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 Wisconsin, bankruptcy exemptions allow individuals to protect certain property from creditors when they file for bankruptcy. The homestead exemption is particularly relevant for protecting equity in one's home. As of the current regulations, Wisconsin residents can exempt up to $75,000 of equity in their home, or $150,000 for a married couple filing jointly, under the homestead exemption. This means that if the equity in the home does not exceed these amounts, it cannot be used to pay off creditors in the bankruptcy process. Wisconsin allows debtors to choose between state exemptions and federal bankruptcy exemptions, but they cannot mix and match between the two systems. The choice between state and federal exemptions can significantly impact the amount of equity and other assets a debtor can protect. For Chapter 7 bankruptcy, non-exempt assets may be liquidated to pay creditors, while Chapter 13 involves a repayment plan where exemptions can influence the amount paid to unsecured creditors. It's important for individuals considering bankruptcy to consult with an attorney to understand how exemptions apply to their specific situation and to make informed decisions about which exemption system to use.