It is common for the total amount of protected assets in bankruptcy to increase from year to year due to a myriad of factors. 2025 is no exception. Bankruptcy Code 104(b) requires exemption amounts to be adjusted for inflation every three years. These new dollar amounts are to take effect April 1, 2025 and will apply to any case filed on or after that date.
Federal vs State Exemptions
When filing for bankruptcy, one of the most important decisions made by the debtor and their lawyer is which set of exemptions work best for their predicament and types of assets: Federal or State. You are not allowed to mix and match exemptions per category; therefore, you must choose one exception or the other. It is very important to determine which assets need the most protection.
Increase in Federal Exemption Amounts
Here is the breakdown on the new bankruptcy federal exemption amounts for the following categories. We’ve also included the previous amounts to compare:
Homestead Equity – $31,575 from $27,900
Motor Vehicle Equity – $5,025 from $4,450
Household Goods Values
Aggregate Limit – $16,850 from $14,875
Per Item Limit – $800 from $700
Jewelry Values – $2,125 from $1,875
Wild Card –
Any Property – $1,675 from $1,475
Unused Homestead – $15,800 from $13,950
Tools of the Trade Values – $3,175 from $2,800
Unmatured Life Insurance Values – $16,850 from $14,875
Personal Injury Claims – $31,575 from $27,900
The majority of these new federal exemption amounts work out to about a 13% increase, with the exception of Per Item Household Goods and Wild Card Property, which works out to roughly 14%.
Last Amount Increase
While it is standard for these federal exemption amounts to increase every three years in order to keep up with inflation, the last update to these amounts was just August of 2024. It is currently unclear whether the 2025 update will last until 2028 or another increase or change is necessary. While much of these updates have to do with rising costs, other changes are sometimes implemented when a discrepancy or oversight is found.
Caveats to Federal Exemption Increases
It is important to note that there are certain limitations to keep in mind when an exemption amount is increased. In several categories, such as the IRA exemption, the amount that is exempt may be dependent on when and how the funds were obtained relative to filing for bankruptcy. As always, the details of each bankruptcy filing are unique and often require someone knowledgeable in the field to determine the best plan of action. To set up a free, no-obligation consultation with one of the experienced attorneys at Hoglund Law, click here.
