Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Utah, bankruptcy exemptions play a crucial role in both Chapter 7 and Chapter 13 bankruptcy filings. These exemptions allow individuals to keep certain property from being liquidated or claimed by creditors. The homestead exemption in Utah is particularly important for protecting equity in one's home. As of the knowledge cutoff in 2023, Utah allows residents to exempt up to $43,000 of equity in their primary residence for an individual filer, and $86,000 for a joint filing by a married couple. This means that if the equity in the home does not exceed these amounts, the home cannot be sold to pay off unsecured creditors in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, the debtor must still pay an amount to unsecured creditors that is at least equal to the value of their nonexempt assets. It's important to note that exemption amounts are subject to change, and debtors should consult with an attorney to understand the most current exemption limits and how they apply to their specific situation.