What you get to keep
Most people who file keep everything they own.
- Bankruptcy "exemptions" protect certain property from being sold.
- Retirement accounts, a car up to a limit, and everyday belongings are usually safe.
- Home equity is protected up to your state's homestead limit, which varies a lot.
- What's at risk is value above the limits, or a second car or vacation home.
- The catch: the homestead exemption swings wildly by state, so check your home equity locally first.
How exemptions decide what you keep
Filing for bankruptcy does not mean losing your things. The law uses exemptions — the dollar limit of a type of property you're allowed to protect. Property that fits inside those limits is safe.
Most people who file Chapter 7 keep everything they own. Their belongings sit within the exemption limits, so there's nothing for the court to sell. The system is built to leave you able to work and live, not to strip you bare.
What's usually safe, and what isn't
Usually protected
- Retirement accounts like a 401(k) or IRA, often in full.
- A car, up to a set value limit.
- Home equity, up to your state's homestead exemption.
- Everyday belongings — clothes, furniture, and the tools of your trade — up to limits.
- Often some cash, or a "wildcard" amount you can apply to anything.
Can be at risk
- Equity above the limits for any protected item.
- A second car or a vacation property.
- Expensive, non-essential items.
- In Chapter 13, nothing is sold — but you pay at least the value of non-exempt property into your plan.
In Chapter 13 you keep everything, even property over the limits. The trade is that your repayment plan has to pay in at least what the non-exempt property is worth. So the value doesn't vanish — you cover it over time instead of handing over the item.
Why the numbers vary so much
Exemptions differ by state. Some states set their own limits. Some let you choose the federal set instead. Two people with the same home and the same debt can keep very different amounts, based only on where they live.
This is the part where local advice matters most. A bankruptcy lawyer in your state can tell you which exemptions apply and how to claim them.
The homestead exemption — the home equity you can protect — varies enormously by state. Some states shield only a small amount. Others protect your full home value.
If you own a home with equity, this is the one number to check locally before you file. It can decide whether Chapter 7 or Chapter 13 is the safer path for you.