Key Takeaway: Most Chapter 7 filers keep everything they own because assets fall within exemption limits. The average case is a "no-asset case" — the trustee finds nothing to liquidate. Retirement accounts are almost always 100% protected.
Federal Bankruptcy Exemptions (2025–2026)
You can choose between federal exemptions or your state's exemptions — but not both. Choose whichever set protects more of your property.
| Exemption Type | Protected Amount | What It Covers |
|---|
| Homestead | $27,900 | Equity in primary residence |
| Motor Vehicle | $4,450 | Equity in one vehicle |
| Household Goods | $700/item; $14,875 total | Furniture, appliances, clothing |
| Jewelry | $1,875 | Jewelry of any kind |
| Tools of Trade | $2,800 | Equipment needed for work |
| Wildcard | $1,475 + unused homestead (up to $13,950) | Any property you choose |
| Life Insurance | $14,875 | Cash surrender value |
| Health Aids | Unlimited | Prescribed health equipment |
| 401k / Pension (ERISA) | Unlimited | All employer-sponsored retirement |
| IRA / Roth IRA | $1,512,350 per person | Adjusted every 3 years |
| Social Security | Unlimited | SSI, SSDI, retirement benefits |
Most Generous State Exemptions
Texas
Homestead: Unlimited (≤10 acres urban)
Personal property: $50K–$100K
Best for: Homeowners with significant equity
Florida
Homestead: Unlimited (2-year residency req.)
Wages: 100% for head of household
Best for: Homeowners, less so for renters
California (System 2)
Homestead: $349K–$699K (county-based)
Wildcard: $31,950
Best for: High-equity homeowners
New York
Homestead: $170K–$341K (by county)
Vehicle: $4,825
Best for: NYC metro area homeowners
Pennsylvania caution: Pennsylvania has NO homestead exemption — all home equity is potentially at risk in Chapter 7. Pennsylvania residents should seriously consider Chapter 13 if they own a home.
What Chapter 7 Can and Cannot Discharge
✓ Typically Dischargeable
- Credit card debt
- Medical bills
- Personal loans
- Utility bills
- Most court judgments
- Lease obligations (if vacating)
✗ Usually Not Dischargeable
- Student loans (rare exceptions)
- Child support / alimony
- Recent tax debts
- Criminal fines
- Debts from fraud
- DUI injury judgments
Alternatives to Bankruptcy Worth Trying First
- Debt validation: Many debts — especially old collections — can't be verified. Validate debts for free →
- Check the statute of limitations: Old debts past your state's SOL can't be collected via lawsuit. See our SOL guide →
- Non-profit credit counseling: NFCC member agencies can reduce interest rates and create a payment plan through a Debt Management Plan.
- Debt settlement: Creditors often settle for 40-60 cents on the dollar before a judgment.
Frequently Asked Questions
Can I choose between federal and state exemptions in Chapter 7?
In about half of states, yes — choose whichever set protects more of your property. In "opt-out" states, you must use state exemptions. A bankruptcy attorney can tell you which applies in your state and which set is better for your situation.
What happens to retirement accounts in Chapter 7 bankruptcy?
ERISA-qualified retirement accounts (401k, 403b, pensions) are 100% protected with no dollar limit. IRAs are protected up to $1,512,350. Never withdraw retirement funds to pay debt before filing — you'd lose protection and owe taxes and penalties.
Can I keep my house in Chapter 7 bankruptcy?
Yes, if home equity falls within your state's homestead exemption ($27,900 federal; unlimited in TX and FL). If equity exceeds the exemption, consider Chapter 13, which lets you keep the home while repaying non-exempt equity over 3-5 years.
Explore Bankruptcy Alternatives First
Many debts can be challenged, negotiated, or are past their statute of limitations — without bankruptcy. Start by validating any debts being collected from you.
Generate Free Validation Letter → This article is for informational purposes only and does not constitute legal advice. Bankruptcy laws change frequently. Consult a qualified bankruptcy attorney for advice about your specific situation.