Bankruptcy exemptions are offered at the State and Federal level. The bankruptcy exemptions determine whether or not your property is protected (exempt) and if not exempt, how much you might have to pay to creditors in order to keep it. For example, if your household goods are valued at a total of $8,000 and the applicable exemption is $10,000, you would be able to keep (protect) all household goods. But, if the value of your household goods are $15,000 and the exemption is only $10,000, you would need to possibly pay unsecured creditors the difference of $5,000, surrender a portion of your household goods, or take other steps that are available.
This is all an important part of bankruptcy pre-planning. Taking a look at all your assets, establishing proper values according to how the bankruptcy courts value property, and then comparing to exemptions to determine if anything is at risk and if so, what are the options at that point. Mississippi offers great exemptions to it’s residents.
So, how do you know what bankruptcy exemptions you can use? In Mississippi, you must be a resident of this State to use Mississippi bankruptcy exemptions. If you are not a resident, you have the option of using Federal exemptions (just moved to Mississippi, filing bankruptcy in Mississippi – your prior state won’t allow you to use their exemptions, so Federal exemptions are your only choice). Each State determines the rules under what is allowed – whether you can use their exemptions, other States, or Federal, and if so, under what circumstances. In Mississippi, you cannot choose to use Federal exemptions over Mississippi exemptions if you are a Mississippi resident. You must then utilize Mississippi exemptions.
Say you moved from Mississippi to Alabama. Alabama requires that you are a resident of Alabama to use their exemptions. If for some reason you don’t fit their residency requirements (length of time, etc) then you would utilize the Federal exemptions. Why? Because Mississippi only allows it’s exemptions to be used by Mississippi residents (of which you are not any longer – you’ve moved to Alabama).
Some states, like Louisiana, do not require you to be a resident to use their exemptions however, Federal exemptions are not available there. Minnesota has no residency requirement and Federal exemptions are available there without residency requirements as well. Federal exemptions are decent. Some States offer little to any exemptions in way of protecting your property. It’s important to know what exemptions apply to you as you prepare for a possible bankruptcy chapter 7 or chapter 13 filing.