District of Columbia law allows Chapter 7 bankruptcy filers to apply either federal bankruptcy exemptions or exemptions unique to the District (including certain federal nonbankruptcy exemptions) to their property. This means that you can choose whichever exemption structure is more financially advantageous for your situation, although you may not “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 however, that if you moved to the District of Columbia less than two years ago, you may be required to exempt property according to the state exemption laws of your prior state of residence.
Written by Attorney Kassandra Kuehl.
Updated January 5, 2022
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 claimingbankruptcy 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 the Use of Federal Bankruptcy Exemptions?
District of Columbia law allows Chapter 7 bankruptcy filers to apply either federal bankruptcy exemptions or exemptions unique to the District (including certain federal nonbankruptcy exemptions) to their property. This means that you can choose whichever exemption structure is more financially advantageous for your situation, although you may not 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 the District of Columbia less than two years ago, you may be required to exempt property according to the state exemption laws of your prior state of residence.
Washington D.C. Bankruptcy Exemptions
If you are filing for bankruptcy as a single individual, you can move on to the next section of information. However, if you are married and filing for bankruptcy jointly with your spouse, you’ll need to keep something in mind as you evaluate the information noted below. With the exception of the homestead exemption, you and your spouse are entitled to benefit from the “doubling rule” for any property you own jointly. Meaning, if you and your spouse both own an asset, the exemption value afforded to single filers is doubled for you and your spouse.
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 and contrast the Washington D.C. and federal exemptions currently available to you.
Real Property – The Washington D.C. Homestead Exemption
Washington D.C. arguably has the most generous homestead exemption allowable by law. If 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 you’re seeking to exempt. If you’re a homeowner, the benefits of this generous state-specific 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)
Food (enough to last 3 months)
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
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
Co-op holdings (up to $500)
Crime victims' compensation
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 2 months for a head of family and up to $60 per month for 2 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
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
Uninsured motorist benefits
Unmatured life insurance contract (excluding credit life insurance)
Wages (up to 2 months’ worth of earned but unpaid wages and pension payments at a 75% rate)
Wrongful death damages
Other Washington D.C. Exemptions
If you own assets that you are not able to 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 are not 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.
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 structures. You can’t pick and choose from both, so you’ll have to weigh the pros and cons of one against the pros and cons of the other. 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. Note that federal exemptions are updated every three years and that the exemption allowance amounts noted below will remain current until April 1, 2022. Just as it is with District of Columbia bankruptcy exemptions, married couples filing jointly are allowed two sets of exemption allowances for jointly owned property under the federal exemption structure, unless otherwise noted.
Federal exemptions available include a homestead exemption of up to $25,150 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 $12,575 of the homestead exemption can be applied to alternative real property or personal 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 $1,362,800)
Jewelry (up to $1,700)
Life insurance policy (loan value up to $13,400)
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 $4,000)
Public assistance and other public benefits (total value)
Personal injury recovery (up to $25,150 – 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 $625 per item, up to $13,400 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 $2,525)
Veteran’s benefits (total value)
Unmatured life insurance policy except credit insurance (total value)
Unemployment compensation (total value)
Wildcard ($1,325 total plus unused homestead exemption value up to $12,575)Wrongful death recovery for loss of an individual you depended on for financial reasons (total value)
Filing Chapter 7 Bankruptcy?
In preparation for filing bankruptcy, it’s important to speak with an experienced Washington D.C. bankruptcy attorney. If you’re thinking, “But I can’t afford a bankruptcy lawyer’s services,” fear not. Most bankruptcy law firms offer free consultations to prospective clients. As such, you can receive legal advice about your bankruptcy case at no cost and with no obligation to retain that firm’s services once your consultation is complete.
If you ultimately need to file for Chapter 13 bankruptcy because you aren’t eligible for debt relief under Chapter 7 of the Bankruptcy Code, you’ll likely need to work out a manageable payment schedule because you’ll need ongoing legal assistance. However, if you’re eligible to file for Chapter 7 bankruptcy, Upsolve’s free web app can help you file your bankruptcy petition for free. In addition, you can access resources regarding bankruptcy for free on the Upsolve website at any time.