What are bankruptcy exemptions?

Bankruptcy exemptions are laws that protect certain property from being sold to pay creditors in Chapter 7 bankruptcy. They ensure you keep essential items like clothing, household goods, and often your home and car.

Can I choose between federal and state exemptions?

In 19 states plus D.C., you can choose between federal and state exemptions. In the remaining 31 states, you must use state exemptions. You cannot mix federal and state exemptions - you must choose one system or the other.

Will I lose my home in Chapter 7 bankruptcy?

Most people keep their homes in Chapter 7 if they're current on mortgage payments and their home equity is protected by the homestead exemption. Federal homestead exemption is $27,900 (single) or $55,800 (married), but many states offer higher protection.

Chapter 7 Bankruptcy Exemptions

Protect your property and keep what matters most

Understanding Bankruptcy Exemptions

Bankruptcy exemptions are laws that allow you to protect certain property from being sold (liquidated) to pay your creditors in Chapter 7 bankruptcy. These exemptions ensure that you're not left destitute after bankruptcy and can maintain a basic standard of living while getting your fresh start.

The good news: Most Chapter 7 cases are "no-asset" cases, meaning all property is protected by exemptions and nothing is sold. Studies show that 96% of Chapter 7 filers lose no property at all.

Key Point: Exemptions protect the equity in your property, not the property itself. If you have a $200,000 home with a $175,000 mortgage, you only need to protect $25,000 in equity.

Federal vs. State Exemptions

The bankruptcy code provides two exemption systems: federal exemptions under 11 U.S.C. § 522(d) and state-specific exemptions. Your options depend on where you file:

States Allowing Choice (19 + D.C.)

Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, Wisconsin

You can choose either federal OR state exemptions (not both)

States Requiring State Exemptions (31)

Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, Virginia, West Virginia, Wyoming

Must use state exemptions only

2026 Federal Bankruptcy Exemptions

Amounts effective April 1, 2025 - March 31, 2028 (adjusted every 3 years for inflation)

Property Type	Single Filer	Married Filing Jointly
Homestead (residence)	$27,900	$55,800
Motor Vehicle	$4,450	$8,900
Household Goods & Furnishings (per item limit: $700)	$14,875 total	$29,750 total
Jewelry	$1,875	$3,750
Tools of Trade	$2,800	$5,600
Life Insurance Cash Value	$14,875	$29,750
Health Aids	Unlimited	Unlimited
Wildcard (any property)	$1,475 + up to $13,950 of unused homestead	$2,950 + up to $27,900 of unused homestead
Retirement Accounts (401k, IRA, pension)	$1,512,350 (IRA/Roth IRA) Unlimited (401k, 403b, profit sharing, pension)	$3,024,700 (IRA/Roth IRA) Unlimited (401k, 403b, profit sharing, pension)
Personal Injury Awards	$27,900	$55,800

Notable State Exemption Highlights

Note: State exemptions vary widely. Some states are much more generous than federal exemptions, while others are more restrictive. Always check your specific state's current exemptions.

States with Unlimited Homestead Exemptions

Texas: Unlimited value for primary residence (up to 10 acres urban/100 acres rural)
Florida: Unlimited value for primary residence (up to 0.5 acres urban/160 acres rural)
Iowa: Unlimited value for primary residence (up to 0.5 acres urban/40 acres rural)
Kansas: Unlimited value for primary residence (up to 1 acre urban/160 acres rural)
Oklahoma: Unlimited value for primary residence (up to 1 acre urban/160 acres rural)

States with High Homestead Exemptions

Nevada: $605,000
Massachusetts: $500,000
Minnesota: $450,000
California: $600,000+ (based on county median home price)
Arizona: $400,000

Special Exemption Categories

100% Protected Property (Cannot Be Taken)

ERISA-qualified retirement accounts (401k, 403b, pension plans)
Social Security benefits
Disability benefits
Veterans benefits
Unemployment compensation
Workers' compensation
Child support and alimony
Public assistance benefits
Crime victim compensation

The Wildcard Exemption: Your Secret Weapon

The wildcard exemption is one of the most flexible tools in bankruptcy. It allows you to protect any property of your choosing, making it invaluable for protecting:

Cash in bank accounts
Tax refunds
Extra vehicle equity
Valuable collections or heirlooms
Business equipment beyond the tools of trade limit
Investment accounts (non-retirement)

Pro Tip: If you don't own a home or have little home equity, you can use unused homestead exemption as additional wildcard in federal exemptions. This can provide up to $15,425 in additional protection for any property.

Strategies to Maximize Your Exemptions

Legal Pre-Filing Planning

Convert Non-Exempt to Exempt Assets:
- Use cash to pay down mortgage (increases homestead protection)
- Purchase necessary household goods or clothing
- Contribute to retirement accounts
- Pay ahead on utilities or insurance
Timing Considerations:
- Wait to file if expecting to spend down non-exempt assets
- File before receiving inheritances or lawsuit settlements
- Consider seasonal income variations
Valuation Strategies:
- Use liquidation value, not retail value
- Get professional appraisals for valuable items
- Document condition issues that reduce value

Warning: Asset transfers or conversions must be done honestly and in good faith. Hiding assets, fraudulent transfers, or last-minute luxury purchases can result in denial of discharge or criminal charges.

Common Exemption Scenarios

Scenario 1: Protecting Your Home

Situation: Home worth $250,000, mortgage balance $200,000, equity $50,000
Federal Exemption: $27,900 (single) protects partial equity
Options:

If in Texas/Florida: Fully protected under state exemptions
If married: $55,800 federal exemption covers all equity
Consider Chapter 13 to keep home with higher equity

Scenario 2: Multiple Vehicles

Situation: Two cars worth $8,000 each, both paid off
Federal Exemption: $4,450 per vehicle + wildcard
Strategy:

Use motor vehicle exemption for first car: $4,450
Use wildcard for remaining $3,550 in first car
Use unused homestead as wildcard for second car
Or: Sell one vehicle before filing, use proceeds for exempt assets

Scenario 3: Bank Accounts and Cash

Situation: $5,000 in checking, $3,000 in savings
Federal Exemption: No specific cash exemption
Strategy:

Use wildcard exemption ($1,475 + unused homestead)
Pay ahead on mortgage, utilities, or insurance
Purchase exempt assets (food, clothing, household goods)
Make necessary home or vehicle repairs

Exemption Planning Checklist

Before Filing Chapter 7:

☐ List all assets with current market values
☐ Calculate equity in secured assets (value minus loans)
☐ Review both federal and state exemptions (if choice available)
☐ Identify non-exempt property at risk
☐ Consider legal asset conversions
☐ Document basis for valuations
☐ Review transactions from past 2 years
☐ Consult attorney about exemption strategies
☐ Ensure no recent large purchases or transfers
☐ Verify retirement accounts are properly titled

Frequently Asked Questions

Can I protect property I'm still paying for?

Yes, exemptions protect your equity in property, not just fully-owned items. If you owe more than the property is worth (no equity), there's nothing for the trustee to take.

What happens to non-exempt property?

The trustee may sell non-exempt property to pay creditors. However, you might be able to: (1) pay the trustee the non-exempt value to keep it, (2) trade exempt property for it, or (3) negotiate a payment plan.

Can exemptions change after I file?

You're locked into the exemption amounts available on your filing date. However, property acquired after filing (with some exceptions) is generally not part of the bankruptcy estate.

What if I recently moved states?

You must live in a state for 730 days (2 years) to use its exemptions. If you haven't, you use the exemptions from where you lived the majority of the 180 days before the 730-day period.

Are exemptions different for married couples?

Married couples filing jointly can double federal exemptions. State exemption rules vary - some allow doubling, others don't. Even if filing separately, a non-filing spouse's property may be protected.

Remember: Exemption laws are complex and vary significantly by state. Small mistakes in claiming exemptions can result in losing property unnecessarily. Always consult with a local bankruptcy attorney to ensure you're maximizing your exemptions properly.

Next Steps

Calculate Your Exemptions View Your State's Exemptions