Exemptions are the rules that decide what a bankruptcy trustee cannot take. Equity in your home, a vehicle, retirement accounts, household goods, tools of your trade, some cash. They are the difference between a filing that costs you nothing material and one that costs you an asset — and they vary more between states than almost anything else in consumer bankruptcy.
This page explains the mechanism, which is what decides cases. For the amounts, go to the statute — and read the warning about why below.
Why we do not publish the numbers here
Because the amounts move. The federal exemption figures are adjusted for inflation periodically, and a number of states index theirs too or amend them by legislation. Homestead protection ranges from very little to effectively unlimited depending on the state.
A confidently formatted table that is eighteen months old is the most dangerous artifact in this topic, because someone will decide whether to file based on it. So: get the amount from your state’s exemption statute or from your attorney, and use what is below to understand what you are reading.
The five mechanisms that decide your outcome
1. State set or federal set
Some states let filers choose between the state exemption set and the federal set in §522(d). Others have opted out, requiring the state set.
Where you have a choice, it is a genuine decision with real money in it: the federal set may protect more of one category and less of another. You must pick one set entirely — you cannot mix and match across the two.
2. The wildcard
Many states, and the federal set, include a wildcard exemption that can be applied to any property. This is what protects the asset that does not fit a category — cash, a second vehicle, equity above the specific limit.
In some state sets, the wildcard is larger if you are not using the homestead exemption, which creates a genuine trade-off for renters versus homeowners.
3. Doubling for married couples
When spouses file jointly, many exemptions double. Some do not — homestead treatment for married filers varies by state, and it is a common and expensive assumption to get wrong.
4. The residency rule
This is the one that catches people who moved.
To use a state’s exemptions, you generally must have been domiciled there for the 730 days before filing. If not, you use the exemptions of the state where you were domiciled for the greater part of the 180 days preceding that two-year period. In some situations this leaves a filer using the federal set because the prior state’s exemptions cannot be applied out of state.
Practical version: if you moved in the last two years, do not assume your current state’s exemptions apply. There is also a federal cap on homestead equity acquired shortly before filing, designed to stop pre-filing relocation to generous states.
5. Retirement accounts are treated separately, and generously
Qualified retirement accounts — 401(k), 403(b), most pensions — are broadly protected, with IRAs protected up to a substantial inflation-adjusted cap. This is worth knowing before anyone considers cashing out a retirement account to pay debts before filing. Doing that converts protected money into non-exempt cash, and it is one of the most costly pre-filing mistakes people make on their own.
The categories to look up
When you find your state’s statute, these are the lines that matter:
- Homestead — equity in your primary residence
- Motor vehicle — per vehicle, sometimes with different treatment for a disabled filer
- Household goods and furnishings — usually generous in practice
- Wearing apparel, jewelry — often small, with a wedding ring frequently treated separately
- Tools of the trade — matters for tradespeople and the self-employed
- Retirement accounts
- Life insurance cash value
- Public benefits — Social Security, unemployment, workers’ compensation, veterans’ benefits
- Wages — recently earned but unpaid
- Wildcard
How the trustee sees it
You claim exemptions on Schedule C. The trustee’s job is to identify non-exempt property worth more than the cost of selling it, sell it, and distribute the proceeds. Two consequences:
- A small amount of non-exempt equity may not be pursued, because sale costs eat it. That is a judgment call by the trustee, not a rule you can rely on.
- Undervaluing property is the wrong strategy. Trustees value assets independently, and a valuation that does not survive scrutiny undermines everything else you have filed. See what the trustee checks.
When exemptions send you to Chapter 13 instead
If you have non-exempt equity you cannot protect — typically home equity in a low-homestead state — Chapter 7 puts that asset at risk. Chapter 13 lets you keep everything and pay creditors at least the value of what they would have received in a liquidation, over three to five years.
So the exemption analysis is not just about what you keep. It is one of the three filters that decide which chapter you file. See when exemptions push you to Chapter 13.
Frequently asked questions
What property can I keep in Chapter 7? Everything covered by your applicable exemptions — typically your home equity up to the homestead limit, a vehicle up to the vehicle limit, retirement accounts, household goods, tools of your trade, and anything you can cover with a wildcard exemption.
Can I choose federal or state exemptions? In some states, yes; others require the state set. Where a choice exists you must use one set in full and cannot combine the two.
What is a wildcard exemption? An amount that can be applied to any property, used to protect an asset that exceeds a category limit or does not fit a category. In some states it is larger if you do not claim a homestead exemption.
Do exemptions double for married couples filing jointly? Many do, but not all, and homestead treatment for married filers differs by state. This is a specific point to confirm rather than assume.
What happens if I moved recently? The 730-day domicile rule may require you to use your previous state’s exemptions, or the federal set if the prior state’s cannot be applied out of state. Moving before filing does not get you a better state’s protection.
Are my retirement accounts safe? Qualified plans are broadly protected, and IRAs up to a substantial cap. Withdrawing retirement money to pay debts before filing turns protected funds into non-exempt cash and is usually a mistake.
This article explains how bankruptcy exemptions work. No exemption amounts are stated here on purpose — federal figures are inflation-adjusted periodically and state amounts change. Get current figures from your state’s statute and confirm your Schedule C with a bankruptcy attorney. Not legal advice.
Sources
- 11 U.S.C. §522 — exemptions, including §522(b)(2) opt-out, §522(d) federal set, §522(b)(3)(A) residency rule, §522(p)
- Each state’s exemption statute (cite individually)
- U.S. Courts — Bankruptcy Basics
This is information, not advice. PayoffPath explains how debt, credit and bankruptcy work. It does not give individual financial, legal or tax advice, and reading it does not create any professional relationship. What is right for you depends on your income, your state and the terms of your accounts. Figures that change over time are linked to their source.
