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Chapter 7 Bankruptcy Exempt Property

Did you know that Chapter 7 bankruptcy is designed to provide quick relief from credit cards, personal loans and other unsecured debts?

Under Chapter 7 law, a filer may have to part with some property in order to partially repay their creditors. The good news is that bankruptcy laws allow certain property to by kept by the filer by claiming them as exempt. In fact, many filers find their assets completely protected by the exemptions in their state.

Exempt Property in Chapter 7 Bankruptcy

Chapter 7 bankruptcy exemptions vary in their specifics from state to state, but generally include many of the same categories. These categories often include:

  • Homestead: In most states, a home up to a certain value is exempt under Chapter 7 laws. If you have no home equity or rent your home, you may not have to worry about this. Note: If you have a home are facing foreclosure, Chapter 13 may work better for you.
  • Wages: Many states set limits on how much of your wages can legally be taken by creditors, based on your household's annual income. Generally, wage garnishment can be halted altogether by filing for bankruptcy, thanks to a legal protection called the automatic stay.
  • Automobile: Another common exemption, the automobile exemption generally has a set value limit, which means that if you drive an older car or one with a low fair market value, you may stand a decent chance of being able to keep it in bankruptcy.
  • Personal property: This exemption has perhaps the most variation from state to state. Some states set a dollar limit to all personal property that can be exempted, and some states set individual limits for clothing, books, trade tools, jewelry and similar categories.
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How Chapter 7 Typically Works

To understand the significance of Chapter 7 bankruptcy property exemptions, it's important to understand how a Chapter 7 case works in bankruptcy court. These are the basics:

  • You take the means test: In order to qualify for protection under Chapter 7 of the U.S. Bankruptcy Code, you must pass the bankruptcy means test, which simply compares your household income to the incomes of other families of your size where you live, as well as your monthly disposable income.
  • You file your case: If you "pass" the means test, you can file your bankruptcy paperwork with the court. The various forms you must file are called "schedules" and outline your income, your assets, your debts and your financial obligations.
  • Your trustee liquidates any non-exempt assets: This is where the Chapter 7 bankruptcy exemptions come into play. If you have any property that is not exempted under your state bankruptcy laws, your bankruptcy trustee can sell it and use the money from the sale to pay off some of what you owe to your creditors.

Ask a Lawyer Whether Your Property Is Exempt in Chapter 7 Bankruptcy

Because of the vast differences among state laws, it's important to understand how your state's bankruptcy exemptions operate before you decide to file your case. For this reason, you may want to consult with a bankruptcy lawyer practicing in your state.

To ask a local bankruptcy lawyer about your specific property and exemption potential, please fill out this form and arrange a free, no-obligation consultation.


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