What Happens to Your Personal Property in Chapter 7 Bankruptcy?

What Personal Property Is Exempt in Chapter 7 Bankruptcy?

What you're allowed to keep depends on whether your state lets you use the federal bankruptcy exemptions or requires you to use its own list.

Federal Bankruptcy Exemptions

If your state allows you to use the federal bankruptcy exemptions, the personal property you can exempt includes the following categories and amounts:

• $5,025 for equity in a motor vehicle (11 U.S.C. § 522(d)(2).)
• $2,125 for jewelry (11 U.S.C. § 522(d)(4).)
• $800 for each individual piece and up to $16,850 in the aggregate for household goods, furnishings, appliances, clothes, books, animals, crops, and musical instruments (11 U.S.C. § 522(d)(3).)
• $3,175 for tools of the trade (11 U.S.C. § 522(d)(6).)
• $16,850 for an unmatured life insurance policy (11 U.S.C. § 522(d)(8).)
• the full cost of health aids (11 U.S.C. § 522(d)(9))
• $31,575 for personal injury payments, not including pain and suffering or actual pecuniary loss (11 U.S.C. § 522(d)(11)(D).)
• $1,675 in any property under the wildcard exemption, plus up to $15,800 of any unused homestead exemption (11 U.S.C. § 522(d)(5).), and
• the balance in certain qualified retirement accounts, plus IRAs and Roth IRAs up to $1,711,975 in the aggregate (11 U.S.C. §§ 522(d)(12), 522(n).)

The federal exemptions also fully protect Social Security, unemployment compensation, and certain other public benefits, though that protection comes from other federal laws rather than the Bankruptcy Code. This is by no means a complete list of categories of property you can exempt. These amounts took effect April 1, 2025, and are scheduled to adjust again on April 1, 2028.

State Bankruptcy Exemptions

States vary widely on the types of personal property a debtor can exempt and in what amount. Typically, states allow personal property exemptions on:

• a car (up to a certain value)
• household goods
• clothing
• jewelry
• wedding rings
• books
• food
• appliances
• tools of your trade
• tax-exempt retirement accounts
• public benefits, such as Social Security, unemployment, and veterans' benefits, and
• alimony and child support you need for support.

Some states exempt additional items like firearms, quantities of consumables like sacks of flour, livestock, and more. Visit Bankruptcy Exemptions by State to see what exemptions are available in your state.

What About Property Liens?

An exemption protects your equity in property, but not property that secures a loan with a lien. If you're behind on a car payment or mortgage, the lender can still repossess or foreclose unless you keep paying or work out other arrangements, even though the property itself is exempt.

Voluntary liens you agree to will remain, regardless of the exemption availability. However, filers can remove judgment liens that impair their ability to protect property with an exemption. 

Getting the Most Out of Your Exemptions

A few strategies can help you get more value from your exemptions.

Value each piece of personal property. You must value each piece of personal property (unless the property is exempt to an unlimited amount). Generally, value household items at yard sale prices. Some bankruptcy courts prefer that you determine either the replacement value of the item or how much it would cost you to replace the item with one of similar age and condition.

Remember to double, if you can. If you're filing a joint petition with your spouse, many states allow you to double the exemption amount (essentially allowing each of you to claim the exemption amount separately).

Categorize carefully. Make sure you determine the type of property you’re exempting. For instance, business-related personal property might qualify for the tools of the trade exemption.

Use the wildcard. Federal bankruptcy exemptions and many state exemption systems include a wildcard exemption. The wildcard allows you to exempt any property up to a certain dollar amount.

What Happens to Nonexempt Personal Property?

Even if you have personal property that isn't exempt, or the exemption doesn't cover the full value of your property, you still might be able to keep it.

Trustee abandons property. In many instances, the Chapter 7 trustee will abandon personal property (meaning the trustee won't take and sell it). Abandonment happens if the trustee doesn't believe that the sale of the property will garner anything for creditors; that is, little or nothing will be left after the exemption, sales costs, and the trustee's commission are subtracted from the sales price. (11 U.S.C. § 554.)

For example, say your car is worth $4,000. If your state motor vehicle exemption is $3,500, it will cost $500 to sell the car, and the trustee will take a $350 commission. Therefore, because nothing would be left for creditors, the trustee probably won't bother to sell the car.

Other ways to keep nonexempt personal property. There are other ways to keep nonexempt personal property. For example, you can sometimes pay the trustee an amount equal to the property's value to keep it. Or you might be able to exchange another piece of exempt property to keep the nonexempt property.

Get Legal Help With Your Bankruptcy

Most Chapter 7 filers keep the bulk of their personal property, but you'll want to confirm your state's exemption list and value your property correctly before you file to ensure you can protect everything you're entitled to. A bankruptcy lawyer can help.