The purpose behind a bankruptcy is it is supposed to give you, the honest but unfortunate debtor, a fresh start. Such a start would be impossible if you are sitting on the side of the road with nothing. Thus, Congress and the state legislature have created exemptions. Exemptions are a way for you to keep and protect important to your assets. Only when there are “nonexempt” assets, or assets that are unable to be protected by the available exemptions, do your risk potentially losing assets. However, in the majority of cases, bankruptcy cases are “no asset” cases. Or cases where there is nothing to be lost and nothing available to go to the creditors.
The amount of exempt property you may protect is typically based on state law. Every state is different, and which set of laws depends on your residence in the five years prior to filing bankruptcy. In most cases, exemptions are based on dollar amounts and not a set list of property because while a single person might only need a dining table with 2 chairs, a family of 5 kids will need a much larger table and with many more chairs. Exemption dollar amounts take into consideration whether you are single or married, have dependents (children or others you are supporting) in your home, or splitting your children between households due to custody share agreements.