Which Assets Are Exempted in Chapter 7 Bankruptcy?

Chapter 7 debtors are allowed to keep certain assets during bankruptcy.
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If you've become overwhelmed by outstanding debt, filing for Chapter 7 bankruptcy protection can give you a fresh financial start. In a Chapter 7 bankruptcy, your debts are effectively eliminated but you may be required to surrender certain assets to the bankruptcy trustee in lieu of payment to your creditors. Chapter 7 debtors can exclude certain property or assets from seizure using state and federal exemption guidelines.

Homestead Exemption

The homestead exemption allows you to exempt a specific amount of equity value in your home. Title 11 of the U.S. bankruptcy code specifies the amount of homestead exemption Chapter 7 debtors can claim. According to the guidelines, which were last updated in 2010, you're allowed to exempt up to $21,625 worth of value in any real property, which would include a traditional home, mobile home or co-op. The federal homestead exemption can also be applied to a burial plot if you don't own a home. Each state treats the homestead exemption differently. Some states allow homeowners to claim an unlimited amount of equity value, while other states don't use the homestead exemption at all.

Personal Property Exemptions

Personal property exemptions typically apply to tangible items, such as your car, household furnishings or goods, books, electronics, clothing, family heirlooms or jewelry. Under federal exemption guidelines, you can exempt up to $3,450 of value in any motor vehicle; up to $1,450 worth of jewelry; and up to $11,525 in personal property. The tools of the trade exemption also allows you to exempt $2,175 worth of items you use to perform your regular job duties. You can also take advantage of a $1,150 wild card exemption that can be used for any personal property. As with the homestead exemption, personal property exemption limits vary by state.

Exemptions for Financial Assets

Certain financial assets can also be exempted in a Chapter 7 bankruptcy filing. Under the federal exemption guidelines, you can exempt all of the money in your tax-exempt retirement accounts, including your 401(k), 403(b), profit-sharing plans, SEP and SIMPLE IRAs and any other defined benefit plan. You can also exempt up to $1,171,650 in your traditional or Roth IRA. Alimony and child support payments you receive are also exempt as are any public assistance or government benefits, including unemployment, Social Security benefits and workers' compensation. Under state guidelines, you may also be able to exempt a certain amount of money in your bank account as well as a portion of your income.


Certain states will allow you to choose whether you want to use federal or state exemptions while others will require you to use the state system. If your state allows you the option of choosing, you may have to meet the residency requirement first. Under federal law, you have to be a resident of a particular state for two years prior to filing bankruptcy in order to use that state's exemption scheme. Otherwise, you'll have to use the exemption guidelines in the state where you previously lived.

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