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Effective April 1, consumers filing bankruptcy in states that use the “federal bankruptcy exemptions” will be able to exempt more of their equity in their homes, cars, household goods, and even retirement accounts.

April 1 Increase of Federal BK Exemptions
John Rao March 14, 2025

Contents

· Bankruptcy Dollar Amounts Going Up

· New Exemption Amounts Protect More Consumer Property

· Limitations on State Homestead Exemptions

· Exemption for Retirement Accounts

· Exemption for Education IRAs, Tuition Savings Programs, and ABLE Accounts

· Other Dollar Amount Adjustments in the Code

Bankruptcy Code § 104(b) requires that the exemption amounts and most other dollar figures in the Code be automatically adjusted for inflation every three years.

The adjustments are based on changes to the Consumer Price Index for All Urban Consumers published by the Dept of Labor, 

New dollar amounts take effect on April 1, 2025, and will apply to all cases filed on or after that date.  

Many lower-income bankruptcy filers can retain all or almost all of their property in a Chapter 7 bankruptcy.

The new higher federal exemption amounts make it even more likely that consumers can protect their property in a Chapter 7 filing.  

New Exemption Amounts Protect More Consumer Property

Consumers in states that have not opted out of the federal exemptions may claim the bankruptcy exemptions under Bankruptcy Code § 522(d), as discussed in NCLC’s Consumer Bankruptcy Law and Practice § 10.2.1.1.  

The federal bankruptcy exemptions may also be claimed in some cases if the “safe harbor” in Code § 522(b)(3)(A) applies because the consumer is ineligible for any state exemption due to the domiciliary requirement, even if the state of the consumer’s domicile is otherwise an opt-out state, as discussed in id. § 10.2.1.2.

The federal exemption amounts can also be relevant in several opt-out states incorporating some federal BK exemptions into the state exemption scheme; see NCLC’s Consumer Bankruptcy Law and Practice Appx. J. 

Exemption amounts refer not to the value of a property but to the consumer’s equity interest after deducting outstanding credit secured by that property.

The exemption amounts in Code § 522(d) are doubled when a married couple files a joint case. 11 U.S.C. § 522(m). 

For a state-by-state summary of state exemption amounts that apply to bankruptcies in certain states and that also protect property from seizure by judgment creditors, see NCLC’s Consumer Bankruptcy Law and Practice Appx. J.  The same state-by-state survey is found in NCLC’s Collection Actions Appx. H. 

The following are the new exemption amounts, effective April 1:

Homestead – § 522(d)(1)…………………………..$31,575
Motor Vehicle – § 522(d)(2)……………………. $5,025

Household Goods – § 522(d)(3)
Per Item Limit……………………………………… $800
Aggregate Limit……………………………………….. $16,850
Jewelry – § 522(d)(4)…………………………………. $2,125

Wild Card – § 522(d)(5) Any property $1,675
Unused homestead under § 522(d)(1)………………………………..$15,800
Tools of the Trade – § 522(d)(6)…………………………………………$3,175
Unmatured Life Insurance – § 522(d)(8)……………………………..$16,850
Personal Injury Claims – § 522(d)(11)(D)…………………………… $31,575

Limitations on State Homestead Exemptions

The cap on homestead property acquired within 1215 days before the bankruptcy filing under Code § 522(p), and based to the commission of certain bad acts by the debtor under Code § 522(q) will be $214,000. 

NCLC’s Consumer Bankruptcy Law and Practice § 10.2.3.4 discusses these limitations on state homestead exemptions.

Exemption for Retirement Accounts

As discussed in NCLC’s Consumer BK Law and Practice § 10.2.3.3, the federal bankruptcy exemption for retirement funds in pension plans and individual retirement accounts is available to all debtors, even those in “opt-out” states who would not otherwise be permitted to claim the federal exemptions. 11 U.S.C. § 522(d)(12) and 522(b)(3)(C).

The maximum dollar amount for this exemption also adjusts every three years. 11 U.S.C. § 522(n). The new maximum aggregate value of funds in retirement accounts that may be exempted will be $1,711,975.

Exemptions for Education IRAs, Tuition Savings Programs, and ABLE Accounts

Specific property is effectively exempt because the Bankruptcy Code excludes it as property of the bankruptcy estate. 

 The amount in an education IRA, a Code § 529 tuition savings program, and a qualified ABLE account excluded from the estate’s property, if placed in such an account between 365 and 720 days before the petition was filed, will now be $8,575.  11 U.S.C. §§ 541(b)(5)(C), 541(b)(6)(C), 541(b)(10)(C).  

This exclusion from the bankruptcy estate is discussed in id. § 2.5.4.

Other Dollar Amount Adjustments in the Code

The inflation adjustment also applies to other dollar amounts in the Code, including:

· Priority for wages and employee benefits under Code § 507(a)(4) will now be $17,150, and the priority for consumer deposits under Code § 507(a)(7) will be $3,800.·

· Distribution to priority creditors is discussed in NCLC’s Consumer Bankruptcy Law and Practice § 3.5.4 and § 18.5.5.

· · Debt limits for eligibility for Chapter 13 under Code § 109(e) will also go up—to $526,700 in unsecured debt and $1,580,125 in secured debt.  

Chapter 13’s debt limitations are discussed in id. § 4.2.1.3 and § 12.2.3.

· · The threshold for the presumption of interchangeability under Code § 523(a)(2)(C) for purchases of luxury goods or services incurred within 90 days before filing will be $900, and cash advances within 70 days before filing will be $1,250.  

· · A discussion of when these presumptions arise can be found in id. § 15.4.3.2.3.2.

· Dollar amounts under the means test for determining whether a presumption of abuse exists, based on the debtor’s income after expenses over 60 months, will now be: (i) $10,275 ($171.25 per month based on a 60 period) or 25% of non-priority unsecured debt, whichever is greater, or (ii) $17,150 ($285.83 per month). 11 U.S.C. § 707(b)(2)(A)(i).  

· · These dollar amounts are discussed in id. § 13.4.6.1.

· The minimum aggregate amount of property that a trustee may seek to recover as a preference in a case filed by a debtor whose debts are not primarily consumer debts will now be $8,575.  11 U.S.C. § 547(c)(9). 

· · This limitation on a trustee’s ability to avoid transfers as a preference is discussed in id. § 10.4.2.6.4.2.