Every state exempts specified assets from creditors' claims. Common examples include the debtor's home, car, tools of the trade, retirement benefits, life-insurance proceeds, alimony payments, and more. The Bankruptcy Code incorporates exemptions in § 522, which allows individual debtors to exempt specified assets from the estate.

In bankruptcy, a properly exempted asset revests in the debtor and ceases to be estate property. But exemptions aren't automatic. To benefit from exemptions, the...