Bankruptcy Exemptions by State: What Property Can You Keep?
One of the biggest fears people have about filing bankruptcy is losing everything they own. The good news is that bankruptcy exemptions protect a significant amount of your property. Understanding what exemptions apply in your state can mean the difference between keeping your home, car, and savings — or losing them.
What Are Bankruptcy Exemptions?
Bankruptcy exemptions are laws that protect certain property from being taken by the bankruptcy trustee to pay your creditors. Every state has its own set of exemptions, and some states also allow you to choose between state exemptions and federal exemptions. If you are new to bankruptcy, start with our guide on What is Bankruptcy? Complete Beginner’s Guide for a full overview.
Federal vs State Exemptions
Some states allow you to choose between the federal bankruptcy exemptions and your state exemptions. Other states require you to use only state exemptions. You cannot mix and match — you must choose one set. Key federal exemptions include up to $27,900 in home equity, up to $4,450 for a motor vehicle, up to $14,875 total for household goods, fully exempt retirement accounts (401k, IRA, pension), and up to $2,800 for tools of the trade.
Homestead Exemption
The homestead exemption protects equity in your primary residence. State homestead exemptions vary dramatically. Texas and Florida offer unlimited homestead exemptions — your home is fully protected regardless of value. California protects up to $600,000 depending on county. New York protects up to $179,975 depending on county. Georgia protects up to $21,500. Tennessee protects up to $5,000. If you are trying to save your home through bankruptcy, read How to Stop Foreclosure with Bankruptcy.
Motor Vehicle Exemption
Most states protect at least some equity in one vehicle. Texas protects up to $50,000 included in personal property exemption. California protects up to $3,325 or $6,650 depending on the system chosen. Florida protects up to $1,000. New York protects up to $4,825. The federal exemption covers up to $4,450.
Retirement Account Exemption
Retirement accounts are protected in bankruptcy under both federal and most state laws. This includes 401(k) plans, 403(b) plans, IRAs up to $1,512,350 under federal law, pension plans, and Social Security benefits. This is one of the strongest protections in bankruptcy law — your retirement savings are almost always safe.
Household Goods and Furnishings
Most states protect everyday household items including furniture, appliances, clothing, and electronics up to a certain total value. The federal exemption allows up to $700 per item with a $14,875 total. These protections ensure you can maintain a functional home even after bankruptcy.
Tools of the Trade
If you use tools or equipment for your job or business, most states protect these up to a certain value. This can include vehicles used for work, computers, machinery, and professional equipment. The federal exemption covers up to $2,800 for tools of the trade.
How Exemptions Work in Chapter 7 vs Chapter 13
In Chapter 7, exemptions protect your property from being sold by the trustee. Any property that exceeds the exemption limit may be liquidated. In Chapter 13, you keep all your property regardless of exemptions. However, your repayment plan must pay unsecured creditors at least as much as they would have received if your non-exempt assets had been liquidated. Read Chapter 7 vs Chapter 13 Bankruptcy to understand which type is better for your situation.
Doubling Exemptions for Married Couples
If you are filing jointly with your spouse, many states allow you to double the exemption amounts. This means both spouses can claim the full exemption for jointly owned property, providing significantly more protection for your shared assets.
How to Claim Your Exemptions
When you file for bankruptcy, you list your exemptions on Schedule C of your bankruptcy forms. You must identify each piece of property you are claiming as exempt and specify the law that allows the exemption. Failing to claim an exemption properly can result in losing property you were entitled to keep. Read How to File Bankruptcy Without a Lawyer carefully for guidance on this process.
Conclusion
Bankruptcy exemptions are your shield in the bankruptcy process. They protect the property you need to live and work while still giving creditors fair treatment. Understanding your state’s specific exemptions before you file is essential. Take the time to research your state’s exemption laws or consult with a bankruptcy attorney. Continue your research with How to File Bankruptcy Without a Lawyer or explore What Debts Can Be Discharged in Bankruptcy.
