Each state has a series of laws or statutes that protect certain assets from seizure or garnishment. As a result, many times I refer to exempt assets as protected assets when talking to clients. This makes it easier for my clients to understand. These state exemption laws protect assets from seizure by judgment creditors outside of bankruptcy and protect assets from seizure by a chapter 7 trustee in bankruptcy cases. The reason that a creditor that has a judgment against a Mississippi resident can only garnish 25% of a person’s net pay is because § 85-3-4 Miss. Code Ann. limits the garnishment to that amount.
Bankruptcy law allows people that are filing bankruptcy to claim either state exemption laws or the federal exemption laws under 11 U.S.C. § 522(d) provided the state has not opted out. When a state such as Mississippi opts out, the result is that the person filing bankruptcy in Mississippi can only choose the Mississippi exemption laws. The exception comes when a person has moved to Mississippi within the last two years, which is explained below.
As stated in the explanation in Chapter 7, a chapter 7 trustee cannot take assets that are properly claimed as exempt. In other words, if an asset (such as a car) is exempt, then a person can file a bankruptcy case and keep it if their is no lien on the car and the value of the car and the other items that he/she is claiming as exempt are within the the dollar limits set by the statute that allows the vehicle to be claimed as exempt.
If there is a lien on the car, then the debtor can still keep the car provided 1) he/she reaffirms the secured debt and pay the installment loan payments on the debt which is secured by the car as set forth in the reaffirmation agreement, and 2) he/she properly claims the the equity (value that exceeds the lien) as exempt and claim of the equity is within the dollar limits of the statute under which the claim of exemption is made.
If you are considering filing a bankruptcy in Mississippi and have moved to Mississippi within the past two years, you will probably be required to use the Federal Exemptions. The state that will control will be the state that you resided for more of the six months prior to the date which is exactly two years prior to filing. At my last review, out of the 49 other states that could control what exemptions you would use, 42 of the states would result in the requirement to use Federal Exemptions and the other 5 states would require the use the state exemptions in those 5 states. Thus, it is important to contact a qualified attorney that can advise you about this problem if you have moved to a different state within the last two years. You can see what you can keep in a bankruptcy if you moved from another state to Mississippi at this link: Federal Exemptions.
If a Debtor has lived in Mississippi for two consecutive years or more, as stated above Mississippi exemptions laws will control what can be claimed as exempt. Although there are a few others, the most commonly claimed exempt assets Mississippi are set forth below:
1. Homestead up to $75,000.00 in equity in real property up to 160 acres. §85-3-17 Miss. Code Ann. Example: If your home has a value of $150,000.00 and your mortgage payoff is $100,000.00, then your equity is $50,000.00 and the homestead is exempt or protected.
2. One (1) mobile home, trailer, manufactured housing, or similar type dwelling owned and occupied as the primary residence by the debtor, not exceeding a value of Thirty Thousand Dollars ($30,000.00); in determining this equity after deducting liens. §85-3-1(d) Miss. Code Ann.
3. Personal property including the following items up to $10,000.00 in value for an individual and up to $10,000.00 each in value for a husband and wife filling jointly, per §85-3-1(a) Miss. Code Ann. , which include the following:
- i) Household goods, wearing apparel, books, animals, crops, one television, wedding rings and engagement rings (this does not include most electronic equipment and jewelry other than wedding rings unless each item is worth less than $200.00; thus, almost all of our client’s electronic equipment and jewelry can be retained),
- ii) Motor vehicles (which in Mississippi is any vehicle or trailer that requires a tag under Mississippi law, but does not include such items as a dirt bike or 4 wheeler that do not require tags),
- iii) Implements, professional books or tools of the debtor’s trade,
- iv) Cash on hand (note: this does not include money in bank accounts),
- v) Professionally prescribed health aids, and
- vi) Any item worth less than $200.00 (thus, items such as the second and third tvs, vcrs, computers, stereos and jewelry, etc. worth less than $200.00 not exempt as a household good would still be exempt).
4. Retirement in multiple forms §85-3-1(b)(i) Miss. Code Ann., including:
- 1) An annuity, pension, or profit-sharing or stock bonus or similar plan established to provide retirement benefits for an officer or employee of a public or private employer or for a self-employed individual;
- ii) An annuity, pension, or military retirement pay plan or other retirement plan administered by the United States; and
- iii) An individual retirement account.
5. Income from disability insurance. §85-3-1(b)(ii) Miss. Code Ann. (Note: We use this on all social security disability claims, even SSI claims which are not really disability insurance. To obtain SSI (supplemental security income), one must be disabled, but it is a needs basis program and is not insurance. SSI can also be exempt under Federal Law.
6. Personal injury judgments up to $10,000.00. (Note: The problem here is that the courts have ruled that a personal injury claim that has not been reduced to a judgment is not exempt.) §85-3-17 Miss. Code Ann. Thus, this exemption normally cannot be used because when individuals file their bankruptcy petition, they normally have a pending claim, not a judgment.
7. Worker’s Compensation benefits. §71-3-43 Miss. Code Ann. 100% of worker’s comp benefits are exempt and protected.
8. Whole life and universal life insurance cash value. (Note: it appears that the amount is unlimited except that the any amount of cash value placed into the policy within the last 12 months that brings the total cash value to greater than $50,000.00 is not exempt.) §85-3-11 Miss. Code Ann.
9. Seventy-five (75%) of all wages and 100% of wages due within the next 30 days after service of a writ. §85-3-2 Miss. Code Ann. This exemption is important when a person normally receives a large bonus each year.
10. A state tax refund up to $5,000.00; a federal tax refund of up to $5,000.00 and earned income credit of up to $5,000.00. A husband and wife filing a joint case can exempt up to $5,000.00 each in each category. §85-3-1(i), (j) & (k) Miss. Code Ann. Most people think of the entire amount they receive as their tax refund. However, most of the time, part of the refund is actually earned income credit and part of it is a refund of taxes withheld the prior year.
11. Proceeds of insurance and or from the sale of exempt property. This from insurance or the sale of real such as one’s homestead or personal property such as autos or household goods. §85-3-1(b)(i) Miss. Code Ann. This can include payments on a deed of trust on the sale of the debtor’s homestead provided he/she/they were still living there at the time of the sale and they have not purchased a new homestead. The homestead would have to have been a Mississippi homestead originally exempt under §85-3-21. Miss. Code Ann. If the proceeds have been received it is critical that these funds have never been co-mingled with other funds.
12. $50,000.00 of anything not identified above for debtors at the age of 70 or above. This exemption has no limitation on type of property. Thus, if you are 70 or older, you have a $50,000.00 wild card exemption and if a husband and wife are both 70 or older, then both of them have a $50,000.00 wild card exemption. §85-3-1(h) Miss. Code Ann.
13. Funds in a health savings account, provided the account was established pursuant to a health savings account program provided in the Health Savings Account Act under Mississippi law. §85-3-1(g)
Although there are a few other items which may be exempted under the Mississippi Code, most people filing bankruptcy do not own or hold any exempt assets other than those listed above. The most common non-exempt assets that the bankruptcy trustee liquidates in chapter 7 proceedings are real property other than one’s homestead, debts owed to the debtors other than those types of debts listed above, personal injury claims or other potential claims or lawsuits in which the debtor holds an interest, and interest in estates.
14. Items exempt under Federal Law. There are multiple items which will be exempt in every state. A few of those are: Student loan funds or grants, FEMA benefits, crop insurance proceeds for farmers, multiple types of retirement accounts, veteran’s benefits, social security benefits and numerous other types of federal benefits.