Bankruptcy Exemptions: What Property You Can Keep
Bankruptcy exemptions protect your essential property from being sold to pay creditors. Every state allows you to keep a certain amount of home equity, vehicle value, retirement funds, and personal belongings. Understanding exemptions helps you keep what matters most while eliminating debt.
| Property Type | Federal Exemption | Common State Range |
|---|---|---|
| Homestead | $27,900 | $25,000 to unlimited |
| Motor vehicle | $4,450 | $2,500 to $15,000 |
| Household goods | $700 per item | $500 to $1,000 per item |
| Retirement accounts | Unlimited for qualified plans | Fully protected |
| Wildcard | $1,475 plus unused homestead | $0 to $30,000 |
Homestead Exemption for Your Home
The homestead exemption protects equity in your primary residence. Equity means your home's market value minus mortgage balance. The federal exemption protects $27,900 for a single filer or $55,800 for married couples filing jointly.
State exemptions vary dramatically. Texas, Florida, and Kansas offer unlimited homestead protection. California protects $300,000 to $600,000 depending on location. Other states provide $25,000 to $100,000. Your state's exemption determines how much home equity stays protected.
When Home Equity Exceeds Exemption
If your equity exceeds the exemption, the trustee could theoretically sell your home, pay you the exempt amount, and distribute the rest to creditors. In practice, this rarely happens because sale costs often exceed any benefit to creditors.
Vehicle Exemptions
Most people can keep their car in bankruptcy. The federal exemption protects $4,450 in vehicle equity. If your car is worth $10,000 and you owe $7,000, you have $3,000 equity which falls within the exemption.
State vehicle exemptions range from $2,500 to over $15,000. Some states allow married couples to double the exemption. If your vehicle equity exceeds exemptions, you might pay the trustee the non-exempt amount to keep the car.
Retirement Account Protection
Retirement accounts receive strong federal protection regardless of which exemption system you use. ERISA-qualified plans including 401k, 403b, and pension accounts are fully protected with no dollar limit. You keep every dollar in these accounts.
Traditional and Roth IRAs receive protection up to approximately $1.5 million under federal law. SEP-IRAs and SIMPLE IRAs from employer contributions are fully protected like 401k plans. Inherited IRAs have less protection and rules vary by state.
Personal Property and Household Items
Exemptions cover household goods, clothing, furniture, appliances, and personal effects. Federal law allows $700 per item up to $14,875 total for household goods. State exemptions vary but generally protect ordinary household items.
Trustees rarely pursue used household goods because resale value is minimal. Your worn furniture, used appliances, and everyday clothing have little value to creditors even if technically exceeding exemption limits.
The Wildcard Exemption
The wildcard exemption lets you protect any property type up to a dollar limit. Federal wildcard provides $1,475 plus up to $13,950 of unused homestead exemption. If you rent instead of own, you can apply up to $15,425 to any property.
Wildcard exemptions work well for protecting cash, tax refunds, bank accounts, or valuable personal property that exceeds specific exemption categories. Strategic use of wildcard can fill gaps left by other exemptions.
"Proper exemption planning is the difference between losing property and keeping everything. Most Chapter 7 cases are no-asset cases when exemptions are applied correctly." — Jeffy Goetz, Bankruptcy Attorney
FAQ
Can I keep my house in bankruptcy?
Usually yes. Homestead exemptions protect equity in your primary residence. The amount varies by state from $25,000 to unlimited protection in states like Texas and Florida.
Are retirement accounts protected in bankruptcy?
Yes, 401k, IRA, pension, and most retirement accounts are fully protected in bankruptcy under federal law regardless of balance. You keep every dollar.
How much car equity can I protect?
Federal exemption protects $4,450 in vehicle equity. State exemptions vary from $2,500 to $15,000 or more depending on your state's laws.
What is the wildcard exemption?
The wildcard exemption lets you protect any property type up to a dollar limit. Federal wildcard is $1,475 plus unused homestead exemption up to $13,950 additional.
Can I choose federal or state exemptions?
Depends on your state. Some states let you choose between federal and state exemptions. Others require state exemptions only. You cannot mix and match from both systems.
What happens to property that exceeds exemptions?
The trustee can sell non-exempt property to pay creditors. In practice, most Chapter 7 cases are no-asset cases where exemptions cover everything the debtor owns.
Updated 2026-01-28