When you file for bankruptcy, you can keep the property that falls within your exemptions: equity in your home up to a set limit, a vehicle, ordinary household belongings, tools you use for work, retirement accounts, public benefits like Social Security, and a modest catch-all amount for anything else. The specific dollar caps depend on whether federal exemptions or your state’s exemptions apply, and the federal figures were last adjusted on April 1, 2025, for cases filed through March 31, 2028. Most people who file Chapter 7 lose nothing at all, because their property is either fully covered by exemptions or has so little resale value that the trustee doesn’t bother with it.1United States Courts. Chapter 7 – Bankruptcy Basics
How Exemptions Work in Chapter 7 and Chapter 13
In Chapter 7, a court-appointed trustee reviews everything you own. Anything not covered by an exemption can be sold to pay your creditors, while property within the exemption limits stays with you. In practice, most Chapter 7 cases are “no-asset” cases: the filer’s property is either fully exempt or worth so little after liens that the trustee liquidates nothing.
Chapter 13 works differently. You keep all your property, but your repayment plan has to satisfy the “best interest of creditors” test — unsecured creditors must receive at least as much through the plan as they would have gotten if your non-exempt assets had been sold in Chapter 7. Exemptions still matter, because they set the floor for what your plan must pay. The more you can exempt, the lower that floor.
Married couples filing jointly can double every federal exemption amount, which is a real advantage when both spouses have property to protect.2Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions
Federal or State Exemptions
Federal bankruptcy exemptions are set out in 11 U.S.C. § 522(d), but roughly two-thirds of states have opted out of the federal list. Residents of those states must use state exemptions instead.3Office of the Law Revision Counsel. 11 U.S.C. 522 – Exemptions The remaining states let filers choose. State exemptions vary widely: some protect unlimited home equity, others are stingier than federal law on vehicles or personal property. If your state gives you the choice, compare the two lists carefully. You pick one system or the other, not a mix of both.
Which state’s exemptions apply depends on where you’ve lived. If you’ve been in the same state for at least 730 days (two full years) before filing, that state’s rules apply. If you moved more recently, the court looks back to where you lived during the 180 days before the start of that 730-day window. If the lookback state doesn’t allow non-residents to use its exemptions, you default to the federal list. This rule exists to stop people from relocating to a generous-exemption state right before filing.
Home Equity
The homestead exemption protects equity in your primary residence — the difference between what your home is worth and what you owe on mortgages and liens. If your home is worth $350,000 and you owe $310,000, you have $40,000 in equity, and that is the amount you need an exemption to cover.
Under the federal system, the homestead exemption is $31,575 per person for cases filed between April 1, 2025, and March 31, 2028. A married couple filing jointly can protect up to $63,150 in home equity. Several states offer more generous protection, and a handful allow unlimited home equity exemptions, though those usually come with acreage restrictions or other conditions.
The exemption only shields your equity from the trustee. It does not eliminate your mortgage. You still have to stay current on payments or the lender can foreclose.
The 1,215-Day Cap on Recently Purchased Homes
If you bought your home within 1,215 days (roughly 40 months) before filing, federal law caps your homestead exemption at $214,000, no matter how high your state’s exemption might otherwise be. This prevents someone from moving cash into a home in an unlimited-exemption state right before bankruptcy. If you rolled equity from a previous home in the same state into your current one, that transferred equity doesn’t count against the cap. Family farmers protecting a principal residence are also exempt from this limit.
Vehicles, Household Goods, and Other Personal Property
The federal exemption amounts for personal property, effective April 1, 2025, are:
- Motor vehicle: $5,025 in equity per filer. If your car is worth $12,000 and you owe $8,000 on the loan, you have $4,000 in equity — within the limit.
- Household goods: $16,850 total, with an $800 cap per item. This covers furniture, appliances, clothing, and similar belongings, valued at what they would bring at a garage sale rather than what you paid.
- Tools of the trade: $3,175 for books, instruments, and equipment you use to earn a living.
- Jewelry: $2,125 total.
These are the federal figures; state exemptions may be higher or lower. Ordinary household belongings are almost always fully protected because used furniture and clothing have very little resale value.
If your vehicle has more equity than the exemption covers, you generally have three options: pay the trustee the non-exempt amount in cash to keep the car, let the trustee sell it and receive the exempt portion from the proceeds, or apply any available wildcard exemption to close the gap.
Retirement Accounts
Retirement savings get some of the strongest protection in bankruptcy. Employer-sponsored plans that qualify under ERISA — 401(k)s, 403(b)s, profit-sharing plans, and pensions — are fully exempt with no dollar cap. The Supreme Court confirmed decades ago that these funds are not part of the bankruptcy estate at all, so the trustee cannot reach them regardless of the balance.
Traditional and Roth IRAs are also protected, but subject to a combined cap of $1,711,975 per person for cases filed between April 1, 2025, and March 31, 2028. That cap covers all of your IRA accounts combined, not each one individually. A bankruptcy court can raise the limit if circumstances justify it, but for most filers the cap is more than enough.
Inherited IRAs Are Different
The Supreme Court ruled unanimously in Clark v. Rameker (2014) that inherited IRAs do not qualify as “retirement funds” under the Bankruptcy Code.4Justia. Clark v. Rameker, 573 U.S. 122 (2014) You cannot contribute new money to an inherited IRA, you must take distributions regardless of your age, and you can withdraw the entire balance at any time without penalty. If you have inherited an IRA, that money is part of your bankruptcy estate unless a wildcard or state-specific exemption covers it. This catches people off guard more than almost any other exemption issue.
Health Savings Accounts
HSAs don’t get the same automatic protection. Federal bankruptcy exemptions do not specifically cover HSA funds, and only a handful of states provide a dedicated HSA exemption. If your state doesn’t protect them, you may be able to shield HSA funds with the wildcard exemption, but a meaningful HSA balance can quickly exceed what the wildcard covers. If you have significant funds in an HSA, check your state’s exemption list before filing.
Public Benefits
Social Security benefits are protected by a separate federal statute, 42 U.S.C. § 407, which bars creditors from reaching those payments in virtually any legal proceeding, including bankruptcy. The same protection covers unemployment compensation, veterans’ disability benefits, and public assistance payments.
Traceability matters. If your Social Security check goes into a bank account that also holds non-exempt income, the trustee may argue the funds have been commingled and lost their protected status. Keep benefit payments in a separate account, or at minimum keep records showing which deposits came from exempt sources. Lump-sum back payments of disability benefits may also require a specific exemption if they are sitting in an account when you file.
The Wildcard Exemption
The federal wildcard exemption is $1,675, usable on any property that doesn’t fit a specific category. That base amount grows substantially if you don’t use your full homestead exemption: you can roll up to $15,800 of the unused homestead into the wildcard, for a combined total of up to $17,475 per filer.
This is where the wildcard becomes a workhorse for renters. Someone who doesn’t own a home can apply the full $17,475 (or $34,950 for a married couple filing jointly) to protect cash, tax refunds, a vehicle with equity above the motor vehicle limit, or anything else. Filers commonly use the wildcard for pending tax refunds, money in checking accounts, and the cash value of small claims or lawsuits that haven’t settled. Without it, many of these smaller assets would be exposed.
Property You Receive After Filing
Bankruptcy captures a snapshot of what you own on the filing date, but certain property you receive within 180 days after filing gets pulled back into the estate. Under 11 U.S.C. § 541(a)(5), three categories are covered:5Office of the Law Revision Counsel. 11 U.S. Code 541 – Property of the Estate
- Inheritances you receive through a bequest.
- Life insurance proceeds paid to you as a beneficiary.
- Property you receive through a divorce property settlement or decree.
Regular wages earned after your filing date are not pulled in — the rule targets only these three categories. If a relative passes away 170 days after you file, that inheritance belongs to the bankruptcy estate. If the same event happens on day 181, it is yours. Anyone expecting an inheritance or insurance payout should discuss timing with a bankruptcy attorney before filing.
Hiding Assets Backfires
Every asset you own must appear on your bankruptcy schedules. The trustee has broad investigative powers, including access to bank statements, tax returns, and property records. The trustee can also reverse any transfer made within two years before filing if it was intended to keep property away from creditors, and the lookback period stretches to ten years for transfers to a self-settled trust.6Office of the Law Revision Counsel. 11 U.S. Code 548 – Fraudulent Transfers and Obligations
Beyond losing the transferred property, a debtor who conceals assets faces denial of discharge, meaning the bankruptcy fails entirely and the debts remain. Concealment can also trigger federal criminal charges under 18 U.S.C. § 152, carrying up to five years in prison.7Office of the Law Revision Counsel. 18 U.S. Code 152 – Concealment of Assets; False Oaths and Claims The far better approach is to work with the exemption system honestly. Most people can protect everything they own through legitimate exemptions.