15.3.1 Purpose
15.3.1 Purpose
Every state protects at least some of a debtor’s basic personal possessions from the reach of creditors. The purpose of these statutes is to allow debtors to retain basic necessities for living. The specific items exempted under each state statute differ, usually as a result of the antiquity of the statutes, geography, and the local economy. For example, states in the north frequently exempt a certain amount of products that are to be used as fuel. States with a strong agricultural community allow for a certain amount of crops and farm animals to be retained, in order to allow the debtor to continue earning a living. Exemptions for personal property may not apply to purchase money debts170 or criminal forfeitures.171
Many exemption statutes limit the number of items in certain categories that may be exempted. In these states, the debtor may have to itemize the exemption claim in order to show that the number of items in each category does not exceed the limit.172
It is common for certain types of personal property, particularly motor vehicles, to be subject to a security interest. Many statutes make it clear—often by referring to “the debtor’s interest” in the property—that the debtor is allowed to retain the property as long as its value does not exceed the amount of the liens plus the amount of the exemption.173 In other words, the exemption applies to the debtor’s equity in the property. If an exemption statute specifies otherwise, it may still be an unfair practice for a creditor to seize personal property in which the debtor has no equity that can be realized by a forced sale.174
Footnotes
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170 See Coonts v. Potts, 316 F.3d 745 (8th Cir. 2003) (Mo. law); In re Johnson, 179 B.R. 800 (Bankr. E.D. Va. 1995) (when consumer borrowed money from credit union for stated purpose of buying car but never listed lien on title certificate, debt was purchase money and car was not exempt).
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171 Nielson v. 2003 Honda Accord, 823 N.W.2d 347 (Minn. Ct. App. 2012) (state statutory and constitutional personal property exemptions do not bar criminal law forfeiture of motor vehicle; distinguishing homestead cases because of preferred position given to homesteads by Minnesota law); State v. One 1965 Red Chevrolet Pickup, 37 P.3d 815 (Okla. 2001) (exemption from “every other species of forced sale” not broad enough to shield personal property from criminal forfeiture). See generally § 11.4, supra.
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172 See, e.g., In re Wade, 466 B.R. 20 (Bankr. D. Colo. 2012) (household goods exemption has per-item limit; denying exemption to all household goods of debtors who failed to itemize). See also Kornman v. Faulkner, 2014 WL 1512478 (Tex. App. Apr. 17, 2014) (holding all debtor’s personal property non-exempt because he was not specific enough in itemizing it and valuing each item). See generally § 13.3.9.1, supra (waiver of exemptions by failure to assert them properly).
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173 See, e.g., In re Rutter, 247 B.R. 334 (Bankr. M.D. Fla. 2000) (statutory exemption for debtor’s interest up to $1000 in motor vehicle is to be applied to protect debtor’s equity in the vehicle).
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174 In re Petralia, 559 B.R. 275, 288 (Bankr. D. Mass. 2016) (stating in dicta that creditor who knows that there is no equity in a vehicle, but seizes it anyway to coerce payment, may have committed unfair or unconscionable act in violation of the Fair Debt Collection Practices Act).