When you file for bankruptcy your bankruptcy attorney will explain exemptions to you and will introduce you to the wildcard exemption. In federal bankruptcy exemptions and in many state exemptions there are wildcard exemptions. A wildcard exemption can be used to exempt (keep) any type of personal property, which has different implications for Chapter 7 and Chapter 13 bankruptcies.
Most bankruptcy exemptions are specific, an auto exemption applies only to an auto and any amount left over is washed away. With a wildcard exemption you're not limited to a specific piece of property, the exemption can generally be used across the board to save different items.
For example, if your state has a $2400 vehicle exemption and a $4000 wildcard exemption you can combine them to save a vehicle that is worth up to $6400. Without this wildcard exemption you may lose your vehicle to the bankruptcy trustee.
Wildcard Exemption Amounts
While a wildcard sounds like a wonderful tool for people who are filing bankruptcy, don't get too excited, not every state allows a wildcard and the amount varies from state to state. The federal wildcard exemption is $1,150 plus any amount of your federal homestead exemption that is not being used.
The thing to remember is that if your state allows it, you have to choose whether you are going to use federal or state exemptions. However, some states do not allow you to use the federal exemptions. This is where your bankruptcy attorney will be very useful in helping you decide what is best for your individual situation.