Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 5–CREDITORS, THE DEBTOR, AND THE ESTATE

Sub Chapter II – Debtor's Duties and Benefits

Sec. 522. Exemptions

 (a) In this section--
        (1) ``dependent'' includes spouse, whether or not actually 
    dependent; and
        (2) ``value'' means fair market value as of the date of the 
    filing of the petition or, with respect to property that becomes 
    property of the estate after such date, as of the date such property 
    becomes property of the estate.

    (b) Notwithstanding section 541 of this title, an individual debtor 
may exempt from property of the estate the property listed in either 
paragraph (1) or, in the alternative, paragraph (2) of this subsection. 
In joint cases filed under section 302 of this title and individual 
cases filed under section 301 or 303 of this title by or against debtors 
who are husband and wife, and whose estates are ordered to be jointly 
administered under Rule 1015(b) of the Federal Rules of Bankruptcy 
Procedure, one debtor may not elect to exempt property listed in 
paragraph (1) and the other debtor elect to exempt property listed in 
paragraph (2) of this subsection. If the parties cannot agree on the 
alternative to be elected, they shall be deemed to elect paragraph (1), 
where such election is permitted under the law of the jurisdiction where 
the case is filed. Such property is--
        (1) property that is specified under subsection (d) of this 
    section, unless the State law that is applicable to the debtor under 
    paragraph (2)(A) of this subsection specifically does not so 
    authorize; or, in the alternative,
        (2)(A) any property that is exempt under Federal law, other than 
    subsection (d) of this section, or State or local law that is 
    applicable on the date of the filing of the petition at the place in 
    which the debtor's domicile has been located for the 180 days 
    immediately preceding the date of the filing of the petition, or for 
    a longer portion of such 180-day period than in any other place; and
        (B) any interest in property in which the debtor had, 
    immediately before the commencement of the case, an interest as a 
    tenant by the entirety or joint tenant to the extent that such 
    interest as a tenant by the entirety or joint tenant is exempt from 
    process under applicable nonbankruptcy law.

    (c) Unless the case is dismissed, property exempted under this 
section is not liable during or after the case for any debt of the 
debtor that arose, or that is determined under section 502 of this title 
as if such debt had arisen, before the commencement of the case, 
except--
        (1) a debt of a kind specified in section 523(a)(1) or 523(a)(5) 
    of this title;
        (2) a debt secured by a lien that is--
            (A)(i) not avoided under subsection (f) or (g) of this 
        section or under section 544, 545, 547, 548, 549, or 724(a) of 
        this title; and
            (ii) not void under section 506(d) of this title; or
            (B) a tax lien, notice of which is properly filed; or

        (3) a debt of a kind specified in section 523(a)(4) or 523(a)(6) 
    of this title owed by an institution-affiliated party of an insured 
    depository institution to a Federal depository institutions 
    regulatory agency acting in its capacity as conservator, receiver, 
    or liquidating agent for such institution.

    (d) The following property may be exempted under subsection (b)(1) 
of this section:
        (1) The debtor's aggregate interest, not to exceed $15,000 in 
    value, in real property or personal property that the debtor or a 
    dependent of the debtor uses as a residence, in a cooperative that 
    owns property that the debtor or a dependent of the debtor uses as a 
    residence, or in a burial plot for the debtor or a dependent of the 
    debtor.
        (2) The debtor's interest, not to exceed $2,400 in value, in one 
    motor vehicle.
        (3) The debtor's interest, not to exceed $400 in value in any 
    particular item or $8,000 in aggregate value, in household 
    furnishings, household goods, wearing apparel, appliances, books, 
    animals, crops, or musical instruments, that are held primarily for 
    the personal, family, or household use of the debtor or a dependent 
    of the debtor.
        (4) The debtor's aggregate interest, not to exceed $1,000 in 
    value, in jewelry held primarily for the personal, family, or 
    household use of the debtor or a dependent of the debtor.
        (5) The debtor's aggregate interest in any property, not to 
    exceed in value $800 plus up to $7,500 of any unused amount of the 
    exemption provided under paragraph (1) of this subsection.
        (6) The debtor's aggregate interest, not to exceed $1,500 in 
    value, in any implements, professional books, or tools, of the trade 
    of the debtor or the trade of a dependent of the debtor.
        (7) Any unmatured life insurance contract owned by the debtor, 
    other than a credit life insurance contract.
        (8) The debtor's aggregate interest, not to exceed in value 
    $8,000 less any amount of property of the estate transferred in the 
    manner specified in section 542(d) of this title, in any accrued 
    dividend or interest under, or loan value of, any unmatured life 
    insurance contract owned by the debtor under which the insured is 
    the debtor or an individual of whom the debtor is a dependent.
        (9) Professionally prescribed health aids for the debtor or a 
    dependent of the debtor.
        (10) The debtor's right to receive--
            (A) a social security benefit, unemployment compensation, or 
        a local public assistance benefit;
            (B) a veterans' benefit;
            (C) a disability, illness, or unemployment benefit;
            (D) alimony, support, or separate maintenance, to the extent 
        reasonably necessary for the support of the debtor and any 
        dependent of the debtor;
            (E) a payment under a stock bonus, pension, profitsharing, 
        annuity, or similar plan or contract on account of illness, 
        disability, death, age, or length of service, to the extent 
        reasonably necessary for the support of the debtor and any 
        dependent of the debtor, unless--
                (i) such plan or contract was established by or under 
            the auspices of an insider that employed the debtor at the 
            time the debtor's rights under such plan or contract arose;
                (ii) such payment is on account of age or length of 
            service; and
                (iii) such plan or contract does not qualify under 
            section 401(a), 403(a), 403(b), or 408 of the Internal 
            Revenue Code of 1986.

        (11) The debtor's right to receive, or property that is 
    traceable to--
            (A) an award under a crime victim's reparation law;
            (B) a payment on account of the wrongful death of an 
        individual of whom the debtor was a dependent, to the extent 
        reasonably necessary for the support of the debtor and any 
        dependent of the debtor;
            (C) a payment under a life insurance contract that insured 
        the life of an individual of whom the debtor was a dependent on 
        the date of such individual's death, to the extent reasonably 
        necessary for the support of the debtor and any dependent of the 
        debtor;
            (D) a payment, not to exceed $15,000, on account of personal 
        bodily injury, not including pain and suffering or compensation 
        for actual pecuniary loss, of the debtor or an individual of 
        whom the debtor is a dependent; or
            (E) 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.

    (e) A waiver of an exemption executed in favor of a creditor that 
holds an unsecured claim against the debtor is unenforceable in a case 
under this title with respect to such claim against property that the 
debtor may exempt under subsection (b) of this section. A waiver by the 
debtor of a power under subsection (f) or (h) of this section to avoid a 
transfer, under subsection (g) or (i) of this section to exempt 
property, or under subsection (i) of this section to recover property or 
to preserve a transfer, is unenforceable in a case under this title.
    (f)(1) Notwithstanding any waiver of exemptions but subject to 
paragraph (3), the debtor may avoid the fixing of a lien on an interest 
of the debtor in property to the extent that such lien impairs an 
exemption to which the debtor would have been entitled under subsection 
(b) of this section, if such lien is--
        (A) a judicial lien, other than a judicial lien that secures a 
    debt--
            (i) to a spouse, former spouse, or child of the debtor, for 
        alimony to, maintenance for, or support of such spouse or child, 
        in connection with a separation agreement, divorce decree or 
        other order of a court of record, determination made in 
        accordance with State or territorial law by a governmental unit, 
        or property settlement agreement; and
            (ii) to the extent that such debt--
                (I) is not assigned to another entity, voluntarily, by 
            operation of law, or otherwise; and
                (II) includes a liability designated as alimony, 
            maintenance, or support, unless such liability is actually 
            in the nature of alimony, maintenance or support.; \1\ or
---------------------------------------------------------------------------
    \1\ So in original. The period preceding the semicolon probably 
should not appear.

        (B) a nonpossessory, nonpurchase-money security interest in 
    any--
            (i) household furnishings, household goods, wearing apparel, 
        appliances, books, animals, crops, musical instruments, or 
        jewelry that are held primarily for the personal, family, or 
        household use of the debtor or a dependent of the debtor;
            (ii) implements, professional books, or tools, of the trade 
        of the debtor or the trade of a dependent of the debtor; or
            (iii) professionally prescribed health aids for the debtor 
        or a dependent of the debtor.

    (2)(A) For the purposes of this subsection, a lien shall be 
considered to impair an exemption to the extent that the sum of--
        (i) the lien;
        (ii) all other liens on the property; and
        (iii) the amount of the exemption that the debtor could claim if 
    there were no liens on the property;

exceeds the value that the debtor's interest in the property would have 
in the absence of any liens.
    (B) In the case of a property subject to more than 1 lien, a lien 
that has been avoided shall not be considered in making the calculation 
under subparagraph (A) with respect to other liens.
    (C) This paragraph shall not apply with respect to a judgment 
arising out of a mortgage foreclosure.
    (3) In a case in which State law that is applicable to the debtor--
        (A) permits a person to voluntarily waive a right to claim 
    exemptions under subsection (d) or prohibits a debtor from claiming 
    exemptions under subsection (d); and
        (B) either permits the debtor to claim exemptions under State 
    law without limitation in amount, except to the extent that the 
    debtor has permitted the fixing of a consensual lien on any property 
    or prohibits avoidance of a consensual lien on property otherwise 
    eligible to be claimed as exempt property;

the debtor may not avoid the fixing of a lien on an interest of the 
debtor or a dependent of the debtor in property if the lien is a 
nonpossessory, nonpurchase-money security interest in implements, 
professional books, or tools of the trade of the debtor or a dependent 
of the debtor or farm animals or crops of the debtor or a dependent of 
the debtor to the extent the value of such implements, professional 
books, tools of the trade, animals, and crops exceeds $5,000.
    (g) Notwithstanding sections 550 and 551 of this title, the debtor 
may exempt under subsection (b) of this section property that the 
trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of 
this title, to the extent that the debtor could have exempted such 
property under subsection (b) of this section if such property had not 
been transferred, if--
        (1)(A) such transfer was not a voluntary transfer of such 
    property by the debtor; and
        (B) the debtor did not conceal such property; or
        (2) the debtor could have avoided such transfer under subsection 
    (f)(2) of this section.

    (h) The debtor may avoid a transfer of property of the debtor or 
recover a setoff to the extent that the debtor could have exempted such 
property under subsection (g)(1) of this section if the trustee had 
avoided such transfer, if--
        (1) such transfer is avoidable by the trustee under section 544, 
    545, 547, 548, 549, or 724(a) of this title or recoverable by the 
    trustee under section 553 of this title; and
        (2) the trustee does not attempt to avoid such transfer.

    (i)(1) If the debtor avoids a transfer or recovers a setoff under 
subsection (f) or (h) of this section, the debtor may recover in the 
manner prescribed by, and subject to the limitations of, section 550 of 
this title, the same as if the trustee had avoided such transfer, and 
may exempt any property so recovered under subsection (b) of this 
section.
    (2) Notwithstanding section 551 of this title, a transfer avoided 
under section 544, 545, 547, 548, 549, or 724(a) of this title, under 
subsection (f) or (h) of this section, or property recovered under 
section 553 of this title, may be preserved for the benefit of the 
debtor to the extent that the debtor may exempt such property under 
subsection (g) of this section or paragraph (1) of this subsection.
    (j) Notwithstanding subsections (g) and (i) of this section, the 
debtor may exempt a particular kind of property under subsections (g) 
and (i) of this section only to the extent that the debtor has exempted 
less property in value of such kind than that to which the debtor is 
entitled under subsection (b) of this section.
    (k) Property that the debtor exempts under this section is not 
liable for payment of any administrative expense except--
        (1) the aliquot share of the costs and expenses of avoiding a 
    transfer of property that the debtor exempts under subsection (g) of 
    this section, or of recovery of such property, that is attributable 
    to the value of the portion of such property exempted in relation to 
    the value of the property recovered; and
        (2) any costs and expenses of avoiding a transfer under 
    subsection (f) or (h) of this section, or of recovery of property 
    under subsection (i)(1) of this section, that the debtor has not 
    paid.

    (l) The debtor shall file a list of property that the debtor claims 
as exempt under subsection (b) of this section. If the debtor does not 
file such a list, a dependent of the debtor may file such a list, or may 
claim property as exempt from property of the estate on behalf of the 
debtor. Unless a party in interest objects, the property claimed as 
exempt on such list is exempt.
    (m) Subject to the limitation in subsection (b), this section shall 
apply separately with respect to each debtor in a joint case.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2586; Pub. L. 98-353, title III, 
Secs. 306, 453, July 10, 1984, 98 Stat. 353, 375; Pub. L. 99-554, title 
II, Sec. 283(i), Oct. 27, 1986, 100 Stat. 3117; Pub. L. 101-647, title 
XXV, Sec. 2522(b), Nov. 29, 1990, 104 Stat. 4866; Pub. L. 103-394, title 
I, Sec. 108(d), title III, Secs. 303, 304(d), 310, title V, 
Sec. 501(d)(12), Oct. 22, 1994, 108 Stat. 4112, 4132, 4133, 4137, 4145.)


                      Historical and Revision Notes

                         legislative statements

    Section 522 of the House amendment represents a compromise on the 
issue of exemptions between the position taken in the House bill, and 
that taken in the Senate amendment. Dollar amounts specified in section 
522(d) of the House bill have been reduced from amounts as contained in 
H.R. 8200 as passed by the House. The States may, by passing a law, 
determine whether the Federal exemptions will apply as an alternative to 
State exemptions in bankruptcy cases.
    Section 522(c)(1) tracks the House bill and provides that 
dischargeable tax claims may not be collected out of exempt property.
    Section 522(f)(2) is derived from the Senate amendment restricting 
the debtor to avoidance of nonpossessory, nonpurchase money security 
interests.
    Exemptions: Section 522(c)(1) of the House amendment adopts a 
provision contained in the House bill that dischargeable taxes cannot be 
collected from exempt assets. This changes present law, which allows 
collection of dischargeable taxes from exempt property, a rule followed 
in the Senate amendment. Nondischargeable taxes, however, will continue 
to the [be] collectable out of exempt property. It is anticipated that 
in the next session Congress will review the exemptions from levy 
currently contained in the Internal Revenue Code [title 26] with a view 
to increasing the exemptions to more realistic levels.


                        senate report no. 95-989

    Subsection (a) of this section defines two terms: ``dependent'' 
includes the debtor's spouse, whether or not actually dependent; and 
``value'' means fair market value as of the date of the filing of the 
petition.
    Subsection (b) tracks current law. It permits a debtor the 
exemptions to which he is entitled under other Federal law and the law 
of the State of his domicile. Some of the items that may be exempted 
under Federal laws other than title 11 include:
        Foreign Service Retirement and Disability payments, 22 U.S.C. 
    1104; \2\
---------------------------------------------------------------------------
    \2\ Replaced by 22 U.S.C. 4060(c).
---------------------------------------------------------------------------
        Social security payments, 42 U.S.C. 407;
        Injury or death compensation payments from war risk hazards, 42 
    U.S.C. 1717;
        Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601; \3\
---------------------------------------------------------------------------
    \3\ Replaced by 46 U.S.C. 11108, 11109.
---------------------------------------------------------------------------
        Civil service retirement benefits, 5 U.S.C. 729, 2265; \4\
---------------------------------------------------------------------------
    \4\ Replaced by 5 U.S.C. 8346.
---------------------------------------------------------------------------
        Longshoremen's and Harbor Workers' Compensation Act death and 
    disability benefits, 33 U.S.C. 916;
        Railroad Retirement Act annuities and pensions, 45 U.S.C. 
    228(L); \5\
---------------------------------------------------------------------------
    \5\ Replaced by 45 U.S.C. 231m.
---------------------------------------------------------------------------
        Veterans benefits, 45 U.S.C. 352(E); \6\
---------------------------------------------------------------------------
    \6\ Railroad unemployment benefits are covered by 45 U.S.C. 352(e).
---------------------------------------------------------------------------
        Special pensions paid to winners of the Congressional Medal of 
    Honor, 38 U.S.C. 3101; \7\ and
---------------------------------------------------------------------------
    \7\ Veterans benefits generally are covered by 38 U.S.C. 3101 [now 
5301].
---------------------------------------------------------------------------
        Federal homestead lands on debts contracted before issuance of 
    the patent, 43 U.S.C. 175.
He may also exempt an interest in property in which the debtor had an 
interest as a tenant by the entirety or joint tenant to the extent that 
interest would have been exempt from process under applicable 
nonbankruptcy law.
    Under proposed section 541, all property of the debtor becomes 
property of the estate, but the debtor is permitted to exempt certain 
property from property of the estate under this section. Property may be 
exempted even if it is subject to a lien, but only the unencumbered 
portion of the property is to be counted in computing the ``value'' of 
the property for the purposes of exemption.
    As under current law, the debtor will be permitted to convert 
nonexempt property into exempt property before filing a bankruptcy 
petition. The practice is not fraudulent as to creditors, and permits 
the debtor to make full use of the exemptions to which he is entitled 
under the law.
    Subsection (c) insulates exempt property from prepetition claims 
other than tax claims (whether or not dischargeable), and other than 
alimony, maintenance, or support claims that are excepted from 
discharge. The bankruptcy discharge does not prevent enforcement of 
valid liens. The rule of Long v. Bullard, 117 U.S. 617 (1886), is 
accepted with respect to the enforcement of valid liens on nonexempt 
property as well as on exempt property. Cf. Louisville Joint Stock Land 
Bank v. Radford, 295 U.S. 555, 583 (1935).
    Subsection (c)(3) permits the collection of dischargeable taxes from 
exempt assets. Only assets exempted from levy under Section 6334 of the 
Internal Revenue Code [title 26] or under applicable state or local tax 
law cannot be applied to satisfy these tax claims. This rule applies to 
prepetition tax claims against the debtor regardless of whether the 
claims do or do not receive priority and whether they are dischargeable 
or nondischargeable. Thus, even if a tax is dischargeable vis-a-vis the 
debtor's after-acquired assets, it may nevertheless be collectible from 
exempt property held by the estate. (Taxes incurred by the debtor's 
estate which are collectible as first priority administrative expenses 
are not collectible from the debtor's estate which are collectible as 
first priority administrative expenses are not collectible from the 
debtor's exempt assets.)
    Subsection (d) protects the debtor's exemptions, either Federal or 
State, by making unenforceable in a bankruptcy case a waiver of 
exemptions or a waiver of the debtor's avoiding powers under the 
following subsections.
    Subsection (e) protects the debtor's exemptions, his discharge, and 
thus his fresh start by permitting him to avoid certain liens on exempt 
property. The debtor may avoid a judicial lien on any property to the 
extent that the property could have been exempted in the absence of the 
lien, and may similarly avoid a nonpurchase-money security interest in 
certain household and personal goods. The avoiding power is independent 
of any waiver of exemptions.
    Subsection (f) gives the debtor the ability to exempt property that 
the trustee recovers under one of the trustee's avoiding powers if the 
property was involuntarily transferred away from the debtor (such as by 
the fixing of a judicial lien) and if the debtor did not conceal the 
property. The debtor is also permitted to exempt property that the 
trustee recovers as the result of the avoiding of the fixing of certain 
security interests to the extent that the debtor could otherwise have 
exempted the property.
    Subsection (g) provides that if the trustee does not exercise an 
avoiding power to recover a transfer of property that would be exempt, 
the debtor may exercise it and exempt the property, if the transfer was 
involuntary and the debtor did not conceal the property. If the debtor 
wishes to preserve his right to pursue any action under this provision, 
then he must intervene in any action brought by the trustee based on the 
same cause of action. It is not intended that the debtor be given an 
additional opportunity to avoid a transfer or that the transferee should 
have to defend the same action twice. Rather, the section is primarily 
designed to give the debtor the rights the trustee could have, but has 
not, pursued. The debtor is given no greater rights under this provision 
than the trustee, and thus, the debtor's avoiding powers under proposed 
sections 544, 545, 547, and 548, are subject to proposed 546, as are the 
trustee's powers.
    These subsections are cumulative. The debtor is not required to 
choose which he will use to gain an exemption. Instead, he may use more 
than one in any particular instance, just as the trustee's avoiding 
powers are cumulative.
    Subsection (h) permits recovery by the debtor of property 
transferred by an avoided transfer from either the initial or subsequent 
transferees. It also permits preserving a transfer for the benefit of 
the debtor. In either event, the debtor may exempt the property 
recovered or preserved.
    Subsection (i) makes clear that the debtor may exempt property under 
the avoiding subsections (f) and (h) only to the extent he has exempted 
less property than allowed under subsection (b).
    Subsection (j) makes clear that the liability of the debtor's exempt 
property is limited to the debtor's aliquot share of the costs and 
expenses recovery of property that the trustee recovers and the debtor 
later exempts, and any costs and expenses of avoiding a transfer by the 
debtor that the debtor has not already paid.
    Subsection (k) requires the debtor to file a list of property that 
he claims as exempt from property of the estate. Absent an objection to 
the list, the property is exempted. A dependent of the debtor may file 
it and thus be protected if the debtor fails to file the list.
    Subsection (l) provides the rule for a joint case.


                         house report no. 95-595

    Subsection (a) of this section defines two terms: ``dependent'' 
includes the debtor's spouse, whether or not actually dependent; and 
``value'' means fair market value as of the date of the filing of the 
petition.
    Subsection (b), the operative subsection of this section, is a 
significant departure from present law. It permits an individual debtor 
in a bankruptcy case a choice between exemption systems. The debtor may 
choose the Federal exemptions prescribed in subsection (d), or he may 
choose the exemptions to which he is entitled under other Federal law 
and the law of the State of his domicile. If the debtor chooses the 
latter, some of the items that may be exempted under other Federal laws 
include:
    --Foreign Service Retirement and Disability payments, 22 U.S.C. 
        1104; \8\
---------------------------------------------------------------------------
    \8\ Replaced by 22 U.S.C. 4060(c).
---------------------------------------------------------------------------
    --Social security payments, 42 U.S.C. 407;
    --Injury or death compensation payments from war risk hazards, 42 
        U.S.C. 1717;
    --Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601;
    --Civil service retirement benefits, 5 U.S.C. 729, 2265; \9\
---------------------------------------------------------------------------
    \9\ Replaced by 5 U.S.C. 8346.
---------------------------------------------------------------------------
    --Longshoremen's and Harbor Workers' Compensation Act death and 
        disability benefits, 33 U.S.C. 916;
    --Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(l); 
        \10\
---------------------------------------------------------------------------
    \10\ Replaced by 45 U.S.C. 231m.
---------------------------------------------------------------------------
    --Veterans benefits, 45 U.S.C. 352(E); \11\
---------------------------------------------------------------------------
    \11\ Railroad unemployment benefits are covered by 45 U.S.C. 352(e).
---------------------------------------------------------------------------
    --Special pensions paid to winners of the Congressional Medal of 
        Honor, 38 U.S.C. 3101; \12\ and
---------------------------------------------------------------------------
    \12\ Veterans benefits generally are covered by 38 U.S.C. 3101 [now 
5301].
---------------------------------------------------------------------------
    --Federal homestead lands on debts contracted before issuance of the 
        patent, 43 U.S.C. 175.
He may also exempt an interest in property in which the debtor had an 
interest as a tenant by the entirety or joint tenant to the extent that 
interest would have been exempt from process under applicable 
nonbankruptcy law. The Rules will provide for the situation where the 
debtor's choice of exemption, Federal or State, was improvident and 
should be changed, for example, where the court has ruled against the 
debtor with respect to a major exemption.
    Under proposed 11 U.S.C. 541, all property of the debtor becomes 
property of the estate, but the debtor is permitted to exempt certain 
property from property of the estate under this section. Property may be 
exempted even if it is subject to a lien, but only the unencumbered 
portion of the property is to be counted in computing the ``value'' of 
the property for the purposes of exemption. Thus, for example, a 
residence worth $30,000 with a mortgage of $25,000 will be exemptable to 
the extent of $5,000. This follows current law. The remaining value of 
the property will be dealt with in the bankruptcy case as is any 
interest in property that is subject to a lien.
    As under current law, the debtor will be permitted to convert 
nonexempt property into exempt property before filing a bankruptcy 
petition. See Hearings, pt. 3, at 1355-58. The practice is not 
fraudulent as to creditors and permits the debtor to make full use of 
the exemptions to which he is entitled under the law.
    Subsection (c) insulates exempt property from prepetition claims, 
except tax and alimony, maintenance, or support claims that are excepted 
from discharge. The bankruptcy discharge will not prevent enforcement of 
valid liens. The rule of Long v. Bullard, 117 U.S. 617 (1886) [6 S.Ct. 
917, 29 L.Ed. 1004], is accepted with respect to the enforcement of 
valid liens on nonexempt property as well as on exempt property. Cf. 
Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 583 (1935) 
[55 S.Ct. 854].
    Subsection (d) specifies the Federal exemptions to which the debtor 
is entitled. They are derived in large part from the Uniform Exemptions 
Act, promulgated by the Commissioners of Uniform State Laws in August, 
1976. Eleven categories of property are exempted. First is a homestead 
to the extent of $10,000, which may be claimed in real or personal 
property that the debtor or a dependent of the debtor uses as a 
residence. Second, the debtor may exempt a motor vehicle to the extent 
of $1500. Third, the debtor may exempt household goods, furnishings, 
clothing, and similar household items, held primarily for the personal, 
family, or household use of the debtor or a dependent of the debtor. 
``Animals'' includes all animals, such as pets, livestock, poultry, and 
fish, if they are held primarily for personal, family or household use. 
The limitation for third category items is $300 on any particular item. 
The debtor may also exempt up to $750 of personal jewelry.
    Paragraph (5) permits the exemption of $500, plus any unused amount 
of the homestead exemption, in any property, in order not to 
discriminate against the nonhomeowner. Paragraph (6) grants the debtor 
up to $1000 in implements, professional books, or tools, of the trade of 
the debtor or a dependent. Paragraph (7) exempts a life insurance 
contract, other than a credit life insurance contract, owned by the 
debtor. This paragraph refers to the life insurance contract itself. It 
does not encompass any other rights under the contract, such as the 
right to borrow out the loan value. Because of this provision, the 
trustee may not surrender a life insurance contract, which remains 
property of the debtor if he chooses the Federal exemptions. Paragraph 
(8) permits the debtor to exempt up to $5000 in loan value in a life 
insurance policy owned by the debtor under which the debtor or an 
individual of whom the debtor is a dependent is the insured. The 
exemption provided by this paragraph and paragraph (7) will also include 
the debtor's rights in a group insurance certificate under which the 
insured is an individual of whom the debtor is a dependent (assuming the 
debtor has rights in the policy that could be exempted) or the debtor. A 
trustee is authorized to collect the entire loan value on every life 
insurance policy owned by the debtor as property of the estate. First, 
however, the debtor will choose which policy or policies under which the 
loan value will be exempted. The $5000 figure is reduced by the amount 
of any automatic premium loan authorized after the date of the filing of 
the petition under section 542(d). Paragraph (9) exempts professionally 
prescribed health aids.
    Paragraph (10) exempts certain benefits that are akin to future 
earnings of the debtor. These include social security, unemployment 
compensation, or public assistance benefits, veteran's benefits, 
disability, illness, or unemployment benefits, alimony, support, or 
separate maintenance (but only to the extent reasonably necessary for 
the support of the debtor and any dependents of the debtor), and 
benefits under a certain stock bonus, pension, profitsharing, annuity or 
similar plan based on illness, disability, death, age or length of 
service. Paragraph (11) allows the debtor to exempt certain compensation 
for losses. These include crime victim's reparation benefits, wrongful 
death benefits (with a reasonably necessary for support limitation), 
life insurance proceeds (same limitation), compensation for bodily 
injury, not including pain and suffering ($10,000 limitation), and loss 
of future earnings payments (support limitation). This provision in 
subparagraph (D)(11) is designed to cover payments in compensation of 
actual bodily injury, such as the loss of a limb, and is not intended to 
include the attendant costs that accompany such a loss, such as medical 
payments, pain and suffering, or loss of earnings. Those items are 
handled separately by the bill.
    Subsection (e) protects the debtor's exemptions, either Federal or 
State, by making unenforceable in a bankruptcy case a waiver of 
exemptions or a waiver of the debtor's avoiding powers under the 
following subsections.
    Subsection (f) protects the debtor's exemptions, his discharge, and 
thus his fresh start by permitting him to avoid certain liens on exempt 
property. The debtor may avoid a judicial lien on any property to the 
extent that the property could have been exempted in the absence of the 
lien, and may similarly avoid a nonpurchase-money security interest in 
certain household and personal goods. The avoiding power is independent 
of any waiver of exemptions.
    Subsection (g) gives the debtor the ability to exempt property that 
the trustee recovers under one of the trustee's avoiding powers if the 
property was involuntarily transferred away from the debtor (such as by 
the fixing of a judicial lien) and if the debtor did not conceal the 
property. The debtor is also permitted to exempt property that the 
trustee recovers as the result of the avoiding of the fixing of certain 
security interests to the extent that the debtor could otherwise have 
exempted the property.
    If the trustee does not pursue an avoiding power to recover a 
transfer of property that would be exempt, the debtor may pursue it and 
exempt the property, if the transfer was involuntary and the debtor did 
not conceal the property. If the debtor wishes to preserve his right to 
pursue an action under this provision, then he must intervene in any 
action brought by the trustee based on the same cause of action. It is 
not intended that the debtor be given an additional opportunity to avoid 
a transfer or that the transferee have to defend the same action twice. 
Rather, the section is primarily designed to give the debtor the rights 
the trustee could have pursued if the trustee chooses not to pursue 
them. The debtor is given no greater rights under this provision than 
the trustee, and thus the debtor's avoiding powers under proposed 11 
U.S.C. 544, 545, 547, and 548, are subject to proposed 11 U.S.C. 546, as 
are the trustee's powers.
    These subsections are cumulative. The debtor is not required to 
choose which he will use to gain an exemption. Instead, he may use more 
than one in any particular instance, just as the trustee's avoiding 
powers are cumulative.
    Subsection (i) permits recovery by the debtor of property 
transferred in an avoided transfer from either the initial or subsequent 
transferees. It also permits preserving a transfer for the benefit of 
the debtor. Under either case the debtor may exempt the property 
recovered or preserved.
    Subsection (k) makes clear that the debtor's aliquot share of the 
costs and expenses [for] recovery of property that the trustee recovers 
and the debtor later exempts, and any costs and expenses of avoiding a 
transfer by the debtor that the debtor has not already paid.
    Subsection (l) requires the debtor to file a list of property that 
he claims as exempt from property of the estate. Absent an objection to 
the list, the property is exempted. A dependent of the debtor may file 
it and thus be protected if the debtor fails to file the list.
    Subsection (m) requires the clerk of the bankruptcy court to give 
notice of any exemptions claimed under subsection (l), in order that 
parties in interest may have an opportunity to object to the claim.
    Subsection (n) provides the rule for a joint case: each debtor is 
entitled to the Federal exemptions provided under this section or to the 
State exemptions, whichever the debtor chooses.

                       References in Text

    The Federal Rules of Bankruptcy Procedure, referred to in subsec. 
(b), are set out in the Appendix to this title.
    The Internal Revenue Code of 1986, referred to in subsec. 
(d)(10)(E)(iii), is classified to Title 26, Internal Revenue Code.


                               Amendments

    1994--Subsec. (b). Pub. L. 103-394, Sec. 501(d)(12)(A), substituted 
``Federal Rules of Bankruptcy Procedure'' for ``Bankruptcy Rules''.
    Subsec. (d)(1) to (6). Pub. L. 103-394, Sec. 108(d)(1)-(6), 
substituted ``$15,000'' for ``$7,500'' in par. (1), ``$2,400'' for 
``$1,200'' in par. (2), ``$400'' and ``$8,000'' for ``$200'' and 
``$4,000'', respectively, in par. (3), ``$1,000'' for ``$500'' in par. 
(4), ``$800'' and ``$7,500'' for ``$400'' and ``$3,750'', respectively, 
in par. (5), and ``$1,500'' for ``$750'' in par. (6).
    Subsec. (d)(8). Pub. L. 103-394, Sec. 108(d)(7), substituted 
``$8,000'' for ``$4,000''.
    Subsec. (d)(10)(E)(iii). Pub. L. 103-394, Sec. 501(d)(12)(B), 
substituted ``or 408'' for ``408, or 409'' and ``Internal Revenue Code 
of 1986'' for ``Internal Revenue Code of 1954 (26 U.S.C. 401(a), 403(a), 
403(b), 408, or 409)''.
    Subsec. (d)(11)(D). Pub. L. 103-394, Sec. 108(d)(8), substituted 
``$15,000'' for ``$7,500''.
    Subsec. (f)(1). Pub. L. 103-394, Secs. 303(3), 310(1), designated 
existing provisions as par. (1) and inserted ``but subject to paragraph 
(3)'' after ``waiver of exemptions'' in introductory provisions. Former 
par. (1) redesignated subpar. (A) of par. (1).
    Subsec. (f)(1)(A). Pub. L. 103-394, Secs. 303(2), 304(d), 
redesignated par. (1) as subpar. (A) of par. (1) and inserted ``, other 
than a judicial lien that secures a debt--
        ``(i) to a spouse, former spouse, or child of the debtor, for 
    alimony to, maintenance for, or support of such spouse or child, in 
    connection with a separation agreement, divorce decree or other 
    order of a court of record, determination made in accordance with 
    State or territorial law by a governmental unit, or property 
    settlement agreement; and
        ``(ii) to the extent that such debt--
            ``(I) is not assigned to another entity, voluntarily, by 
        operation of law, or otherwise; and
            ``(II) includes a liability designated as alimony, 
        maintenance, or support, unless such liability is actually in 
        the nature of alimony, maintenance or support.''
    Subsec. (f)(1)(B). Pub. L. 103-394, Sec. 303(1), redesignated par. 
(2) as subpar. (B) of par. (1) and subpars. (A) to (C) of par. (2) as 
cls. (i) to (iii), respectively, of subpar. (B) of par. (1).
    Subsec. (f)(2). Pub. L. 103-394, Sec. 303(4), added par. (2). Former 
par. (2) redesignated subpar. (B) of par. (1).
    Subsec. (f)(3). Pub. L. 103-394, Sec. 310(2), added par. (3).
    1990--Subsec. (c)(3). Pub. L. 101-647 added par. (3).
    1986--Subsec. (h)(1). Pub. L. 99-554, Sec. 283(i)(1), substituted 
``553 of this title'' for ``553 of this tittle''.
    Subsec. (i)(2). Pub. L. 99-554, Sec. 283(i)(2), substituted ``this'' 
for ``his'' after ``subsection (g) of''.
    1984--Subsec. (a)(2). Pub. L. 98-353, Sec. 453(a), inserted ``or, 
with respect to property that becomes property of an estate after such 
date, as of the date such property becomes property of the estate''.
    Subsec. (b). Pub. L. 98-353, Sec. 306(a), inserted provision that in 
joint cases filed under section 302 of this title and individual cases 
filed under section 301 or 303 of this title by or against debtors who 
are husband and wife, and whose estates are ordered to be jointly 
administered under Rule 1015(b) of the Bankruptcy Rules, one debtor may 
not elect to exempt property listed in paragraph (1) and the other 
debtor elect to exempt property listed in paragraph (2) of this 
subsection, but that if the parties cannot agree on the alternative to 
be elected, they shall be deemed to elect paragraph (1), where such 
election is permitted under the law of the jurisdiction where the case 
is filed.
    Subsec. (c). Pub. L. 98-353, Sec. 453(b), amended subsec. (c) 
generally. Prior to amendment, subsec. (c) read as follows: ``Unless the 
case is dismissed, property exempted under this section is not liable 
during or after the case for any debt of the debtor that arose, or that 
is determined under section 502 of this title as if such claim had 
arisen before the commencement of the case, except--
        ``(1) a debt of a kind specified in section 523(a)(1) or section 
    523(a)(5) of this title; or
        ``(2) a lien that is--
            ``(A) not avoided under section 544, 545, 547, 548, 549, or 
        724(a) of this title;
            ``(B) not voided under section 506(d) of this title; or
            ``(C)(i) a tax lien, notice of which is properly filed; and
            ``(ii) avoided under section 545(2) of this title.''
    Subsec. (d)(3). Pub. L. 98-353, Sec. 306(b), inserted ``or $4,000 in 
aggregate value''.
    Subsec. (d)(5). Pub. L. 98-353, Sec. 306(c), amended par. (5) 
generally. Prior to amendment, par. (5) read as follows: ``The debtor's 
aggregate interest, not to exceed in value $400 plus any unused amount 
of the exemption provided under paragraph (1) of this subsection, in any 
property.''
    Subsec. (e). Pub. L. 98-353, Sec. 453(c), substituted ``an 
exemption'' for ``exemptions''.
    Subsec. (m). Pub. L. 98-353, Sec. 306(d), substituted ``Subject to 
the limitation in subsection (b), this section shall apply separately 
with respect to each debtor in a joint case'' for ``This section shall 
apply separately with respect to each debtor in a joint case''.


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, 
see section 302(a) of Pub. L. 99-554, set out as a note under section 
581 of Title 28, Judiciary and Judicial Procedure.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.


                      Adjustment of Dollar Amounts

    For adjustment of dollar amounts specified in subsec. (d)(1) to (6), 
(8), (11)(D) of this section by the Judicial Conference of the United 
States, effective Apr. 1, 1998, see note set out under section 104 of 
this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 101, 104, 106, 110, 349, 
502, 542, 551, 552, 722, 1123 of this title; title 26 sections 1017, 
1398; title 28 section 3014; title 29 section 1405.



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