What Are the Washington D.C. Bankruptcy Exemptions?

What Are the Washington D.C. Bankruptcy Exemptions and Why Are They Important in a Chapter 7 Bankruptcy? 

One of the most important steps in the Chapter 7 bankruptcy process involves claiming bankruptcy exemptions. Ideally, when you file bankruptcy, you set yourself up to benefit from a fresh start, financially speaking. However, if you don’t claim all the bankruptcy exemptions available to you, you risk being burdened with having to purchase property to replace the nonexempt property that your bankruptcy trustee has sold to repay your creditors.

Starting over can be liberating. However, starting over without your personal property can be devastating. As you fill out your bankruptcy forms, take great care to claim as many exemptions as apply to your situation to safeguard your property from being sold by your trustee. This guide will explore the kinds of exemptions you can claim and the values of each exemption available to Washington D.C. residents.

Does Washington D.C. Allow Filers To Use Federal Bankruptcy Exemptions?

District of Columbia law allows Chapter 7 bankruptcy filers to apply either federal bankruptcy exemptions or DC's exemptions (plus certain federal nonbankruptcy exemptions) to their property. This means that you can choose whichever set of exemptions is best for your situation. But you can't pick and choose exemptions from both structures.

The information listed below will help you to compare and contrast the pros and cons of each approach. Note that if you moved to D.C. less than two years ago, you may be limited to using the federal exemptions.

Washington D.C. Bankruptcy Exemptions

The exemption amounts listed throughout are for individuals filing bankruptcy alone. But if you're married and filing for bankruptcy jointly with your spouse, you can double most exemption amounts for property you own together. One exception is the homestead exemption.

For example, say that the single filing exemption allowance for clothing in Washington D.C. was $200. If you both own the clothing in your house, your exemption amount would double to $400. Keep this calculus in mind as you compare the Washington D.C. and federal exemptions.

Real Property: The Washington D.C. Homestead Exemption

f you’re a homeowner and you choose to apply D.C. bankruptcy exemptions to your property, you can exempt 100% of the equity in your home or co-op, as long as you and/or your dependents reside in the residence. Compared to most other states this is an incredibly generous exemption. If you’re a homeowner, the benefits of this state exemption may ultimately outweigh the advantages of claiming federal exemptions overall.

Personal Property Exemptions

To protect your tangible assets, you’ll need to claim as many personal property exemptions as you can. Unless otherwise noted, you can exempt the following kinds of personal property up to their full value:

• Appliances, books, clothing, household furnishings, household goods, musical instruments, and pets up to $425 per item and $8,625 total – values tend to be calculated at garage sale prices

• Family library up to $400

• Family pictures

• Food (enough to last three months)

• Health aids

• Motor vehicle up to $2,575 of equity in a single motor vehicle

Additionally, the following “tools of the trade” may also be exempted up to a certain allowance:

• Books, furniture, and tools of a professional or artist up to $300

• Mechanic’s tools up to $200

• Notary public’s seal and documents

Money Benefits

In addition to exemptions for tangible property and real estate, District of Columbia law allows for exemption of a variety of monetary, insurance-related, and retirement assets, as well as many public benefits.

Unless otherwise noted, the following monetary benefits may be exempted up to their full value under D.C. law:

• Aid to the blind, elderly, and disabled

• Alimony or spousal support

• Cemetery and burial funds

• Child support

• Condo deposit

• Co-op holdings (up to $500)

• Crime victims' compensation

• Disability benefits

• Fraternal benefit society benefits

• General public assistance

• Group life insurance policy or proceeds

• Higher education tuition savings account

• IRAS and Roth IRAs (up to currently allowed amount)

• Life insurance payments

• Life insurance proceeds (if a provision in the contract states that the proceeds cannot be used to pay creditors)

• Life insurance proceeds or avails

• Loss of future earnings payments

• Nonwage earnings - including pension payments, insurance proceeds, and retirement benefits (up to $200 per month for two months for a head of family and up to $60 per month for two months filers who aren’t a head of family)

• Pain and suffering recovery

• Pensions for judges and public school teachers

• Retirement benefits for police, firefighters, and teachers

• Social Security

• Stock bonus, annuity, pension, or profit-sharing plan

• Tax-exempt retirement accounts - including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans

• Unemployment compensation

• Uninsured motorist benefits

• Unmatured life insurance contract (excluding credit life insurance)

• Veteran’s benefits

• Wages (up to 2 months’ worth of earned but unpaid wages and pension payments at a 75% rate)

• Workers’ compensation

• Wrongful death damages

Other Washington D.C. Exemptions

If you own assets that you can't exempt or fully exempt using the provisions noted above, you can use the Washington D.C. wildcard exemption to safeguard an additional $850 of property value for the assets of your choice. If you aren't a homeowner, you can claim an additional $8,075 worth of exemption value under the wildcard provision because you haven’t used the homestead exemption.

Federal Exemptions

You can’t know whether it will be more advantageous to claim District of Columbia bankruptcy exemptions or federal bankruptcy exemptions until you compare the two. Remember, you can’t pick and choose from both. Depending on the kinds of property you own, you may be able to exempt all of your property via both options or you may benefit from choosing a specific approach.

Now that you’re familiar with D.C. bankruptcy exemptions, it’s time to evaluate federal law. Federal exemptions are updated every three years. The exemption allowance amounts noted below are current as of April 1, 2022. Just like with state exemptions, federal exemptions allow married couples filing jointly to double the exemption amounts for each item, unless otherwise noted.

Federal exemptions available include a homestead exemption of up to $27,900 in equity value (for a single filer). If you either aren’t a homeowner or you don’t need to utilize the full value of the homestead exemption to safeguard equity in your home, note that up to $13,950 of the homestead exemption can be applied to the property of your choice. Additional exempt property values included in the federal exemption structure are as follows:

• Alimony or spousal support (total value)

• Child support (total value)

• Crime victims’ compensation (total value)

• Disability, illness, or unemployment insurance benefits (total value)

• Health aids and other health equipment (total value)

• IRAS and Roth IRAs up to $1,512,350

• Jewelry up to $1,875

• Life insurance policy with a loan value up to $14,875

• Life insurance policy for a lost loved one you depended on, which you currently need for support (total value)

• Lost earnings payments (total value)

• Motor vehicle equity up to $4,450

• Public assistance and other public benefits (total value)

• Personal injury recovery up to $27,900, with exceptions made for pain and suffering, as well as pecuniary loss

• Personal property: Animals, appliances, books, clothing, crops, furniture, household goods, and musical instruments up to $700 per item, up to $14,875 overall

• Retirement accounts that are tax-exempt: 401(k)s, 403(b)s, defined benefit plans, money purchase plans, profit-sharing plans, SEP, and SIMPLE IRAs (total value)

• Social Security benefits (total value)

• Tools of Trade: Books, implements, and tools of the trade up to $2,800

• Veteran’s benefits (total value)

• Unmatured life insurance policy except credit insurance (total value)

• Unemployment compensation (total value)

• Wildcard up to $1,475 total plus unused homestead exemption value up to $13,950

• Wrongful death recovery for loss of an individual you depended on for financial reasons (total value)

Filing Chapter 7 Bankruptcy? 

If you aren't sure which set of exemptions will be most beneficial to protect the things you own, you can speak with aWashington D.C. bankruptcy attorney. Most bankruptcy law firms offer free consultations to prospective clients, which allows you to get some tailored legal advice for your case.

If you decide to file Chapter 7 bankruptcy, Upsolve’s filing tool can help you file your bankruptcy petition for free.