What are the Oklahoma Bankruptcy Exemptions?

What are the Oklahoma bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

One of the most important aspects of the Chapter 7 bankruptcy process involves applying bankruptcy exemptions to your property. If you don’t carefully claim every Oklahoma bankruptcy exemption applicable to your situation, the bankruptcy trustee assigned to your case can sell your personal property to help pay back your creditors. Thankfully, if you don’t own much valuable property, the state exemptions available to Oklahoma residents should allow you to safeguard most or all of your assets from the risk of being sold by the trustee assigned to your bankruptcy case. It’s therefore important to approach the process of identifying and claiming applicable Oklahoma exemptions carefully so that you don’t lose ownership of any of your property simply due to carelessness.

Does Oklahoma allow the use of federal bankruptcy exemptions?

Identifying available bankruptcy exemptions is relatively straightforward in Oklahoma, because state law doesn’t allow residents to claim federal bankruptcy exemptions. While 17 states do allow residents to choose between state and federal exemptions, Oklahoma does not. As a result, if you have lived in Oklahoma for at least two years, the bankruptcy court will only allow you to claim Oklahoma’s unique state exemptions. You can learn about each of the exemptions available to you in the information listed below. As you’re reading this information, jot down any questions that it inspires so that you can reference them easily if you choose to meet with a bankruptcy attorney.

Oklahoma Bankruptcy Exemptions

It’s important to note that if you and your spouse are filing jointly as a married couple, you are each entitled to claim the full value of each Oklahoma exemption (unless otherwise noted). Practically, this means that you should (unless otherwise noted) “double” the value amounts listed below as long as you are co-owners of the property you’re trying to exempt. If you’re a single filer, you don’t need to take this calculus into account.

It’s also important to understand that exemption limits will apply to equity held in certain property you’re trying to protect. For example, say that you own a motor vehicle that has an estimated cash value of $10,000. If you still owe $8,000 in loans on that vehicle, your car or truck will only have an equity value of $2,000. If an exemption “covers” the value of your equity and you want to keep making payments on your property that remains subject to loan payments, you should be able to keep it. This issue primarily affects real property and other secured debts.

Two final points to keep in mind as you’re assessing Oklahoma’s Chapter 7 bankruptcy exemptions:

• If you own property that cannot be exempted, you’ll likely need to pay your bankruptcy trustee the value of that property if you want to keep it. Otherwise, your trustee will likely sell that nonexempt property to pay back your creditors.

• Oklahoma law does allow filers to claim certain select federal exemptions. This does not mean that filers can claim other federal exemptions not specifically allowed under Oklahoma law. If an exemption isn’t explicitly listed in the information below, ask an attorney for guidance before you try to claim it.

Real Property - the Oklahoma Homestead Exemption

If you own land and/or real estate, you’re very lucky that you’re choosing to file bankruptcy in Oklahoma. Oklahoma is one of only a few states that provides residents with an “unlimited” homestead exemption value. Essentially, instead of limiting the amount of value you can exempt in a home or land, you’re only limited to exempt a certain amount of acreage. If you live in an urban area or a town, you can exempt one acre of land and the buildings that sit on that land. If you live in a rural area, you can exempt up to 160 acres and the buildings that sit on that land.

The only major exception to the very generous Oklahoma homestead exemption involves land or buildings used for business purposes. If the home is located within a city or town and more than 25%  of the total square footage of the property is used for business purposes, the homestead exemption is limited to $5,000.  If you use the homestead exemption to protect your primary residence, state law allows you to exempt your equity in that home subject to the limitations noted above.

Personal Property Exemptions

Unless otherwise noted, Oklahoma law allows filers to exempt the full value of the following kinds of personal property. Unlike many other states, Oklahoma doesn’t place a limit on the value of most kinds of personal property eligible for exemption. This makes Oklahoma’s personal property exemption structure one of the most generous in the nation:

• Books

• Bridles and saddles (2 of each)

• Burial plots

• Clothing (up to $4,000)

• Crop seed to last one year

• Food to last one year

• Funeral benefits that have been prepaid and placed in a trust

• Furniture

• Guns for household use (up to $2,000)

• Household items

• Individual development account deposits

• Interest in college savings plans

• Livestock for family use (up to 2 horses, 5 cows, 10 hogs, 20 sheep, and 100 chickens as well as their feed to last one year)

• Personal computers

• Personal injury and wrongful death recoveries (up to $50,000 with additional exemplary or punitive damages exempt without limitation)

• Pictures and portraits

• Prescription health aids

• War bond payroll saving account

• Wedding bands and anniversary rings (up to $3,000)

Additionally, you can exempt equity in a motor vehicle up to $7,500 as a single filer or $15,000 if you’re married and filing jointly. If you use a motor vehicle as part of your profession, you may be able to claim an additional $10,000 in equity in that vehicle under Oklahoma’s tools of trade exemption. The tools of the trade exemption generally covers $10,000 total value of implements necessary for working farmland that also serves as your homestead. Tools of the trade exemptions generally cover any equipment required to carry out your business or profession.  

Money Benefits

In addition to offering protections for retirement plans and most retirement accounts, Oklahoma law exempts 75% of those wages earned in the 90 days before a filer submits their bankruptcy petition to the court. The court has discretion to exempt more than that threshold if the filer can demonstrate hardship. Given that most Chapter 7 bankruptcy filers are low-income, hardship is generally not difficult to demonstrate in this context.

In addition to the wage-specific exemption, Oklahoma law allows for the following “money benefit” exemptions: 

• ERISA-qualified benefits

• IRAs and Roth IRAs (up to the current maximum as outlined in 11 U.S.C. § 522(b)(3)(C)(n); §15-41-30(A)(13) – these figures are adjusted every 3 years)

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

Finally, Oklahoma law gives special exemption-related consideration of pensions and other qualifying assets owned by members of certain professions. For more information on these specific considerations, see the legal codes provided:

• County employees §19-959

• Disabled veterans §31-7

• Firefighters §11-49-126

• Judges §20-1111

• Law enforcement employees §47-2-303.3

• Police officers §11-50-124

• Public employees §74-923

• Teachers §70-17-109

Other Oklahoma Exemptions

A number of public benefits, insurance benefits and miscellaneous assets are also exempt (up to their full value, unless otherwise noted) under Oklahoma state law. These additional exemptions include:

• Alimony or spousal support

• Annuity benefits (and cash value)

• Assessment of mutual benefits

• Beneficiary’s interest in a statutory support trust

• Child support

• Crime victim compensation

• Earned income tax credit refund amounts

• Fraternal benefit society benefits

• Group life insurance policy or proceeds

• Liquor license

• Property of a formal business partnership

• Public assistance

• Social Security benefits

• Stock insurance benefits (in an amount consistent with the limitations outlined in §36-2510)

• Unemployment compensation

• Workers' compensation

Additionally, as long as the insurance contract in question protects their proceeds and cash value from being used to repay creditors, the value of accident, health, life, and mutual benefit insurance is also exempt under Oklahoma law.

Filing Chapter 7 bankruptcy? 

Don’t worry if you still have questions about bankruptcy exemptions and/or any other aspect of the Chapter 7 bankruptcy process. Bankruptcy is complex and most filers have a lot of questions while they’re weighing their options. Everyone who is thinking about filing for bankruptcy can benefit from receiving some legal advice about their debt relief options. Thankfully, most Oklahoma bankruptcy attorneys offer free consultations for anyone interested in learning more about filing bankruptcy. Upsolve can help you to locate a qualified Chapter 7 and Chapter 13 bankruptcy lawyer in your area so that you can have a no-cost, no-obligation conversation about your options. That way, you’ll be empowered to make an informed decision about the debt relief options available to you at this time. If you can’t afford to keep working with an attorney after your free consultation, Upsolve may be able to help you file your Chapter 7 bankruptcy case for free.