What Can I Keep If I File for Bankruptcy? Exemptions and Limits

If you file bankruptcy, you can generally keep any property that fits within the exemption limits that apply to you, and most filers keep everything they own. Roughly 96 percent of Chapter 7 cases close without the trustee selling a single asset. What you get to keep when you file bankruptcy depends on three things: the categories and dollar amounts of exemptions available to you, whether you file Chapter 7 or Chapter 13, and whether any of your property secures a loan.

How Exemptions Decide What You Keep

Exemptions are dollar caps on specific categories of property. If the equity you own in an asset falls within the cap, that asset is protected. Equity means current market value minus what you still owe on any loan tied to it. A car worth $15,000 with $13,000 still owed on it has $2,000 of equity, and that $2,000 is what has to fit within the vehicle exemption.

Exemptions are not automatic. You have to list each asset you want to protect on Schedule C of the bankruptcy paperwork and identify the exemption you’re claiming for it. Anything you leave off can be taken by the trustee and sold to pay creditors.¹ This is one of the most common preventable mistakes in bankruptcy.

Federal or State Exemptions: Which List Applies

Federal bankruptcy law has its own exemption list, and every state has one too. Some states let you choose whichever list protects more of your property. Others have opted out of the federal list, so filers there must use only the state list.² You cannot mix the two: once you pick a system, every exemption you claim has to come from that single list.

Where you’ve lived recently controls which state’s list you can use. You generally must have lived in one state for the full 730 days before filing to use that state’s exemptions. If you moved during that window, you may have to use the exemptions of the state where you lived for most of the 180 days before that.² If applying those rules leaves you with no eligible state list, you can use the federal list regardless of your state’s opt-out.

What the Federal Exemptions Protect

The dollar figures below are the federal amounts in effect from April 1, 2025 through March 31, 2028. State amounts can be higher, lower, or structured differently, so compare the two lists carefully if your state gives you the choice.

Your Home

The federal homestead exemption protects up to $31,575 of equity in your primary residence.³ A few states offer unlimited homestead protection, which is why the choice between federal and state lists matters most to homeowners.

One important limit applies regardless of your state’s rules. If you acquired your home within 1,215 days (roughly three years and four months) of filing, a federal cap of $214,000 applies to the equity you can shield through a state homestead exemption.² The cap doesn’t apply to equity rolled from a prior home in the same state, and it doesn’t apply to family farmers protecting a principal residence.

Your Car

Federal law protects up to $5,025 of equity in one motor vehicle.³ Most car loans leave the borrower with little or no equity anyway, so the exemption often covers the entire amount at stake. State vehicle exemptions vary, and some are considerably higher.

Household Goods and Personal Property

Federal exemptions protect household goods, clothing, and appliances up to $800 per item, with a combined cap of $16,850. Jewelry gets its own exemption of up to $2,125.³ In practice, used furniture and clothing have low resale value, and trustees rarely pursue them.

Personal injury compensation is protected up to $31,575 (pain and suffering awards are excluded), and unmatured life insurance contracts are protected outright. If a life insurance policy has built-up cash surrender value, the federal exemption covers up to $16,850 of that value.²

Cash and Bank Accounts

The balance in your checking or savings account on the day you file is an asset you have to report, and there is no standalone federal exemption for bank cash. This is why the wildcard exemption (covered below) matters so much: it’s often the only tool available for protecting money in the bank.

Money that came from an exempt source keeps its protected status once deposited. Social Security, veterans’ benefits, and disability payments generally remain exempt in your account as long as you can trace where the funds came from. Mixing those deposits with other income makes tracing harder, so keeping them in a separate account before filing helps preserve the protection.

Tools of Your Trade

Equipment, tools, and books you use in your job or profession are protected up to $3,175.³ The exemption is meant to make sure you can keep earning after the case closes.

Retirement Savings and Government Benefits

Retirement accounts get some of the strongest protection in bankruptcy. Employer-sponsored plans like 401(k)s and pensions are shielded under federal law with no dollar cap. Traditional and Roth IRAs are exempt up to a combined $1,711,975.³

Inherited IRAs are the exception. The Supreme Court held in Clark v. Rameker that money in an inherited IRA does not count as “retirement funds” for bankruptcy purposes, because the account holder can withdraw the full balance at any time without penalty and is required to take distributions regardless of age.⁴ An inherited IRA is part of your bankruptcy estate unless a state exemption specifically covers it.

Government benefits are also protected. Social Security, unemployment compensation, veterans’ benefits, and public assistance remain exempt.³

The Wildcard

The federal wildcard exemption protects any property you choose, up to $1,675 plus up to $15,800 of any unused portion of the homestead exemption.³ A renter who uses no homestead exemption can stack the full $17,475 on any asset. This is where cash in the bank, a tax refund, or a second vehicle typically gets protected.

Tax refunds deserve special mention. Any refund based on income earned before you file is part of your bankruptcy estate. If your refund is large and hasn’t arrived yet, the trustee can claim it. The wildcard is usually the tool that shields it, so timing the filing relative to when the refund comes in can matter.

Judgment Liens That Reduce Your Protection

Even property that qualifies for an exemption can be eaten into by a judgment lien recorded against it. Federal law lets you ask the court to strip judicial liens and certain non-purchase-money security interests on household goods, tools of the trade, and health aids to the extent those liens impair your exemptions.² Removing a pre-filing judgment lien on your home can preserve the full value of the homestead exemption.

Property With a Loan Against It

Exemptions only protect equity. When property secures a loan, the lender’s lien survives bankruptcy. Your personal obligation to pay is discharged, but if you stop paying, the lender can still repossess or foreclose. You have three options in Chapter 7 for handling secured property.

Reaffirmation

A reaffirmation agreement is a new contract putting you back on the hook for the debt in exchange for keeping the property. The lender keeps its lien, and you keep paying as though the bankruptcy never touched that loan. The risk is that a later default lets the lender repossess and sue you for any deficiency, with no discharge available. Reaffirmations are voluntary and must be filed within 60 days of the first meeting of creditors.⁵ If you don’t have an attorney, the judge must find the agreement in your best interest before approving it. You have a 60-day window after filing the agreement (or after your discharge date, whichever is later) to cancel.

Redemption

Redemption lets you keep personal property, usually a car, by paying the lender its current fair market value in one lump sum, even if you owe more on the loan. After payment, you own it free and clear. The obvious barrier is coming up with the cash. If you and the lender disagree on value, the court decides at a hearing.

Surrender

You can also hand the property back and have the remaining debt discharged. This is the simplest option when the property isn’t worth keeping or the payments aren’t sustainable.

Real estate works a little differently. Courts have generally allowed a homeowner who stays current on mortgage payments to keep the home through bankruptcy without signing a reaffirmation, because the 2005 amendments that eliminated this “ride-through” for personal property did not clearly reach real estate. Keep paying the mortgage, and in most cases the lender cannot foreclose even without a reaffirmation.

What Happens to Property Above the Limits

If an asset’s equity exceeds the applicable exemption, the excess is non-exempt. What happens to it depends on the chapter.

In Chapter 7, the trustee can sell non-exempt assets and distribute the net proceeds to creditors. A car worth $10,000 with the $5,025 vehicle exemption applied could be sold, with $5,025 paid to you and the remainder (after sales costs and the trustee’s commission) paid to creditors. Trustees often decide the effort isn’t worth it. If the non-exempt equity is small, sale costs can consume most of the proceeds, and federal law allows the trustee to abandon property that is burdensome or of inconsequential value to the estate.⁶ Abandoned property returns to you as though the bankruptcy never touched it. Anything the trustee has not administered by the time the case closes is deemed abandoned automatically. Most Chapter 7 cases end without any sale at all.⁷

In Chapter 13, nothing is sold. You keep everything, exempt and non-exempt alike. The value of your non-exempt property instead sets the floor for what your three-to-five-year repayment plan must pay unsecured creditors: they have to receive at least as much through the plan as they would have received in a Chapter 7 liquidation.⁸ More non-exempt equity means higher plan payments.⁹ This is why filers with significant non-exempt equity in a home often choose Chapter 13: they keep the house instead of risking a sale.

Situations That Can Pull Property Into the Case

Even careful exemption planning can be upset by a few rules that reach beyond the filing date or backward into what you did before filing.

The 180-Day Rule

If you receive an inheritance, become the beneficiary of a life insurance payout, or receive property through a divorce settlement within 180 days after filing, that property becomes part of your bankruptcy estate as though you owned it on the filing date.¹⁰ In Chapter 7, the trustee can take it. In Chapter 13, it can raise your plan payments. You are legally required to report the windfall, and failing to do so can result in your discharge being revoked.⁷

Payments and Transfers Before You Filed

If you paid one creditor at the expense of others shortly before filing, the trustee can reverse the payment. The lookback is 90 days for ordinary creditors and one year for insiders like family members or business partners.¹¹ Paying back a relative in full while credit card debt goes unpaid is the classic trigger.

Fraudulent transfers reach further back. If you gave away property or sold it for far less than it was worth within two years before filing, whether or not you meant to hide it, the trustee can undo the transfer and pull the property back in.¹² Transferring a car title to a relative before filing is a common example, and trustees look for it.

The 1,215-Day Homestead Cap

The $214,000 cap on state homestead protection for equity acquired within 1,215 days of filing exists precisely to stop filers from moving to a state with unlimited exemptions and sinking cash into a home right before filing.² If you have owned your home longer than 1,215 days, the cap doesn’t apply and your state’s full homestead protection is available.

1
United States Bankruptcy Court District of New Jersey. Information Concerning Exemptions
2
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
3
Office of the Law Revision Counsel. 11 USC 522 – Exemptions – Adjustment of Dollar Amounts
4
Justia U.S. Supreme Court Center. Clark v. Rameker, 573 US 122 (2014)
5
United States Bankruptcy Court Western District of Washington. Reaffirmation Agreements
6
Office of the Law Revision Counsel. 11 USC 554 – Abandonment of Property of the Estate
7
United States Courts. Chapter 7 – Bankruptcy Basics
8
Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan
9
United States Courts. Chapter 13 – Bankruptcy Basics
10
Office of the Law Revision Counsel. 11 USC 541 – Property of the Estate
11
Office of the Law Revision Counsel. 11 USC 547 – Preferences
12
Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations