William E. Maddox Jr., L.L.C. - Knoxville Bankruptcy Attorney

Call For A Free Consultation

Exempt and non-exempt property in bankruptcy

Debt is a heavy burden that many people struggle with. Bankruptcy is a common option to help provide some relief from financial burdens

When contemplating bankruptcy, it is important that parties understand what all it entails. Exemptions are an important part of the process, and there are certain factors that help determine whether property does or does not fit into that category.

Bankruptcy process

There are a few different ways that a bankruptcy may take place, and the specific means of completing the process depends on the type of bankruptcy. However, all types of bankruptcy ultimately lead to reducing debt in some capacity. While some allow debtors to consolidate debt accounts, others help to pay down many debts and provide a means for paying back the rest. In either scenario, the courts utilize the assets of the debtor in paying off debt. This process must be in accordance with the federal bankruptcy code


Non-exempt assets are those that the courts include in the bankruptcy to liquidate and utilize to pay down debts. The courts may include some common assets in this category:

  • Secondary or vacation homes
  • Additional vehicles
  • Investments, stocks, bonds and bank accounts
  • Expensive collections or instruments
  • Family heirlooms

These and other non-essential items usually fit into the non-exempt category. Depending on the situation, debtors may be able to petition for certain non-exempt items to become exempt.


Usually, assets that are essential to daily life fall into the exempt category. Some of the most common exempt assets include the following:

  • Tools of a trade
  • Necessary clothing and home furnishings
  • Primary motor vehicles
  • Public assistance benefits

Along with these assets, a few others may be exempt. It may be beneficial to consult with an attorney to determine the items that are naturally exempt and those that a debtor may petition for.

This is a brief overview of exempt and non-exempt assets. Exemptions vary from state to state and depending on if the debtor is using the state system or federal system. For those considering bankruptcy, it is important to do the necessary research and select the most beneficial option for their situation.

FindLaw Network

Get Help Today:
Email Us

Fast Track Your Free Consult.

Complete your bankruptcy questionnaire electronically prior to your visit.