Bankruptcy

Understanding D.C. Bankruptcy Exemptions: What You Need to Know

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The District of Columbia Residency Requirements

To determine if you can file for bankruptcy in D.C., you must have resided there for at least 91 days out of the last 60 months. This is commonly referred to as the 180-day rule. Once you meet that requirement, the next requirement is determining if you will use the D.C. bankruptcy exemptions. To do so, you must have resided in D.C. for at least 730 days.

District of Columbia Homestead Exemptions

Important Note: Throughout my blogs and YouTube videos, I have continually stated that AI (Artificial Intelligence), blogs, and even statutes are listing exemptions wrong. So always research from multiple sources.

Over and over again, some blogs referenced a 100% exemption for burial plots, while others didn’t. Statute 15-501(a)(1) kept being referenced. While it’s possible it was listed at some point, it’s not in the statute as of today. But you see how that simple mistake could cost you thousands if not tens of thousands of dollars.

Currently, Statute 15-501(a)(1) reads as follows:

  • The following property of the head of a family or householder residing in the District of Columbia, or of a person who earns the major portion of his livelihood in the District of Columbia, being the head of a family or householder, regardless of his place of residence, is free and exempt from distraint, attachment, levy, or seizure and sale on execution or decree of any court in the District of Columbia:

However, there is reference to burial plots in subsection (14): the debtor’s aggregate interest in real property used as the residence of the debtor, or property that the debtor or a dependent of the debtor in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or dependent of the debtor, except nothing relative to these exemptions shall impair the following debt instruments on real property: deed of trust, mortgage, mechanic’s lien, or tax lien; and…

Subsection (14) is referenced in §15-501(a)(3), which references the wildcard exemption. You can read more about the wildcard exemption below, but here’s that section: (3) the debtor’s aggregate interest in any property, not to exceed $850 in value, plus up to $8,075 of any unused amount of the exemption provided under paragraph (14) of this subsection;…

Personal Property Exemptions

Besides homestead property, personal assets are also protected. This includes household goods such as clothing, household furnishings, appliances, household goods, animals, books, and musical instruments up to $425 per item, with a total aggregate limit of $8,625.

§15-501(a)(2): the debtor’s interest, not to exceed $425 in value, in any particular item or $8,625 in aggregate value in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal family or household use of the debtor or a dependent of the debtor. Your car is also exempt up to $2,575 per §15-501(a)(1). Note that you can double most of the exemptions if you are married and filing your bankruptcy petition jointly.

When valuating these items, it should be at the fair market value (FMV), which is another way of saying garage sale value. Let’s review an example of how exemptions would work.

Suppose your household goods are estimated at $14,000, but $8,625 is protected. If you subtract the value of your goods from the exemption amount ($14,000-$8,625), you have $5,375. That is the over-exempt amount of your assets. That is the amount that belongs to the bankruptcy estate.

The Tools of the Trade Exemptions

Some states, and D.C. as well, provide an additional exemption for what is known as tools of the trade. This means that business owners can exempt assets related to their business. For example, what are the tools of the trade for me? For lawyers, it’s basic: computers, printers, furniture, etc. But regardless of the business, up to $1,625 is exempt.

Statute 15-501 (a)(4) reads as follows: the debtor’s aggregate interest, not to exceed $1,625 in value, in any implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor (this exemption shall also apply to merchants).

The Wildcard Exemption

Some states offer what is known as the wildcard exemption. D.C. does as well. The wildcard exemption protects up to $8,075 if you did not claim the homestead exemption, $850 if you did.  

Note that these are just some of the exemptions offered by D.C., so make sure to review the bankruptcy petition carefully, as well as the statutes, to make sure you protect all your assets.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.


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