Common Questions
Clear, data-backed answers to the most frequently asked questions
How Bankruptcy Exemptions Protect Your Property
Bankruptcy exemptions are the legal mechanism that allows you to keep essential property when filing bankruptcy. Every state has its own set of exemptions, and some states also allow you to use federal bankruptcy exemptions instead. Common categories include homestead (protecting equity in your home), motor vehicle, household goods, retirement accounts (which receive nearly unlimited protection under federal law), tools of the trade, and wildcard exemptions that can be applied to any property.
Frequently Asked Questions
What are bankruptcy exemptions?
Bankruptcy exemptions are laws that protect certain property from being taken by creditors or a bankruptcy trustee. Common exemptions cover your home (homestead exemption), vehicle, household goods, retirement accounts, and tools of your trade. Each state sets its own exemption amounts, and some states allow you to choose between state and federal exemptions.
Can I keep my car in bankruptcy?
In most cases, yes. Your state's motor vehicle exemption protects equity in your car up to a certain dollar amount. If your car equity is below the exemption limit, you keep it. In Chapter 13, you can also restructure car loan payments. In Chapter 7, you may need to reaffirm the car loan or redeem the vehicle.
What is the homestead exemption?
The homestead exemption protects equity in your primary residence from creditors in bankruptcy. The amount varies significantly by state, from a few thousand dollars to unlimited protection in some states like Texas and Florida. The federal homestead exemption is approximately $27,900 per person as of 2026.