Exempt Property

Exempt property summary

Exempt property is the things you own that you're allowed to keep if you file Chapter 7 bankruptcy.
Your exemptions depend on the state where you live. Some states also allow you to use a federal list if you prefer.
Exemptions also affect how much you have to pay in Chapter 13 bankruptcy. You must pay at least as much as you would in a Chapter 7 filing.

Exempt property definition and meaning

Exempt property refers to the assets you own that you wouldn't have to give up in a Chapter 7 bankruptcy.

Each state has its own exempt property list, which may include work tools, personal belongings, a basic vehicle and/or some home equity. There's also a federal list that some states allow you to use if you prefer.

Key concept:

Exempt property is property that you don't have to surrender if you file Chapter 7 bankruptcy. If you file Chapter 13

, you don't give up the things you own, but it impacts how much you'll have to pay your creditors.

More about exempt property

If you're considering filing for bankruptcy, you should check your state's list of exempt property

. If you're in a state that lets you choose between the state or federal list, compare your state's list to the federal list. These lists will tell you a lot about what you might have to give up in exchange for protection from creditors.

The states that let you opt for the federal list are Arkansas, Connecticut, Kentucky, Massachusetts, Michigan, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, West Virginia, and Wisconsin.

Exempt property: A comprehensive breakdown

The federal exempt property list includes:

$27,900 of home equity (homestead exemption)
$14,875 in loan value, accrued dividends, or a life insurance policy interest
$14,875 total for household goods, furnishings, appliances, clothes, books, animals, crops, musical instruments
$4,450 for your motor vehicle
$2,800 for tools of the trade, including implements and books
$1,875 for jewelry
A wild card exemption you can use for non-exempt property of up to $1,475 plus up to $13,950 of any unused portion of your homestead exemption
Health aids (no set limit)

Non-taxable retirement accounts are fully exempt in bankruptcy. The bankruptcy exemption limit for IRAs and Roth IRAs is $1,512,350.

The federal list may be more or less generous than your state's exemptions. For instance, Texas offers an unlimited homestead exemption. If you have a lot of home equity or you own your home free and clear in Texas, you'll probably do better using your state exemption list than the federal list. The federal exemption list only protects $27,900 in home equity.

On the other hand, the federal list might be more generous for you if you rent your home but have a large gun collection (Texas only lets you exempt two guns).

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Exempt Property FAQs

How much debt do you need to be eligible for bankruptcy?

There's no minimum amount of debt for filing bankruptcy. You’ll pay court fees, and most people hire an attorney. So you need to have enough debt to make those expenses worth paying. Ultimately, it's up to you to decide if filing is worth it for the amount you owe.

Do I need a lawyer to file for bankruptcy?

You don't need a lawyer to file bankruptcy, but you might want to hire one.

You could download the forms you need at the U.S. Courts website, and find which bankruptcy court to send them to. This may be a good option if you qualify for Chapter 7 and all of your assets are exempt. For instance, you may have a straightforward case if you don't own a home and all of your debt is on credit cards.

However, bankruptcy can be complex, and people who represent themselves are far less successful, on average, than people who hire a bankruptcy attorney. The court staff is not allowed to help or advise you.The U.S. Bankruptcy Court published a report in 2020 showing that only 55.6% of self-represented filers successfully had their debt discharged (forgiven), compared to 94.1% of filers who had an attorney. In courts where electronic self-help was available, the success rate was 84.2%.

If you make an error, it could be very costly. You could fail to get relief you're entitled to, or lose an asset that you could have kept. It's normal to say, “If I could afford to hire an attorney, I wouldn't need to file bankruptcy,” but this is a situation where finding a way could have long-term benefits.

How can I get rid of debt without filing for bankruptcy?

There are several ways to get rid of debt without filing for bankruptcy. You could:

Use a debt consolidation loan
to streamline payments
Work with a credit counselor to pay off your debts in full without a consolidation loan
Resolve the debt
for less than you owe

A Debt Consultant can help you weigh all the options to find the right one.