Bankruptcy exemptions are state and federal laws that allow filers to protect property, such as home equity, a vehicle, and retirement funds, in Chapter 7 and Chapter 13.
Bankruptcy exemptions are the state and federal laws that protect specific property—like home equity, a vehicle, and retirement funds—when you file for bankruptcy. You won’t lose everything you own. Here are the basics of bankruptcy exemptions:
- Your state decides which property you can protect.
- You’ll lose unprotected property in Chapter 7 and pay to keep it in Chapter 13.
- Timing rules tell you which state’s exemption laws you’ll use if you’ve moved recently.
How Bankruptcy Exemptions Work in Chapter 7 and Chapter 13
In Chapter 7 bankruptcy, you lose any property that isn’t covered by an exemption. The bankruptcy trustee sells it for the benefit of your creditors. In Chapter 13 bankruptcy, you can keep all of your property, but that comes at a price. You must pay your creditors the value of anything not covered by an exemption through your Chapter 13 repayment plan. (11 U.S.C. § 522; 11 U.S.C. § 1325(a)(4).)
For example, say you own a car outright worth $3,000, and your state has a vehicle exemption of up to $5,000. Here’s what would happen in each chapter.
Chapter 7 Bankruptcy
You’d keep your car because the exemption fully protects the equity. If your vehicle were worth $15,000 instead, the bankruptcy trustee would sell it, pay you $5,000 for the exemption, and distribute the rest to your unsecured creditors.
Chapter 13 Bankruptcy
You wouldn’t need to pay extra to your creditors through your repayment plan. However, if the car were worth $15,000, you’d need to pay your creditors at least $10,000 (minus sales costs) through your plan.
Keep in mind that these examples don’t account for a vehicle loan. For more information, read How to File Bankruptcy Without Losing a Car.
Choosing Between State and Federal Bankruptcy Exemptions
You can typically use only one exemption system at a time—either your state’s exemptions or the federal bankruptcy exemptions—and roughly a third of states let you choose whichever protects your property best. If you have a choice, pick the system that best protects the property you want to keep. You can’t mix and match between the two schemes, but if you choose the state exemptions, you can also use the federal nonbankruptcy exemptions. (11 U.S.C. § 522(b).)
California is unique because it offers two sets of state exemptions for debtors to choose between.
Bankruptcy Exemptions by State
Every state publishes its own exemption amounts for property like home equity, vehicles, and personal belongings; use the table below to find your state’s rules. Start by taking an inventory of your property, then use sites like Realtor.com, Zillow.com, KBB.com, Nada.com, or eBay for replacement value estimates. Craigslist or Facebook Marketplace listings work too, but strive for accuracy and keep copies of comparable listings—the trustee might require a professional appraisal for unique items.
Finally, if you have a choice between two exemption systems, select the one that covers the property you’d most like to keep.
| Alabama | Missouri | South Carolina |
| California | Nevada | Tennessee |
| Colorado | New Jersey | Texas |
| Florida | New York | Virginia |
| Georgia | Ohio | Washington |
| Illinois | Oklahoma | Wisconsin |
| Indiana |
If your state isn't listed, you'll find more state exemptions here.
Timing Rules and Bankruptcy Exemption Selection
Some states have significantly more generous bankruptcy exemptions than others. But you can’t move there and use them immediately. To prevent abuse, you must live in the state for at least two years—otherwise, you’ll use the previous state’s exemptions. Here’s how it works.
If you’ve made your permanent home (your “domicile”) in your current state for at least two years, you can use the state’s exemptions (or the federal exemptions if allowed).
The rules get more complicated if your domicile hasn’t been in the same state for two years. So prepare yourself—this is going to sound strange. But we’ll explain it two ways, so you’ll know you didn’t read it wrong. Here’s the first way: You’ll choose the state you lived in the longest during the 180 days immediately before the two years before filing.
Another approach is to count back two and a half years. Then ask yourself where you lived the longest during the first six months of that two-and-a-half-year period.
Example. Suppose you planned to file on January 1, 2026. Your two-and-a-half-year period would start July 1, 2023, and you’d qualify to use the exemptions of whichever state you resided in the most from July 1, 2023, through December 31, 2023. You wouldn’t have to file your case there, but you’d use that state’s exemptions.
Special Homestead Exemption Rules
The homestead exemption protects your ownership interest in your home. You’ll need to read your state’s homestead statute to determine the specifics, such as the amount of equity and acreage covered, whether the exemption protects a manufactured home, and if you need to file a homestead exemption with the county clerk. But in all states, the property must be your residence. Also, you’ll need to comply with a federal timing law and be aware of fraud penalties.
Ownership length. You must own your home for over 40 months (1,215 days) before filing for bankruptcy to claim the full state homestead exemption. Otherwise, your homestead exemption is capped at $214,000 if you file between April 1, 2025 and March 31, 2028. This cap doesn’t apply if you rolled over equity from a previous home located in the same state as your current home. (11 U.S.C. § 522(p).)
Fraud works against you. If you converted nonexempt property into your homestead within 10 years before filing with the intent to hinder, delay, or defraud a creditor, the court can deny the exemption entirely for that converted value. Separately, if you were convicted of a felony showing that your bankruptcy filing was an abuse of the system, or you owe debts from securities violations, fiduciary fraud, racketeering, or certain drug or DUI-related injuries, your homestead exemption is capped at $214,000 regardless of how long you’ve owned the home. (11 U.S.C. §§ 522(o), (q).)
Navigating Your Bankruptcy Case
Your safest move is to talk to a bankruptcy attorney before you file, not after. Bankruptcy is essentially a qualification process that is more often complicated than not, and the best way to protect your assets is by hiring a local bankruptcy lawyer. In the meantime, here are more easy-to-understand articles:
Take our bankruptcy quiz to identify potential issues and learn how to best proceed with your bankruptcy case.
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