeds to your creditors. That makes accurate scheduling, and accurate petition-date valuation under 11 U.S.C. § 522(a)(2), central to the outcome.

Do exemptions stop a lender from repossessing a car I still owe on?

Not by themselves. Court guidance notes that liens on property may still be enforced after discharge, so a creditor may retain the right to foreclose a mortgage or repossess a vehicle. Separate tools address liens: § 522(f) permits avoidance of certain nonpossessory, nonpurchase-money security interests, and 11 U.S.C. § 722 permits redemption of certain exempted or abandoned tangible personal property by paying the allowed secured claim.

Does the exemption election work differently in Chapter 13?

The election under 11 U.S.C. § 522 applies to individual debtors generally, so the same two alternatives and the same domicile rule are in play. What differs is consequence: in Chapter 7 a trustee may sell non-exempt property, while Chapter 13 is a repayment-plan chapter for individuals with regular income. How non-exempt equity affects a plan is a question to raise with a local attorney.

Sources

• 11 U.S.C. § 522 — Exemptions · official source
• 11 U.S.C. § 541 — Property of the estate · official source
• 11 U.S.C. § 523 — Exceptions to discharge · official source
• 11 U.S.C. § 722 — Redemption · official source
• Fla. Stat. § 222.20 — Nonavailability of federal bankruptcy exemptions
• N.D. Cent. Code § 28-22-17 — Nonavailability of federal bankruptcy exemptions
• Miss. Code Ann. § 85-3-2 — Certain federal exemptions prohibited
• Indiana Code § IC 34-55-10-1 — Bankruptcy exemptions
• Neb. Rev. Stat. § 25-15,105 — Federal exemptions; rejected
• Ohio Rev. Code § 2329.662 — Federal exemption not authorized
• 735 ILCS 5/12-1201 — Bankruptcy exemption
• A.R.S. § 33-1133 — Other exemption laws
• Ala. Code § 6-10-11 — Exemptions in Federal Bankruptcy
• K.S.A. 60-2312 — No right to elect exemptions under federal law, exception
• Ark. Code Ann. § 16-66-217 — Election of bankruptcy exemptions
• Ark. Code Ann. § 16-66-218 — Exemptions from execution under federal bankruptcy proceedings
• KRS 427.170 — Federal bankruptcy code exemptions applicable in Kentucky
• N.Y. Debt. & Cred. Law § 285 — Alternative federal exemptions
• Cal. Civ. Proc. Code § 703.140
• O.C.G.A. § 44-13-100 — Exemptions for purposes of bankruptcy and intestate insolvent estates
• U.S. Bankr. Ct. D. Alaska, Exemptions (Schedule C) for Alaska Bankruptcy Cases
• Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals
• Bankr. E.D. La. official guidance — Chapter 7 Form Packet
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9

Related

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