Bankruptcy may seem like the only way out when you’re in debt. Still, it’s essential to understand the risks before making that decision. Creditors are entitled to some debt repayment even in a bankrupt situation, and there are laws in place to protect you from total financial ruin.
Filing for bankruptcy does not mean you must give up all your possessions. Bankruptcy is a process that can help individuals and businesses get a new start. However, all assets will be considered and may be used to repay some of the outstanding debt.
what creditors can take

All nonexempt assets may be used to repay your creditors in a Chapter 7 bankruptcy. These include:
- Vehicles
- Land
- Houses
- Investment Properties
- Savings accounts
- Any other items of value, like artwork or jewelry
You can keep a certain value amount of these because of federal and state bankruptcy exemptions.
After filing for bankruptcy, what do you keep?

When you declare bankruptcy, certain property protections are put in place. These are called bankruptcy exemptions and can vary depending on the process and the state.
A few different bankruptcy exemptions are commonly used by those who file for bankruptcy. Married couples who file jointly can double the exemption amount. The numbers below are for cases filed after April 1, 2022, and will be adjusted again on March 31, 2025.
Exemptions for property
You may be able to exempt your primary residence from bankruptcy proceedings if the equity in the property is below a specific limit. For example, under federal exemptions, you can protect $27,900 of equity in a home.
The homestead exemption can apply to properties that are used as a primary residences, which may include:
- A house or another dwelling
- Personal property used as a residence
Exemptions for vehicles
Assuming you own your car outright, it is considered an asset during bankruptcy proceedings. However, depending on the type of bankruptcy filed, whether you own or lease the car, and its value, your vehicle may be exempt from liquidation. According to federal bankruptcy exemption law, up to $4,450 in equity may be protected.
If your equity exceeds the limit, several things may happen:
- A trustee can sell your vehicle to pay creditors, with you receiving any exempted amount.
- Repossession of your car is a real possibility should you fall behind on payments.
- You can surrender the vehicle, which relieves you of the responsibility from the auto loan after bankruptcy.
Exemptions for personal and household items
Personal property can sometimes be exempt from bankruptcy. This includes everyday items such as your home, car, and other personal belongings. Federal personal property exemptions are available for many people. Some of the most commonly claimed things are listed below:
- $1,870 for jewelry
- $2,800 for tools of the trade
- $14,875 in aggregate ($700 for each item) for household goods and furnishings, appliances, clothing, animals, books, crops, or musical instruments
- $13,400 in accrued interest, dividend, or loan value of a life insurance contract
- Professionally prescribed health aids
Exemptions from wages, benefits, and retirement accounts
Exemptions exist to protect your benefits, support, or retirement savings, including:
- Alimony, support, or maintenance that you reasonably need for your support
- Life insurance payments that you need for support
- All Social Security benefits, unemployment benefits, veteran’s benefits, public assistance, and disability or illness benefits
- Under most circumstances, you can keep proceeds from your retirement accounts up to the maximum aggregate value of $1,512,350
Exemptions from injury recovery
Exemptions for personal injury recovery include:
- $27,900 for personal injury recovery, not including pain and suffering or financial loss
- Compensation for loss of future earnings necessary for the support
- Payment for the wrongful death of a person you depended on for support
- Balance due to being a victim of a crime
Exemptions for wildcards
It can be used for any property. The exemption is $1,475 plus $13,950 of any unused portion of your property exemption.
State exemptions vs. federal exemptions

Certain states’ bankruptcy exemption rules differ from the federal government’s. You can use either the state’s or the federal government’s exemptions in these states.
- Alaska
- Arkansas
- Connecticut
- District of Columbia
- Hawaii
- Kentucky
- Massachusetts
- Michigan
- Minnesota
- New Hampshire
- New Jersey
- New Mexico
- New York
- Oregon
- Pennsylvania
- Rhode Island
- Texas
- Vermont
- Washington
- Wisconsin
If your state does not have its laws, you will follow federal regulations.
Chapter 7 and Chapter 13 bankruptcy differences

When considering bankruptcy, there are two main types of bankruptcy to choose from – Chapter 7 and Chapter 13. Each has its advantages and disadvantages and will result in different outcomes for your assets. It is essential to understand all of this before deciding which type of bankruptcy to file.
Filing for bankruptcy can offer relief from many of your debts. Certain debts may be discharged depending on the type of bankruptcy you file. To qualify for bankruptcy, you must pass a means test. This will help determine whether you are eligible for relief from your debts.
One downside to filing for bankruptcy is that some of your nonexempt property may be seized. This includes any properties that are not your primary residence. The transfer could be reversed, however, if it is found that the property was transferred before the bankruptcy filing. On the plus side, all of your debts will be forgiven under Chapter 7 bankruptcy.
Bankruptcy can be difficult and stressful, but it doesn’t have to be. There are options available to help you get back on your feet and improve your financial situation. One option is called “reorganization” or “reaffirmation.” This type of bankruptcy allows you to make a payment plan to pay off your debts over time.
The payment period is usually three to five years, but it has been extended to seven years in 2021. Reorganization bankruptcy protects your property and prevents wage garnishment. And unlike some other types of bankruptcy, your debt isn’t forgiven with a reorganization.
How to prepare for bankruptcy

Your bankruptcy filing will have a lasting impact on your credit. A Chapter 7 bankruptcy will stay on your credit report for ten years, while a Chapter 13 bankruptcy will remain for seven years.
Although you are not legally obligated to retain a lawyer for your bankruptcy proceedings, it may be in your best interest to do so. You may be able to find free legal services.