What Property Can You Keep While Filing for Bankruptcy?

If you’re asked to file for bankruptcy, you may have images of repo men coming into your home and taking your possessions, selling them to the bank, and leaving you empty-handed. This is a misconception of what happens when you file for bankruptcy. In reality, some laws help protect your property during this time. However, some of these protections decrease over time or only exist within certain states. Here is some important information about what property you can keep while filing for bankruptcy.


What Are Chapter 7 Exemptions?

When you file for bankruptcy, all of your finances are on the table. Your bankruptcy trustee will determine what property you get to keep. Some bankruptcy exemptions can help mitigate the burden of a financial predicament by allowing people to keep certain essential items. If an item is exempt, it cannot be subject to liquidation to pay off creditors.

The Difference Between Federal and State Bankruptcy Exemptions

Many of the Chapter 7 bankruptcy exemptions have limits. This means that you will not protect every type of possession worth a specific monetary amount. For example, if your car is worth $3,500 and your state’s exemption for motor vehicles is currently set at $6,000, then you would be allowed to retain such possession. However, if your car were instead worth $9,000, the trustee could choose to sell it for $9,000. The trustee would then give you $6,000 from the selling profits and distribute the remaining $3,000 to your creditors.

Qualifying State Exemptions

If you lived in a state for two or more years, that is where you will most likely declare bankruptcy. However, if you haven’t lived in any state for at least two years–but you have lived in multiple states over the past 18 months–it will be assumed that your domicile, or permanent home, is the place where you’ve spent the majority of your time. 

The Most Common Chapter 7 Exemptions

Even though each state has its own way of determining which assets can be claimed as exempt, some exemptions are common across all states. A few examples include the vehicles you use for work and personal purposes, tools of the trade if you are a carpenter or plumber, your most prized possessions, investments like stocks and bonds, employer-issued property such as uniforms or vehicles, vacation homes and timeshares, and collections such as antiques, depending on the item’s resale value.

Real Estate (Your House)

Depending on how much equity you have in the home, your primary residence could be exempt from your Chapter 7 bankruptcy filing. But some homeowners choose to file for Chapter 13 bankruptcy instead. If this is the case, and you owe more than you own, your home will be put up for sale outside of the bankruptcy process to pay off as much debt as possible. As of 2013, exemptions don’t apply to mortgage companies. So if a bank claims you have shorted them on payments despite an exemption, like stating it’s a vacation property or rental, that doesn’t mean they can take it back.


What Property to Keep in Bankruptcy



A lot of people have a hard time imagining living without their car. However, when it comes to protecting your vehicle’s resale value, e-scrap yards are an entirely different story. Electronics contain materials such as nickel, copper, aluminum, and gold, valuable rare earth minerals. And artificial precious stones that can bring hefty profits towards their destruction for recycling purposes.

If you have stopped making payments on your auto loan, the lender may try to take legal action against you. However, if your car is worth less than what you owe, you can pay off the outstanding loan balance and drive away. So if having a car that’s more than likely falling apart or being repossessed is not something you want to consider, make sure you get an auto refinance loan so that you don’t find yourself in such a predicament.

In some cases, you wouldn’t have a chance of trying to make the payments on your car loan. When this happens, you should first try to reach out for a loan modification if possible. If that fails, there may be options to surrender the vehicle back to the lender via return or repossession.

Personal Items and Household Goods

Larger things like your house and vehicle generally won’t be taken out of your hands during bankruptcy. But, that doesn’t mean that every single item within them will remain safe. For example, things like designer clothes, expensive toiletries or jewelry, valuable appliances, and high-end electronics may not be protected. Check with a local lawyer before assuming any amount of protection is provided to you by law.


Any wages you earned before filing for bankruptcy but were not able to receive until after filing for bankruptcy are usually only partially protected by your bankruptcy filing. Categories like retirement accounts, welfare benefits, or other monies accrued as a result of debts or employment payments are almost always exempt from being claimed by creditors once filing for Chapter 7. 

However, if your attorney feels like any of these funds may be challenged in court, it is recommended that you verify the claim yourself and/or hire an attorney to represent your concerns before the court. In addition, Social Security payments or unemployment benefits are also considered tax-exempt and will continue whether during or after bankruptcy.


Blue Bee Bankruptcy Attorneys


Choose the Right Attorney

You should now have a better understanding of the common assets to claim as exempt in your state. If you have a valuable home, you may want to consult a lawyer before giving up your exemption. 

If you have questions about filing for bankruptcy or other matters, call Blue Bee Bankruptcy at any time. You can contact us at 801-285-0980.


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