If you are filing for bankruptcy under Chapter 7 or Chapter 13, you may be able to protect most or all of your assets by claiming exemptions under state or federal laws. Most exemptions are designated for specific types of assets, such as the homestead exemption for your primary residence or the motor vehicle exemption for a car. Other exemptions cover items such as clothes, work tools, or household appliances. The wildcard exemption is different from these exemptions because it can be applied to any type of property.
You should be aware that you cannot mix and match federal exemptions with state exemptions. For example, you cannot claim the federal wildcard exemption while using your state homestead exemption, and you cannot claim the wildcard exemption in your state while using the federal motor vehicle exemption.
Determining How to Apply the Wildcard Exemption
There are two different strategies for using the wildcard exemption. First, you can use it to protect an asset that does not have a specific exemption to cover it, such as a family heirloom or something that has personal significance to you but not much objective value. Or you can stack it with a specific exemption to fully protect a certain asset if the specific exemption does not cover it completely.
For example, you might have too much equity in your car to protect all of it with the motor vehicle exemption. By combining the wildcard exemption with the motor vehicle exemption, you might be able to fully protect your car. You can even divide the wildcard exemption to cover a few different types of property. However, it does not cover a large amount, so a debtor more often will use it on only one asset. Strategizing how to use a wildcard exemption can be complex because of the wide range of options, so you may want to consult a bankruptcy attorney to make sure that you understand the full scope of what you can do with it.
In some states and under the federal bankruptcy exemptions, a portion of your homestead exemption (up to a certain limit) that you do not need to protect your primary residence can be applied toward other assets as well. If this applies in your state, or if you use the federal exemptions, you can think of the leftover homestead exemption as a second wildcard exemption or as an additional amount in your wildcard exemption.
Amounts Covered by Wildcard Exemptions
Not every state has a wildcard exemption, and each state that does have a wildcard exemption assigns a different value to it. As of 2018, the federal wildcard exemption is $13,100 for someone who does not have home equity, or $1,250 plus up to $11,850 of any unused amount of the homestead exemption (which adds up to $13,100). Not every state allows a debtor to use the federal system. The states that do are New York, New Jersey, Connecticut, Pennsylvania, Rhode Island, Massachusetts, Vermont, New Hampshire, Kentucky, Michigan, Minnesota, Wisconsin, Texas, New Mexico, Oregon, Washington, Alaska, Hawaii, and the District of Columbia.