Chapter 7 and Chapter 13 treat personal property in nearly opposite ways. In Chapter 7, a court-appointed trustee can sell anything you own that isn’t protected by an exemption and pay the cash to your creditors. In Chapter 13, you keep every belonging, exempt or not, but your three-to-five-year repayment plan has to pay unsecured creditors at least what they would have received if those non-exempt items had been sold in a Chapter 7. So the same couch, car, or coin collection can be safe in one chapter and at risk in the other, and the deciding factors are exemptions, valuation, and whether the item secures a loan.
Exemptions Decide What You Keep
When you file, almost everything you own becomes part of the bankruptcy estate.1United States Bankruptcy Court. What Happens When a Bankruptcy Petition Is Filed and What Is an Estate Exemptions are the rules that let you pull specific items back out.2Office of the Law Revision Counsel. 11 USC 522 – Exemptions What is left after exemptions is what a Chapter 7 trustee can chase, and it is also what drives your minimum payment in Chapter 13.
Federal exemption limits are adjusted every three years. The current set took effect April 1, 2025, and runs through March 2028:2Office of the Law Revision Counsel. 11 USC 522 – Exemptions
- Motor vehicle: up to $5,025 in equity
- Household goods: up to $800 per item, $16,850 total
- Jewelry: up to $2,125
- Tools of the trade: up to $3,175
- Wildcard: $1,675 in any property, plus up to $15,800 of any unused homestead exemption
About two-thirds of states require you to use their own exemption system instead of the federal list. The rest let you choose, but you can’t mix the two. State exemptions vary a lot, so which set applies can change what stays and what goes. There is also a residency rule: you generally must have been domiciled in the same state for the 730 days before filing to use its exemptions. If you moved during that window, the state where you lived for most of the 180 days before the 730-day period governs.3Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions If the formula leaves you ineligible for any state’s system, you can fall back on the federal exemptions.
What Happens to Your Belongings in Chapter 7
Chapter 7 is liquidation. A trustee is appointed to gather non-exempt assets and turn them into cash for unsecured creditors.4Office of the Law Revision Counsel. 11 USC 704 – Duties of Trustee If you own a coin collection worth $8,000 and no exemption reaches it, the trustee can seize and sell it.
Most Chapter 7 filings are “no-asset” cases in practice. Everything the debtor owns is either exempt or so low in value that selling it would not produce a meaningful return. A trustee can abandon property that is burdensome or of inconsequential value, and abandoned property goes back to you.5Office of the Law Revision Counsel. 11 U.S. Code 554 – Abandonment of Property of the Estate
When there is a non-exempt item you want to keep, you can often negotiate a buy-back. You pay the trustee the item’s value, or an agreed number, and the item stays with you. The trustee collects roughly what an auction would have produced, sometimes more, because there are no sale costs.
Secured Personal Property: Three Choices
If a piece of personal property secures a debt, most commonly a financed car, Chapter 7 forces a decision. Within 30 days of filing, or by the creditors’ meeting if that comes sooner, you must file a statement of intention for each secured item, and you have another 30 days after the meeting to act on it.6Office of the Law Revision Counsel. 11 U.S. Code 521 – Debtors Duties The options are:
- Reaffirmation. You sign a new agreement with the lender and keep paying as though the bankruptcy never happened. The debt survives your discharge, so you are personally liable again if you fall behind. The agreement has to be filed before discharge, and you can rescind it within 60 days of filing. If you do not have a lawyer, the court has to approve it and find no undue hardship.7Office of the Law Revision Counsel. 11 U.S. Code 524 – Effect of Discharge
- Redemption. You pay the lender the property’s current replacement value in a single lump sum and keep the item free of the lien. It only applies to tangible personal property used for personal or household purposes. If your car is worth $6,000 and you owe $14,000, you pay $6,000 and owe nothing more.8Office of the Law Revision Counsel. 11 USC 722 – Redemption
- Surrender. You return the property to the lender. Any remaining balance becomes unsecured debt and is typically wiped out in your discharge.
Reaffirmation is the most common choice for cars because most people need the vehicle and can’t produce a lump sum. It carries real risk. If you reaffirm and later default, the lender can repossess and sue you for the deficiency, and you cannot file Chapter 7 again for eight years.
What Happens to Your Belongings in Chapter 13
Chapter 13 lets you keep all your personal property, exempt or not.9United States Courts. Chapter 13 – Bankruptcy Basics The trade-off is the repayment plan. Plans run three years if your income is below your state’s median and five years if it’s above.
The plan has to satisfy the “best interest of creditors” test, meaning it must pay unsecured creditors at least as much as they would have received from a Chapter 7 liquidation of your assets.10Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan Every dollar of non-exempt value gets added to your plan’s minimum payout. Own a non-exempt boat worth $5,000? You keep it, but $5,000 more has to flow to unsecured creditors over the life of the plan. This is why Chapter 13 tends to be the better fit for people with valuable non-exempt items they refuse to give up.
Cramdown on Secured Personal Property
Chapter 13 offers something Chapter 7 doesn’t: a cramdown. If your car is worth $8,000 but you owe $15,000, the plan can reduce the secured claim to $8,000. You pay that amount with interest through the plan, and the $7,000 leftover becomes unsecured debt that may be paid only in part or discharged entirely.
The big limit is timing. For a vehicle purchased within 910 days (about two and a half years) before filing, cramdown does not apply and you must pay the full loan balance.11Office of the Law Revision Counsel. 11 U.S. Code 1325 – Confirmation of Plan A shorter one-year lookback applies to other secured personal property. Cramdowns work best on older loans where the item has depreciated below the balance owed.
How Your Property Gets Valued
Valuation drives the numbers in both chapters. In Chapter 7 it determines how much equity a trustee can chase; in Chapter 13 it sets how much extra you owe your plan.
For personal property that secures a debt, the standard is replacement value as of the filing date.12Office of the Law Revision Counsel. 11 USC 506 – Determination of Secured Status For household items, that means what a retail merchant would charge for a similar item of the same age and condition. For vehicles, courts often start with industry pricing guides and adjust for actual condition. Wholesale or trade-in numbers are not the standard; the statute targets what it would cost a consumer to replace the item at retail.
For property that doesn’t secure any debt — the belongings you’re trying to exempt — the standard is fair market value as of the filing date.2Office of the Law Revision Counsel. 11 USC 522 – Exemptions That’s what a willing buyer would pay a willing seller, and for used household goods the number is often surprisingly low. A couch that cost $2,000 new might resell for $200. Lower values make it easier to fit within exemption limits.
Accuracy runs in both directions. Undervalue and the trustee or a creditor can challenge your schedules. Overvalue and you may inflate your Chapter 13 plan payments or expose property you could have protected. For anything worth more than a few hundred dollars, pulling comparable resale prices before filing is worth the time.
Whether Chapter 7 Is Even an Option
If your household income exceeds your state’s median for a family of your size, you have to pass a means test to file Chapter 7. The test subtracts allowed expenses and secured debt payments from your income over a projected five-year period. If enough is left, the court presumes the filing would be an abuse and generally pushes you into Chapter 13 instead. You can rebut that presumption by showing special circumstances that justify additional expenses.13United States Courts. Chapter 7 – Bankruptcy Basics
For personal property, this is often the fork in the road. Fail the means test and you land in Chapter 13, keeping your belongings and paying their non-exempt value through the plan. Pass it and Chapter 7 is faster, typically three to four months from filing to discharge, but any non-exempt property is at risk.