Filing Chapter 7 rarely means losing much of what you own. The assets you can lose in Chapter 7 bankruptcy are the ones that fall outside your exemption limits: equity above the cap on your home or car, non-retirement investments, valuable collections, excess cash, and luxury items. Retirement accounts, ordinary household goods, government benefits, and modest home and vehicle equity are protected by law. Most Chapter 7 cases close as “no-asset” cases, meaning the trustee sells nothing at all.
How the Trustee Decides What to Take
When you file, everything you own becomes part of a bankruptcy estate managed by a court-appointed trustee. The trustee’s job is to find property worth selling to pay your creditors. Exemptions are the legal shields that pull property back out of the trustee’s reach. Anything covered by an exemption stays with you. Anything left unprotected can be liquidated.
Two separate exemption systems exist: federal exemptions written into the U.S. Bankruptcy Code and a distinct set created by each state. You pick one system or the other; you cannot combine them. Some states have opted out of the federal exemptions entirely, so filers in those states must use the state list.1Office of the Law Revision Counsel. 11 USC 522 – Exemptions
In practice, most filers own nothing that exceeds their exemption limits. When that happens, the trustee reports the case as a no-asset case and nothing gets sold.
Property That’s Almost Always Safe
The dollar figures below are the federal exemption amounts, last adjusted on April 1, 2025.2Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases State amounts vary, sometimes considerably.
Home Equity
The federal homestead exemption protects up to $31,575 in equity in your primary residence. Many states offer more, and a handful have unlimited homestead exemptions. One catch: if you bought your current home within 1,215 days (roughly three years and four months) before filing, federal law caps how much of a state homestead exemption you can claim, even in a state with unlimited protection.3Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions
Vehicles
The federal motor vehicle exemption covers up to $5,025 in equity per vehicle. Equity is what your car is worth minus the loan balance. A $12,000 car with a $9,000 loan carries $3,000 in equity, well under the cap.
Retirement Accounts
Employer-sponsored retirement plans like 401(k)s, pensions, and profit-sharing plans are protected under ERISA with no dollar cap.4U.S. Department of Labor. FAQs about Retirement Plans and ERISA Traditional and Roth IRAs are also protected, with a combined federal cap of roughly $1,712,000 that covers the vast majority of filers.
Household Goods and Personal Property
The federal system protects furniture, clothing, appliances, and similar belongings up to $800 per item, with a total cap of $16,850. Trustees rarely bother with used household items because the resale value is low and the cost of selling them would eat up any return.
Tools of the Trade
Equipment, books, and tools you need for your job are protected up to $2,125 under the federal system. Some states offer more.
Government Benefits
Social Security benefits are broadly protected from creditors by federal law, including in bankruptcy.5Social Security Administration. SSR 79-4 – Sections 207, 452(b), 459 and 462(f) – Levy and Garnishment of Benefits Unemployment compensation, veterans’ benefits, and public assistance payments receive similar protection.
The Wildcard Exemption
The federal wildcard exemption lets you protect $1,675 worth of any property you choose. If you don’t use your full homestead exemption (because you rent, for example), you can add up to $15,800 of the unused homestead amount to the wildcard, bringing the total to as much as $17,475. This is one of the most flexible tools in the federal system and the reason many renters keep their entire bank balance safe.
Property That’s Commonly at Risk
Anything that exceeds an exemption limit or doesn’t fit into any exemption category is non-exempt. The trustee can sell those assets and distribute the proceeds to creditors. That applies even when a single asset is only partly exposed. If your car has $9,000 in equity and the federal exemption covers $5,025, the trustee can sell it, return $5,025 to you, and pay the rest to creditors.
Assets most commonly at risk:
- Second homes and investment property. Only your primary residence qualifies for the homestead exemption.
- Art, coins, stamps, and other collections above the personal property cap.
- Stocks, bonds, and mutual funds held in a regular brokerage account, which have no dedicated exemption.
- Bank balances beyond what the wildcard or another exemption covers.
- Boats, recreational vehicles, and expensive jewelry above the applicable limits.
Tax Refunds
A refund based on income you earned before filing is part of your bankruptcy estate, even if the check hasn’t arrived yet. File in March with a prior-year refund still pending and the trustee can claim it. The portion of any refund attributable to income earned after your filing date belongs to you. If the amount is large enough to matter, the wildcard exemption can protect it, or you can wait to file until the refund arrives and has been spent on necessary expenses.
Bank Account Setoffs
If you owe money to the same bank where you keep your checking or savings account, the bank may have the right to freeze the account and take funds to cover the debt. This is called a setoff, and it can happen without a court order. Move your money to a bank where you don’t have any outstanding loans or credit cards before filing.
Windfalls Within 180 Days of Filing
Your estate isn’t limited to what you own on the day you file. Federal law adds anything you become entitled to receive within 180 days after filing in three specific categories:6Office of the Law Revision Counsel. 11 U.S. Code 541 – Property of the Estate
- Inheritances, if a relative dies during that window.
- Life insurance proceeds you become entitled to receive.
- Property from a divorce decree or separation agreement.
Regular wages earned after filing are not affected. Post-filing paychecks belong to you. The 180-day rule targets windfalls, not ongoing income.
Transfers You Made Before Filing
Giving away property or paying off certain debts before you file won’t keep those assets safe. Trustees can claw back transfers under two separate rules.
Preferential transfers: if you paid a regular creditor more than they would have received through bankruptcy, the trustee can recover the payment if it was made within 90 days before filing. The lookback extends to a full year for payments to “insiders” like family members, business partners, or close friends.7Office of the Law Revision Counsel. 11 U.S. Code 547 – Preferences Paying back your brother-in-law’s $5,000 loan right before filing is exactly the kind of transfer that gets reversed.
Fraudulent transfers: the trustee can undo transfers made within two years before filing if you received less than fair value in return, or if the transfer was intended to put assets beyond creditors’ reach.8Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations Selling your car to a friend for $1, or moving your house into a relative’s name, are textbook examples. The trustee doesn’t need to prove intent; receiving far less than an asset is worth is enough.
Cars and Houses: A Separate Question
Secured debts are loans tied to specific property, like a car loan or a mortgage. Chapter 7 can discharge your personal obligation on these debts, but the lender’s lien survives. The lender can still repossess the car or foreclose on the house if payments stop. You have three ways to handle secured property.
Surrender. You return the property, and the remaining debt is discharged. This makes sense when payments are unaffordable or the property is worth less than the loan balance. You walk away owing nothing.
Reaffirmation. You sign a new agreement committing to continue payments and keep the property. The debt survives your discharge, so you’re personally on the hook again.9U.S. Courts. Reaffirmation Documents – Form B240A If you fall behind later, the lender can repossess and come after you for any remaining balance.10Office of the Law Revision Counsel. 11 U.S. Code 524 – Effect of Discharge
Redemption. You keep personal property (not real estate) by paying the lender a single lump sum equal to the current value of the secured claim rather than the full loan balance.11Office of the Law Revision Counsel. 11 USC 722 – Redemption Owe $12,000 on a car worth $7,000 and you could redeem it for $7,000. The math is favorable; the challenge is coming up with the cash during bankruptcy. Some companies offer redemption loans, though the interest rates tend to be steep.