When something is exempt, that generally means there are rules, regulations, or circumstances that would normally apply but which will be excused in a particular instance. Exempt property usually refers to items that cannot be considered in the same manner as other items. Such a situation could arise during bankruptcy proceedings, when paying personal property taxes, or when property is divided following the death of an original owner.
Exempt property can be thought of as protected property. It is protected in the sense that for some reason it is excluded from consideration. This status is often a matter to be dealt with during bankruptcy proceedings.
Chapter 7 is one type of bankruptcy in the United States (US). It generally involves liquidating certain personal property, such as stocks, vacation homes, and boats, to pay outstanding debts. Although the bankruptcy rules vary from one state to another, there is certain property that is not subject to surrender or liquidation. These items include necessary clothing, appliances, and professional tools.
Property in a certain category may not be unconditionally exempt. According to the American Bar Association (ABA), Florida is a state that has a homestead exemption, which is designed to protect a person’s home from her creditors despite her debt. That exemption only applies if certain criteria are met, however. ABA says to qualify for protection the home cannot exceed half an acre in a municipality or 160 acres elsewhere. In some cases, limits are set by property value instead of size.
The payment of taxes provides another instance in which the matter of exempt property may need to be considered. Personal property tax is money a local government charges individuals or businesses after assessing the value of certain types of belongings, such as real estate or vehicles. There are certain organizations that may be excused from paying this type of tax, such as churches, charities, and schools.
Death also raises the issue of exempt property. If an individual is married, there are some items which the law may prohibit anyone other than the surviving spouse from obtaining during probate. This is true even if the deceased expressly stated in his will that those items were to be left to another person. Other property that is exempt during probate are items that were jointly owned by the deceased and a survivor. Despite the type or value of that property, the survivor should be fully entitled to it.