A bankruptcy exemption is the value of property owned by a debtor in bankruptcy that cannot be touched by creditors or a bankruptcy trustee. The debtor will keep this property, and it cannot be taken by creditors or a bankruptcy trustee to pay his or her debts.
Determining which property will be exempt is an important step in deciding whether to declare bankruptcy. An experienced bankruptcy attorney will look to maximize the amount and type of property to claim as exempt.
Which property is exempt varies from state to state. The Bankruptcy Code has a list of all property considered exempt, but some states have opted out of this list and established lists of their own. This means that you must look to the law of the state and not the Bankruptcy Code to determine which property is exempt and which is not.