11 U.S.C. Section 522 - Exemptions

How the Bankruptcy Code lets a debtor keep certain property out of the estate, when state versus federal exemption schedules apply, the 730-day domicile rule for choosing which state's law governs, and the limits the Supreme Court has placed on courts to surcharge those exemptions.

Home › Statutes › 11 U.S.C. Section 522 - Exemptions

What Section 522 Does

Section 522 is the exemption statute. Exemptions are the mechanism by which a debtor keeps property out of the bankruptcy estate, beyond the reach of unsecured creditors. Without exemptions, every dollar of a Chapter 7 debtor's assets would be available for liquidation; the exemption schedule is what makes Chapter 7 a workable fresh-start tool rather than a forced surrender of everything the debtor owns.

Official citation: 11 U.S.C. § 522

The section also contains the procedural rules for objecting to claimed exemptions, the federal exemption schedule in subsection (d), the lien-avoidance powers of subsection (f), the homestead caps and reductions in subsections (o), (p), and (q), and the protection of retirement funds in subsection (n).

Section 522(b): Federal Versus State Election

Section 522(b)(1) gives the debtor the option to claim the federal exemptions listed in subsection (d) or the exemptions allowed under applicable nonbankruptcy law (state exemptions plus federal nonbankruptcy exemptions). Section 522(b)(2) authorizes any state to "opt out" and force its residents to use only the state exemption schedule. About two-thirds of states have opted out; the rest permit the debtor to choose.

The choice between federal and state schedules is binary; a debtor in a permissive state cannot mix and match. For married couples filing jointly, both spouses must elect the same schedule (Section 522(b)(1)).

Opt-out states include large jurisdictions like Florida, Texas, Tennessee, North Carolina, and Ohio. Permissive states include Massachusetts, Pennsylvania, New York (with restrictions), and Washington. The list moves; check current state law before electing.

Section 522(b)(3): State-Domicile Rule and the 730-Day Lookback

Before BAPCPA, a debtor could move from a low-exemption state to a high-exemption state shortly before filing and claim the new state's more generous exemptions. BAPCPA added a domicile-lookback rule in Section 522(b)(3)(A) to discourage that maneuver.

Under current law, the debtor must use the exemptions of the state where the debtor was domiciled "for the 730 days immediately preceding the date of the filing of the petition." If the debtor has lived in the current state for less than 730 days, the debtor uses the exemptions of the state where the debtor was domiciled "for the 180-day period immediately preceding such 730-day period, or for a longer portion of such 180-day period than in any other place."

If application of the lookback rule "renders the debtor ineligible for any exemption," the debtor may use the federal exemptions in Section 522(d). This savings clause prevents a debtor from being trapped between two states where, for example, the prior state restricts its exemptions to current residents.

Worked example: debtor moves from State A to State B 18 months before filing. Because the debtor has not been domiciled in State B for the full 730 days, the lookback turns to the 180 days before that 730-day window. If the debtor was in State A throughout that earlier 180-day window, State A's exemptions apply, even though the debtor now lives in State B.

Section 522(d): The Federal Exemption Schedule

For debtors who elect or default into the federal schedule, Section 522(d) lists the federally allowed exemptions, with dollar amounts that are adjusted every three years for inflation under Section 104. The major categories include a homestead exemption, motor vehicle exemption, household goods exemption with a per-item cap, jewelry exemption, "wildcard" exemption (the unused portion of the homestead allowance plus an additional fixed amount that can be applied to any property), tools-of-the-trade exemption, life insurance, professionally prescribed health aids, retirement funds, alimony and support, and personal-injury and wrongful-death recoveries.

The federal homestead is materially less generous than several state homesteads. Debtors in opt-in states with significant home equity routinely elect state law for the homestead reason alone. The federal wildcard, by contrast, is often more flexible than state wildcards and can be load-bearing for a debtor with a checking-account balance or other property that does not fit a category-specific exemption.

Section 522(f): Lien Avoidance

Section 522(f) gives the debtor a powerful tool: the right to avoid (strip off) two kinds of liens that impair an exemption to which the debtor would otherwise be entitled.

Section 522(f)(1)(A) allows avoidance of "a judicial lien" that impairs an exemption, with limited carve-outs for domestic-support obligations. A judgment creditor who has recorded a judgment lien against the debtor's home can have that lien avoided to the extent it impairs the debtor's homestead exemption. The calculation formula in Section 522(f)(2) is mathematical: the lien impairs the exemption to the extent that the sum of the lien, all other liens, and the exemption exceeds the value the debtor's interest in the property would have absent any liens.

Section 522(f)(1)(B) allows avoidance of "a nonpossessory, nonpurchase-money security interest" in certain categories of consumer goods: household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, jewelry held primarily for personal use, professionally prescribed health aids, and tools of the trade. The classic application is the "consolidation loan" lender that took a blanket security interest in everything in the debtor's house as nonpurchase-money collateral; Section 522(f)(1)(B) eliminates the security interest and converts the lender to general unsecured status.

Section 522(o) and (p): Homestead Reduction

BAPCPA added two homestead caps targeting pre-filing equity manipulation.

Section 522(o) reduces a debtor's homestead claim by the value of any nonexempt property the debtor "disposed of in the 10-year period ending on the date of the filing of the petition" with intent to hinder, delay, or defraud creditors, if that nonexempt value was converted into the homestead. This addresses the abuse of liquidating nonexempt assets and pouring the proceeds into an unlimited-homestead-state residence shortly before filing.

Section 522(p) imposes an absolute cap on homestead exemptions claimed for residences acquired within 1,215 days (about 3 years and 4 months) before filing. The cap is adjusted for inflation under Section 104. The provision applies regardless of intent: even an honest move into a high-exemption state and an honest purchase of a primary residence is subject to the cap if it falls within the 1,215-day window. Section 522(p) does not cover transfers between in-state principal residences (the "rollover" carve-out).

Section 522(q) imposes a similar absolute cap when the debtor has been convicted of a felony demonstrating abuse of the bankruptcy laws, has been found liable for certain securities-law violations, or owes a debt arising from intentional misconduct that caused serious physical injury or death.

Law v. Siegel: Limits on Equitable Surcharge

The Supreme Court held in Law v. Siegel, 571 U.S. 415 (2014), that a bankruptcy court may not "surcharge" a debtor's homestead exemption to compensate a trustee for fees incurred in unwinding the debtor's fraud. The trustee had argued that the debtor's misconduct in fabricating a fake second mortgage to defeat the trustee's nonexempt-equity recovery justified using the court's equitable powers under Section 105(a) to allow recovery from the otherwise-exempt homestead. The Court unanimously rejected that approach.

The opinion holds that Section 105(a) cannot be used to override the express provisions of the Bankruptcy Code. Section 522 sets out specific grounds on which an exemption may be denied or reduced, and bad-faith litigation conduct is not among them. The fact that the debtor's behavior was "egregious" did not give the bankruptcy court free-floating equitable authority to penalize him by stripping his statutory exemption. Other tools (denial of discharge under Section 727(a), criminal referral, sanctions under nonbankruptcy law) remained available, but reaching into a properly claimed homestead was not.

Doctrinal effect: Law v. Siegel locks the four corners of Section 522 as the only basis for limiting exemptions. A trustee who believes the debtor has obtained an exemption through misconduct must work within the statute (timely objection under Rule 4003, denial of discharge under Section 727) rather than asking the court to forge a remedy from Section 105.

Procedure: Objections Under Rule 4003

Federal Rule of Bankruptcy Procedure 4003(b) requires a party objecting to a claimed exemption to file the objection within 30 days after the conclusion of the meeting of creditors (or within 30 days of an amendment to the exemption schedule). The Supreme Court held in Taylor v. Freeland & Kronz, 503 U.S. 638 (1992), that the failure to object within the deadline forecloses challenges to even patently improper exemption claims. Trustees and creditors must act quickly or lose the right entirely.

Related Bankruptcy Code Sections

Bankruptcy Tools Network:
Discharge Screener · Research Platform · Exemptions by State · Keep Your Car · Keep Your House · Bankruptcy Cost