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What are Federal Tax Exemptions

Debtor's in bankruptcy are entitled to protect their equity (see NOTE below) in certain property, also known as "assets", from liquidation and distribution to creditors. The nature and extent of the property, known as exempt property, is determined by either the Bankruptcy Code or applicable state law. 11 U.S.C. §522(b) allows an individual debtor to “exempt” his/her equity in certain real, personal, or intangible property from the property of the estate. However, the specific federal exemptions set out in 11 U.S.C. §522(d) are not available in Oregon. Only the exemptions allowed under Oregon state law are available. The dollar amounts of those exemptions, are mostly listed in Chapter 18 of the Oregon Revised Statutes (ORS 18).

NOTE: If the unsecured value of an asset exceeds the value of your exemption, then it can be sold by the trustee and only the exempt amount returned to you. In addition, if an item is otherwise exempt, it does not eliminate the interests of a secured creditor. For example, if you own a car or a house that was purchased with a loan from a bank or credit union and the debt is not paid off, your equity (equity = market value less the balance owing) is exempt up to the amount allowed by law, BUT you will still have to continue to pay for the car or house or the creditor can repossess it.

Deciding which assets are exempt and how and if you can protect these assets from your creditors can be one of the more important and difficult aspects of your bankruptcy case. It is extremely important to consult an attorney if you have any questions regarding the issue of exempt assets.

Once you have determined what exemptions apply to your assets, you need to fill them in on Schedule C. As with all schedules, it is important to fully complete and provide all of the information requested. If no one objects to the exemptions you have listed within the time frame specified by the Bankruptcy Court, these assets will not be a part of your bankruptcy estate and will not be used to pay creditors through your bankruptcy case.

Typically, exempt assets (all subject to certain dollar limitations) include clothing, jewelry, home furnishings, vehicles, equity in your home, tools of the trade, etc. The most common exemptions and amounts allowed in Oregon are as follows:

Wages: Disposable (net) earnings for individuals are exempt unless they are in excess of the following amounts: paid weekly - $170, paid biweekly - $340, paid semi-monthly - $368 or paid monthly - $731.

If the disposable net earnings are more than the foregoing figures, then the LESSER of (1) the amount by which the disposable earnings exceed the foregoing figures, or (2) 25% of the disposable earnings may not be exempt and can become a part of your bankruptcy estate. [ORS 18.385]

Homestead: $25,000 in equity for individual debtor; $33,000 in equity for joint debtors. Also applies to proceeds of sale of residence for one year. [ORS 18.395]

Mobile home (including houseboat): $23,000 for individual debtor; $30,000 joint debtors when real property also owned; $20,000 for individual; $27,000 for joint debtors when only mobile home is owned. [ORS 18.428]

The following exemptions are found in ORS 18.345:

       Household Goods: furniture, radios, a television set and utensils: $3,000 plus provisions and fuel as required for support of householder and family for 60 days.

       Books, pictures, musical instruments: $600 for individual debtor; $1,200 for joint debtors.

       Wearing apparel, jewelry, other personal items: $1,800 for individual debtor; $3,600 for joint debtors.

       Motor vehicle: $1,700 for individual debtor; $3,400 for joint debtors.

       Domestic animals and poultry: $1,000 per household, plus sufficient food to maintain animals for 60 days.
 
       Tools of trade: Includes a library necessary for the debtor’s occupation up to $3,000 for individual debtor; $6,000 for joint debtors (provided both spouses use tools in their trade).
 
       Earned income tax credit: Unlimited debtor’s right to receive moneys from, or traceable to, payment of an earned income tax credit under the federal tax laws.

       Other personal property: $400 interest in any personal property but cannot be used to increase the amount of any other exemption.

       Health aids: Unlimited if professionally prescribed for debtor or dependent of debtor.
 
       Spousal support, child support, separate maintenance: To the extent reasonably necessary for the support of debtor and any dependent.

       Personal injury: Payments up to $10,000 for individual; $15,000 for joint debtors.

       Loss of Future Earnings: To extent reasonably necessary for support of debtor and any dependent.

Firearms: $1,000 combined value for one rifle or shotgun and a pistol for each debtor who is a citizen of Oregon and over 16 years of age [ORS 18.362]

Bank Accounts: up to $7,500 if traceable to exempt sources. [ORS 18.348 ]

Examples of other possible exemptions: Unemployment Benefits [ORS 657.855]; Social Security Benefits (including SSI) [42 USC §407]; Public Welfare - aid to disabled [ORS 412.610], aid to blind [ORS 412.115] and old age assistance [ORS 413.130]; Vocational Rehabilitation payments [ORS 344.580]; Longshoremen’s & Harbor Worker’s Compensation [ORS 656.234 and 33 USC §916]; Veterans Benefits 38 USC § 3101];Group life insurance proceeds [ORS 743.047] ; Proceeds from health insurance policies [ORS 743.050]; Burial plots [ORS 65.870]; Pensions, Retirement Plans, IRA or Keogh Plans [ORS 18.358 ]; Public employees retirement fund [ORS 238.445 and Award under Crime Victim Reparation Law [ORS 18.345].

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