Most U.S. states have opted out of the federal bankruptcy exemption scheme, requiring their bankruptcy debtors to use state-specific exemption laws. This page explains the framework, the policy rationale, and the practical effect on debtors.
Section 522(b)(2) was a compromise in the original 1978 Bankruptcy Code. Some states wanted their own exemption schemes (often more generous in specific categories like homestead) to apply rather than a uniform federal cap. The opt-out provision lets each state decide.
In an opt-out state, a bankruptcy debtor uses the state's exemption laws, which apply to:
State exemption schemes vary widely in scope, dollar amounts, and procedural requirements. Some examples of state-specific quirks:
Both states allow an unlimited dollar amount of homestead protection, but with acreage limits:
The federal § 522(p) "second home" cap limits this advantage if the property was acquired within 1,215 days (~3.3 years) of filing — in such cases, the homestead is capped at approximately $214,000 regardless of state law.
Kansas allows 160 acres of rural homestead or 1 acre of urban homestead, with no dollar cap on value. This is one of the most protective in-state homestead schemes.
California allows debtors to choose between two state schemes:
Various dollar caps in the $40,000-$200,000 range with specific rules around joint ownership, agricultural land, and proceeds from sale.
States with more generous exemption schemes (Texas, Florida, Kansas) tend to have:
States with restrictive exemption schemes have inverse patterns. The OBP visualization portfolio's per-district filing-volume data tracks these patterns.