What Do You Lose When You File for Bankruptcy?

When you file for bankruptcy, what you lose depends on the chapter. Under Chapter 7, a trustee sells any property that isn’t protected by exemptions and uses the proceeds to pay creditors. Under Chapter 13, you generally keep your property but hand over your disposable income for three to five years under a court-supervised repayment plan. In either case, the filing stays on your credit report for up to ten years, and several categories of debt — child support, most taxes, most student loans — survive the process entirely.

Everything You Own Becomes the Estate on Filing Day

The moment you file, a legal entity called the bankruptcy estate comes into existence and temporarily holds nearly everything you own: bank accounts, real estate, vehicles, investments, and even the right to sue someone, regardless of where the property sits or who has physical possession of it.¹ A court-appointed trustee reviews what’s in the estate, figures out what’s shielded by exemptions, and decides what to do with the rest.

In Chapter 7, the trustee sells the non-exempt property and distributes the proceeds. The case typically wraps up in three to four months, and qualifying unsecured debts are wiped out. In Chapter 13, the loss is not physical assets. It is financial autonomy: a court-approved budget controls your spending, and raises, bonuses, or windfalls during the plan period may push your monthly payment higher.²

What Exemptions Protect and What They Don’t

Exemptions are dollar limits that shield categories of property from the estate. Federal law provides one set of exemptions, but roughly two-thirds of states require you to use their own amounts instead. The remaining states let you pick.³ State amounts vary widely, so the same asset can be safe in one state and lost in another.

The federal figures, adjusted in April 2025 and applicable to cases filed in 2026, give a useful benchmark:

Homestead (primary residence): up to $31,575 in equity
Motor vehicle: up to $5,025 in equity in one vehicle
Household goods: up to $800 per item and $16,850 total
Jewelry: up to $2,125 for personal-use pieces
Tools of your trade: up to $3,175 in work-related equipment
Wildcard: $1,675 plus up to $15,800 of any unused homestead exemption, applied to any property

Any value that exceeds these limits is available for the trustee to liquidate.⁴

Everyday furniture, clothing, and kitchen appliances are almost always safe because their resale value rarely tops the per-item or aggregate limits. Higher-value goods draw the trustee’s attention: high-end electronics, designer furniture, jewelry pieces worth more than the individual limit, and collectibles like coins, rare art, or sports memorabilia, which are treated as investment assets rather than household necessities. If the resale cost would eat into the proceeds, the trustee typically abandons the item and you keep it. Trustees value property at fair market resale, not what you paid.

Your home and car are evaluated on equity, meaning current market value minus any loan balance. A car worth $20,000 with a $16,000 loan has $4,000 in equity and would be fully covered by the federal vehicle exemption. If equity exceeds the limit, the trustee can sell the asset, pay off the secured loan, hand you the exempt amount, and give creditors the rest. Being current on your monthly payments does not protect a property with non-exempt equity. Secondary properties — vacation cabins, rentals, undeveloped land — rarely qualify for homestead protection and are typically liquidated in full. Boats, jet skis, and motorhomes are treated as luxury assets rather than basic transportation.

Cash, Tax Refunds, and Windfalls After Filing

Cash is the easiest asset for a trustee to collect. On the day you file, the trustee effectively takes a snapshot of every checking account, savings account, and digital payment balance in your name. Those balances are estate property even if you’ve already written checks that haven’t cleared. The wildcard exemption can shield some of this — potentially up to $17,475 under federal rules — applied to any type of property.³

Tax refunds for income earned before your filing date are estate property too, even if the IRS hasn’t cut the check yet. If you file in June, the trustee can claim roughly half of your expected annual refund. You must disclose expected refunds on your bankruptcy forms; spending or hiding a non-exempt refund can cost you your discharge.¹

Some windfalls that arrive after filing still belong to the estate. If you become entitled to an inheritance, life insurance payout, or divorce property settlement within 180 days of your filing date, that money goes to the trustee. The trigger is the date you become legally entitled — for an inheritance, the date the relative dies — not the date a check arrives. Anything you become entitled to more than 180 days after filing is yours to keep. If a relative is seriously ill and you’re considering bankruptcy, that timing can determine whether the inheritance goes to creditors or to you.

Legal claims count as property of the estate as well. If you had a personal injury lawsuit or any other legal claim pending when you filed, the trustee steps into your shoes and can settle or litigate the case. Proceeds pay creditors first, and only any remainder comes back to you.⁵

Retirement Accounts Are Mostly Safe

Employer-sponsored plans — 401(k)s, 403(b)s, pensions, and other plans governed by federal employee benefits law — are generally excluded from the estate entirely, with no dollar cap. The law requires plan assets to be held in trust, separate from the employer’s business assets, and creditors can’t reach them.⁶

Traditional and Roth IRAs are strongly protected too, but capped. The current federal limit is $1,711,975 across all your IRAs combined; anything above that is available to creditors. SEP-IRAs and SIMPLE IRAs funded by employer contributions get the same unlimited protection as a 401(k), while your own contributions count against the IRA cap.

One pitfall: if you cash out a retirement account before filing and deposit the money into a regular bank account, those funds lose their retirement-plan protection and join the estate like any other cash. A direct rollover from one qualified plan to another preserves the protection.

Chapter 13: Years of Disposable Income

File Chapter 13 and the main thing you lose is control over your paycheck for three to five years. You must submit a repayment plan that dedicates all your projected disposable income to the trustee for distribution to creditors.² Disposable income is whatever’s left after expenses the court considers reasonably necessary.

The court doesn’t simply accept what you say you spend. It uses IRS national standards to evaluate your budget, with separate regional figures for housing and transportation.⁷ Anything you earn above the approved expenses goes to creditors.

The plan runs three years if your income is below your state’s median and five years if it’s at or above. During that time, you must report changes in income, and the court can raise your monthly payment when a raise, new job, or bonus comes in. Saving, investing, and discretionary spending are all limited by the plan. Missing the required payments can get your case dismissed, which means your debts come back in full with no discharge.

Debts That Survive Either Chapter

A discharge doesn’t erase every debt. Several categories follow you out of bankruptcy, so you lose the relief you might have been counting on:

Child support and alimony survive in full.
Recent income taxes, taxes tied to a late or fraudulent return, and payroll taxes are generally non-dischargeable.
Student loans survive unless you file a separate lawsuit and prove that repayment would impose an “undue hardship,” a standard that remains difficult to meet in most courts.
Debts from fraud — money obtained through misrepresentation, false financial statements, or embezzlement — can’t be discharged.
Obligations from death or personal injury you caused while driving intoxicated survive.
Criminal restitution and government fines remain owed.
Debts you fail to list on your bankruptcy forms may survive if the creditor didn’t learn about your case in time to file a claim.

The statutory list of exceptions extends further, covering additional situations involving fiduciary fraud and debts carried over from a prior case.⁸

Transfers the Trustee Can Undo

Giving away or selling property for less than it’s worth before filing can backfire. The trustee has the power to reverse certain transfers, meaning the trustee can sue the recipient and force the property back into the estate.

Under federal bankruptcy law, the trustee can undo transfers made within two years before filing if you intended to cheat creditors or received significantly less than the property was worth while insolvent.⁹ Transfers to insiders — family members, business partners, and their relatives — face extra scrutiny, with a one-year lookback for preferential payments that gave the insider priority over other creditors. Common triggers include signing a car title over to a sibling, selling your home to a relative below market value, or paying back a personal loan to family while other creditors went unpaid. Self-settled trusts created to shelter assets face a lookback of up to ten years.

Credit Report Damage

A bankruptcy filing can remain on your credit report for up to ten years from the filing date.¹⁰ During that stretch, the notation can make it harder to qualify for mortgages, car loans, credit cards, apartment leases, and sometimes employment. Interest rates on any credit you do get will typically run higher.

The impact fades. Many filers start receiving credit card offers within a year or two of discharge, though on unfavorable terms. Consistent on-time payments on new accounts rebuild credit over time, and the scoring effect diminishes as the filing ages, even though the bureaus continue to report it for the full statutory period.¹¹

Filing and Attorney Costs

Filing itself costs money. The court fee is $338 for a Chapter 7 case and $313 for a Chapter 13 case. Fee waivers and installment plans are available if you can’t pay upfront.

Attorney fees vary by region and case complexity. Chapter 7 cases generally run $600 to $3,000 in legal fees. Chapter 13 cases involve more ongoing work and typically run $1,800 to $7,500; some Chapter 13 attorneys roll their fees into the repayment plan.

Federal law also requires two financial education courses: a credit counseling session before filing and a debtor education course after. Each typically costs $10 to $50, with fee waivers for filers below 150 percent of the federal poverty line. Skipping either course can get your case dismissed or your discharge denied.

1
Office of the Law Revision Counsel. 11 USC 541 – Property of the Estate
2
Office of the Law Revision Counsel. 11 USC Chapter 13 Subchapter II – The Plan
3
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
4
Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases
5
Office of the Law Revision Counsel. 11 USC Chapter 5 Subchapter III – The Estate
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U.S. Department of Labor. FAQs about Retirement Plans and ERISA
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U.S. Department of Justice. IRS National Standards for Allowable Living Expenses
8
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
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Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations
10
Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports
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Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports?