Chapter 7 Bankruptcy Exemptions: What You Can Keep

Filing for bankruptcy doesn’t mean losing everything. Most people who file Chapter 7 keep far more than they expect. That’s because of Chapter 7 bankruptcy exemptions.

An exemption protects you by making certain property off-limits to your creditors. When you file, a bankruptcy trustee manages your case and looks for things that can be sold to pay your debts. An exemption tells that trustee: this one’s not yours to take.

Exemptions cover your essentials: the things you need to keep working and living. What you can protect, and how much, depends on where you live and which exemption rules you use. That’s a question this article can help you answer.

What Chapter 7 bankruptcy exemptions protect

Think of exemptions as a list of things the law says you’re allowed to keep. Anything on the list is safe. Anything not on the list, or worth more than the limit, could be sold to pay your creditors.

Here’s what most exemption systems cover:

• Your home: the equity you have in it, up to a dollar limit
• Your car: the equity, up to a dollar limit
• Household basics: furniture, clothing, appliances, books
• Retirement savings: most 401(k)s, pensions, and IRAs
• Work tools: equipment you need to do your job
• Certain benefits: Social Security, veterans benefits, unemployment payments

Here’s a fact worth holding onto: about 96% of Chapter 7 cases are “no-asset” cases. That means the trustee found nothing to sell. The filer kept everything. (Source)

One thing confuses a lot of people: exemption limits apply to your equity, not what the asset is worth.

Equity is simple. It’s what you’d pocket if you sold something and paid off whatever you owe on it. If your car is worth $7,000 but you still owe $3,000, your equity is $4,000. The federal car exemption covers up to $5,025 in equity, so that $4,000 is fully protected.

What usually isn’t protected: a car with significant equity (especially if it’s a second vehicle), a vacation home, investment accounts outside of retirement, valuable collections, and cash above whatever your state’s limit allows.

Federal vs. state exemptions and how to choose

There are two sets of exemption rules: the federal list and your state’s list. You pick one. You can’t mix and match items from both.

Some states let you choose which list to use. Others require you to use state rules only. These states or territories allow you to choose:

If your state isn’t listed, you can’t use federal exemptions (as of May 2026).

So which list is better? It depends on what you’re trying to protect.

If you own a home with a lot of equity, check your state’s homestead exemption first. Some states are very generous—Texas and Florida, for example, have no dollar cap on home equity, though residency and acreage rules apply. The federal homestead exemption tops out at $31,575.

If you don’t have much home equity, the federal list often works better. Here’s why: anything left over from the federal home exemption turns into a “wildcard” you can use on any property you want. That flexibility is hard to beat.

Two rules that apply no matter which list you use:

If you moved to your state less than two years ago, you may need to use your old state’s rules. Federal law requires it. 

If you’re filing jointly with a spouse, you can generally double the exemption amounts. 

Federal exemptions: how much can you protect?

Here are the current federal exemption amounts. These apply to cases filed between April 1, 2025, and March 31, 2028.

Your 401(k), pension, and most workplace retirement accounts are fully protected, with no dollar cap. IRAs and Roth IRAs have a cap of $1,711,975 per person. For most people, that’s not a real limit.

If you don’t need to protect home equity, you could put the full $15,800 toward anything else you want to keep: jewelry, a car with more equity, cash. Add the base $1,675 and a single filer could have up to $17,475 in wildcard protection.

These amounts are adjusted every three years to reflect changes in the Consumer Price Index. Next adjustment: April 1, 2028.

State exemptions vary widely, and sometimes dramatically. A bankruptcy attorney in your state can tell you whether your state’s list or the federal list would protect more of what you own.

What’s not protected: non-exempt assets in Chapter 7

The trustee could sell anything not covered by an exemption. It’s worth knowing what that is before you file.

If you own something with more equity than the exemption covers, the trustee could sell it. You’d get back the exempted amount in cash. The rest would go toward paying your creditors.

Things that often fall outside exemptions:

• A car with significant equity
• Investment accounts that aren’t retirement accounts
• Vacation homes and rental properties
• Expensive collections: rare coins, art, jewelry above the $2,125 limit
• Cash above your state’s exemption limit
• A tax refund you’re owed but haven’t received yet

That said, trustees are practical. If selling something would barely cover the cost of selling it, most trustees won’t bother. A worn couch or an old laptop usually isn’t worth the effort.

If you have property you’re worried about losing, consider a conversation with an attorney about Chapter 13. Instead of selling nonexempt property, Chapter 13 lets you keep everything while you repay creditors over three to five years. In a Chapter 13 bankruptcy, you must pay at least as much as you would have with a Chapter 7, but you won’t have to surrender property.

How to claim your exemptions when you file

Exemptions don’t happen on their own. You have to ask for them.

When you file, you fill out a form called Schedule C (Official Bankruptcy Form 106C). On it, you list everything you own, what it’s worth, and which exemption you’re claiming for each item.

Before you fill it out, do the math:

1. Write down everything you own.
2. For each item, figure out your equity: current value minus what you still owe. Kelley Blue Book for cars, Zillow for your home.
3. Check each item against the exemption amounts. If your equity is under the limit, it’s protected.

After you file, the trustee has 30 days from your 341 meeting (a short, required check-in with the trustee) to challenge any exemption you’ve claimed.

Your 341 meeting typically happens within 21 to 40 days of filing.

Get the numbers right. Claiming more than you’re entitled to could lead to an objection and delay your case. Claiming less than you’re entitled to could mean that you end up giving up something you could have kept.

Bills Action Plan

1. Make a list of everything you own and estimate the equity in each item. Value minus what you owe.
2. Find out whether your state lets you choose federal exemptions or requires state rules. If you have a choice, run the numbers on both and pick the one that protects more of what you care about.
3. Before you file, talk to a bankruptcy attorney, especially if you own a home with significant equity, a second vehicle, or investment accounts. A short consultation now could prevent a costly surprise later.

Key Terms

Exemption: A legal rule that protects specific property from being sold in bankruptcy. If your property is covered by an exemption, the trustee can’t take it.

Nonexempt property: Property that isn’t protected. The trustee could sell it to pay your creditors.

Equity: What you’d pocket if you sold something and paid off any loans on it. Exemptions apply to equity, not the total value.

Bankruptcy estate: When you file, all your property temporarily belongs to the bankruptcy estate. Exemptions are what get it back.

Homestead exemption: Protects the equity in your home. The federal amount is $31,575. Some states offer much more.

Wildcard exemption: A flexible protection you can apply to any property you choose. The base federal wildcard is $1,675, but filers with no home equity to protect could apply up to $17,475.

Bankruptcy trustee: The person who manages your bankruptcy case and looks for assets that can be sold to pay your creditors. In most cases, there’s nothing to find.

Schedule C: The bankruptcy form where you list your property and claim your exemptions.

No-asset case: A case where exemptions cover everything. The trustee has nothing to sell. About 96% of Chapter 7 cases end this way. (Source: USCourts.gov)

Opt-out state: A state that requires you to use state exemptions only, rather than the federal list. This article is for general education. We can’t advise you on whether to file for bankruptcy protection or which chapter is right for you. Consult a bankruptcy attorney for advice specific to your situation.