Chapter 7 Bankruptcy Exemptions: What Property Can You Keep?

Filing for Chapter 7 bankruptcy can feel scary. You might worry about losing your home, car, or everyday items. But here’s the truth: Most people who file keep all their property.

Bankruptcy exemptions protect the essentials you need. Your car. Your clothes. Your furniture. Even some savings. These laws exist to give you a real fresh start.

Here’s how Chapter 7 exemptions work, what you can protect, and how to claim them properly.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions are laws that shield your property during bankruptcy.

Think of exemptions as a legal shield. You list all your property on bankruptcy forms. Then you claim the exemptions that apply. If your property is fully protected, you keep it.

Exemptions don’t just cover physical items. They also protect:

• Social Security and unemployment benefits
• Retirement savings
• Alimony and child support
• Personal injury compensation
• Health aids and prescribed medical devices

Why Bankruptcy Exemptions Exist

Bankruptcy exemptions ensure you can rebuild after filing. They protect what you need to survive: your home, car, clothes, and work tools.

Without exemptions, bankruptcy could leave you homeless and jobless. That defeats the purpose of a financial fresh start.

The bankruptcy system helps people recover, not punish them. Exemptions are central to that mission. They stop you from losing everything because you fell behind on debt.

By protecting basic property, these laws help you get through bankruptcy ready to move forward.

Do Most People Lose Property in Chapter 7?

No. The vast majority keep all their property.

About 95% of Chapter 7 cases are “no-asset” cases. Everything the filer owns is protected by exemptions. The bankruptcy trustee doesn’t sell anything.

The bankruptcy trustee manages your case. They ensure any non-exempt property pays back creditors. If your belongings are fully covered, the trustee files a report saying no assets exist to distribute.

Even if you own something worth slightly more than the exemption allows, many trustees won’t bother selling it. They need meaningful money for creditors to justify the effort.

Understanding and properly claiming exemptions is critical. When you do, you’ll likely erase debts and keep everything you own.

How To Claim Bankruptcy Exemptions

To protect your property, list exemptions on your Schedule C form.

Schedule C is part of the paperwork you file with bankruptcy court. You officially claim what property you want to protect on this form.

Each item you want to protect needs to be:

• Listed by name and description (e.g., “2016 Ford F-150 truck”)
• Assigned a current value (market value for cars, garage sale pricing for household goods)
• Matched with an exemption amount covering that value
• Linked to a legal exemption code, like 11 U.S.C. § 522(d)(2)

You’ll also use Schedule A/B to list everything you own. The values and descriptions on both forms should match. Many filers use Schedule A/B as a checklist for Schedule C.

Feeling overwhelmed? Speak with a bankruptcy attorney for free to get help with your forms.

What Happens if You Don’t Claim Exemptions?

If you forget to claim an exemption, the trustee can treat your property as unprotected.

The trustee may take it, sell it, and use the money to repay unsecured creditors.

What if You Accidentally Leave Something Out?

In most cases, if you made a good faith effort, the trustee might let you fix the mistake. You can usually file an amended Schedule C to add or correct an exemption.

But if you leave Schedule C blank or clearly skip key items, the trustee isn’t required to give you a second chance.

Take your time filling out bankruptcy forms. Anything you want to keep should be clearly listed and properly claimed as exempt.

Federal vs. State Bankruptcy Exemptions

Two main sets of bankruptcy exemptions exist: federal exemptions and state exemptions. Both protect your property but come from different laws.

When you file Chapter 7, you can’t mix and match. You must choose one system: either federal exemptions or your state’s exemptions, depending on what your state allows.

Some states require you to use their exemptions. These are opt-out states that opted out of the federal system.

Other states let you choose federal exemptions if they protect more property.

How To Know Which Exemptions You Can Use

Not everyone gets to choose. Whether you have a choice depends on your state’s laws and residency history.

Here’s how to figure it out:

• If your state is an opt-out state, you must use your state’s exemption list, even if federal exemptions protect more.
• If your state allows you to choose, compare both lists and decide which gives better protection.
• If you’ve moved recently, things get complicated. To use your current state’s exemptions, you need to have lived there for at least 730 days (two years) before filing. If you haven’t, the court looks at where you lived for most of the six months before the two-year period started.

Federal Bankruptcy Exemptions (Updated for 2025)

Federal bankruptcy exemptions protect everyday things you need: home equity, car, household items, retirement accounts, and certain benefits.

These amounts adjust every three years for inflation. The most recent update took effect April 1, 2025.

These exemptions apply to your equity: the item’s value minus any loans you still owe.

For example, if your car is worth $7,000 and you owe $3,000, your equity is $4,000. The federal motor vehicle exemption of $5,025 fully protects this.

Wildcard Exemption

The wildcard exemption gives you flexibility. You can use it to protect:

• Property not covered by another category
• Property only partially covered (to “top off” an exemption)
• Cash, bank balances, or personal keepsakes

In 2025, the federal wildcard exemption protects:

• $1,675 on its own
• Up to $15,800 of any unused homestead exemption

That’s a potential total of $17,475 in wildcard protection. For many filers, this fully protects extra items that don’t fit other categories.

Money, Accounts, and Benefit Protections

Federal exemptions also protect financial and legal benefits. The following are fully protected:

• Social Security, VA benefits, public assistance, and unemployment
• Alimony and child support
• Wrongful death, future earnings, and crime victim compensation
• Disability or illness-related payments

The following are protected up to the listed amount:

• IRAs and Roth IRAs up to $1,711,975
• Personal injury awards up to $31,575 (excluding pain/suffering and financial loss)
• Unmatured life insurance up to $16,850

What Happens to Non-Exempt Property?

If you own something not fully protected by an exemption, like a second vehicle or valuable collectible, it may not be safe.

The bankruptcy trustee may be allowed to sell that item. They use the money to repay creditors.

Remember, most people who file Chapter 7 don’t lose anything. But when property isn’t exempt, here are common outcomes:

• You may be able to buy it back. If the trustee thinks it’s easier and more cost-effective, they might let you pay the non-exempt value. For example, if something is worth $6,000 and only $5,000 is protected, you might pay the $1,000 difference to keep it.
• The trustee might not sell it. If the item is hard to sell or wouldn’t bring in much money, the trustee can decide it’s not worth pursuing. You may still keep it.

Common Questions About What You Can Keep

Here are frequently asked questions about bankruptcy exemptions and what you can keep when you file.

How Do Exemptions Work in Chapter 13 Bankruptcy?

Exemptions matter in Chapter 13 bankruptcy, but differently than in Chapter 7. In Chapter 13, you usually keep all your property, even non-exempt items. It also allows you to catch up on secured debt like a mortgage or car loan.

Instead of selling your stuff, you make monthly payments through a court-approved repayment plan. These usually last 3–5 years. The amount you repay is partly based on how much non-exempt property you have.

What Are Federal Non-Bankruptcy Exemptions?

Federal non-bankruptcy exemptions are legal protections from other parts of federal law, not the Bankruptcy Code.

They protect certain benefits or income from creditors, even outside bankruptcy. But if you’re filing Chapter 7, they can give you extra protection when you’re using your state’s exemptions (not federal ones).

Some benefits, like Social Security or VA payments, are protected under both bankruptcy and non-bankruptcy law. But non-bankruptcy protections may go further, especially if your state’s laws don’t fully protect certain benefits or accounts.

Who Qualifies for Federal Non-Bankruptcy Exemptions?

Federal non-bankruptcy exemptions are designed for people connected to specific federal systems or work types.

You might qualify if you are or were:

• A veteran
• A railroad worker
• A military service member
• A civilian or federal employee
• A seaman or harbor worker
• Someone receiving federal retirement or disability benefits

If you qualify, these exemptions can protect:

• Social Security benefits
• VA disability and retirement benefits
• Military group life insurance
• Deposits made to military savings accounts while stationed abroad
• Railroad retirement and unemployment benefits
• Seamen’s wages and clothing
• Indian lands and tribal income
• Survivors benefits for lighthouse workers and federal judges’ dependents

Many of these protections are unlimited, no matter the benefit’s worth.

Can I Double Exemptions if I’m Married?

Sometimes. If you’re a married couple filing jointly, you may double certain exemption amounts. But only if both spouses legally own the property in question.

For example, if you and your spouse jointly own a car, and your state (or federal exemption system) allows a $5,000 vehicle exemption per filer, you may protect up to $10,000 in car equity.

Not every exemption can be doubled. It depends on the exemption laws you’re using.

How Do I Choose Between Federal and State Exemptions?

If your state gives you the option, you can choose between federal bankruptcy exemptions or your state’s exemptions, but not both.

To decide which is better, start by thinking about what property you need to protect.

Make a list of your key assets:

• Home equity
• Vehicle value
• Personal property (furniture, jewelry, cash)
• Retirement accounts
• Insurance benefits or payouts

Then check which exemption set offers better protection for what you care about most. For example:

• Some states offer higher homestead exemptions (helpful if you own a home with equity)
• The federal system has a generous wildcard exemption, protecting cash, savings, or anything not covered elsewhere

Also, if you’re using state exemptions, you might qualify for extra protection under federal non-bankruptcy exemptions (like Social Security or veterans benefits).

Need help deciding? Talk to a bankruptcy attorney for free to understand your options.