In Chapter 13 bankruptcy, you can keep every dollar of cash and every bank account balance you have, but only the portion covered by exemptions is truly yours free and clear. Under the federal exemption system, at least $1,675 in cash is protected outright through the wildcard exemption, and that figure can climb to as much as $17,475 if you don’t need your full homestead exemption. State exemptions can offer more or less. Cash beyond your exemptions isn’t taken from you, but its value gets folded into what your repayment plan owes unsecured creditors.
You Keep the Cash, but Non-Exempt Money Raises Your Plan Cost
Chapter 13 is different from Chapter 7 on this point. There’s no trustee liquidating your property. Your house, car, bank accounts, and cash on hand all stay with you while you fund a court-supervised repayment plan lasting three to five years out of future income.1United States Courts. Chapter 13 Bankruptcy Basics
The tradeoff is the “best interest of creditors” test. Your plan has to promise unsecured creditors at least as much as they would have received if your assets had been sold in a Chapter 7 case.2Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan So exempt cash is genuinely yours. Non-exempt cash stays in your pocket, but it raises the price tag on your plan.
Federal Exemptions That Protect Cash and Bank Accounts
If your state permits use of the federal exemption system, two provisions do most of the work for liquid assets. For cases filed on or after April 1, 2025, the wildcard exemption under Section 522(d)(5) protects $1,675 in any type of property, including cash.3Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases Modest on its own. It grows when combined with the homestead.
The federal homestead exemption under Section 522(d)(1) protects up to $31,575 in equity in your primary residence. If you rent, don’t own a home, or have little home equity, that exemption sits mostly unused. You can redirect up to $15,800 of unused homestead exemption into the wildcard, bringing total cash protection to as much as $17,475.3Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases For renters and recent home sellers, that combination is often the single most valuable tool for shielding liquid assets.
These dollar amounts are adjusted every three years and the current figures are effective through March 31, 2028.
State Exemptions Can Change the Number Significantly
Roughly 20 states and the District of Columbia let filers choose between federal and state exemptions. The rest require the state system. Where you have a choice, comparing the two matters, because one may protect substantially more cash than the other depending on what you own.
State schemes differ enormously. Some states have their own wildcard exemptions that apply to cash. Others protect bank deposits but not physical cash, or the reverse. A few are notably generous; others barely protect liquid assets at all. The exemption system available where you live is often the biggest single factor in how much cash you can shield.
Whichever system applies, you have to list every asset on Schedule A/B of your petition, including all cash and bank balances, and claim your exemptions on Schedule C. Anything you fail to list can cause serious problems later, up to dismissal of your case.
Cash That Sits Outside the Exemption Math
Some funds are protected regardless of your exemption limits. Social Security benefits are the clearest case. Federal law places Social Security payments off-limits to creditors and bankruptcy proceedings.4Office of the Law Revision Counsel. 42 USC 407 – Assignment of Benefits If your account balance is traceable to Social Security deposits, those dollars are protected without touching your wildcard or homestead figures.
Similar protections often reach Veterans Affairs disability benefits, Supplemental Security Income, and certain retirement account funds. The word to focus on is “traceable.” If your Social Security check hits the same account as your paycheck, you’ll need to show which dollars came from where. Keeping benefit funds in a separate account makes this easy and heads off disputes with the trustee.
What Happens to Cash Above Your Exemptions
Say you have $25,000 in savings and can exempt $17,475. The remaining $7,525 doesn’t go to the trustee. You keep the money. But your Chapter 13 plan has to pay unsecured creditors at least $7,525 more than it otherwise would, spread across the life of the plan.2Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan That translates into higher monthly payments.
The math isn’t a straight dollar-for-dollar add. A proper liquidation analysis subtracts what a hypothetical Chapter 7 trustee would have spent on administrative costs, secured liens, and priority claims before any distribution to unsecured creditors. The net after those deductions is the floor your plan has to meet. Non-exempt cash raises your plan payments, but often by less than the full non-exempt amount.
Money That Arrives After You File
Tax Refunds
Most trustees treat tax refunds as disposable income that belongs in the plan, because the refund wasn’t built into your allowed monthly expenses when the plan was calculated. Expect the trustee to claim at least a portion of any significant refund.
There are a few ways to push back. You can address refunds directly in your initial plan proposal, asking the court to exclude a limited amount; keep the request modest to reduce objections. You can also file a plan modification in a given year for a specific, necessary, and unforeseeable expense such as a major car repair or an unexpected medical bill. Routine living costs won’t qualify. The simplest move is to adjust your withholding so you receive less of a refund at all. Smaller refund, less for the trustee to claim, more take-home pay each month.
Inheritances and Windfalls
Money you inherit or receive as a windfall during your case creates special obligations. Any inheritance, life insurance payout, or divorce settlement you become entitled to within 180 days of your filing date automatically becomes part of your bankruptcy estate.5Office of the Law Revision Counsel. 11 USC 541 – Property of the Estate Courts treat an inheritance as “acquired” when the person dies, not when the funds actually land in your hands. Even a pending inheritance counts if the death was inside that window.
The trustee will typically require these funds to increase your plan payments or to be paid as a lump sum toward creditor claims. The obligation doesn’t always stop at 180 days either. Because Chapter 13 captures disposable income across the whole plan period, courts often treat inheritances received later in the plan as contributable too, particularly when the amount is substantial.
Failing to disclose an inheritance or windfall can lead to dismissal or allegations of bankruptcy fraud. Report any such funds to your attorney and the trustee immediately, even if the money hasn’t arrived. Counsel can sometimes argue the funds are exempt under applicable law or that a plan modification is the right response rather than full turnover.
Cash Moves to Avoid Before Filing
Some people try to reduce their cash before filing, thinking a smaller balance means an easier case. It usually goes the other way.
Paying back friends or family before filing creates a preferential transfer. The trustee can claw back any payment made to a creditor within 90 days before filing if that payment gave the creditor more than they would have received through the bankruptcy. For insiders like relatives, business partners, or close associates, the lookback stretches to a full year.6Office of the Law Revision Counsel. 11 USC 547 – Preferences Intent doesn’t matter; the payment itself is enough.
Spending on luxuries, giving gifts, or transferring assets to hide them can be treated as a fraudulent transfer. The trustee can unwind any transfer made within two years before filing if it was intended to put assets beyond creditors’ reach, or if you received less than fair value in return while insolvent.7Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations
Ordinary living expenses are fine. Rent, groceries, car repairs, catching up on utilities. Keep receipts. Avoid anything that looks like moving money around to keep it away from creditors. The trustee reviews your bank statements and asks pointed questions about anything unusual.