What an exemption is
An exemption is a law that puts a piece of property out of reach of the trustee and your creditors. If something you own is exempt, it stays yours through the bankruptcy.
This is why most people who file Chapter 7 don't lose anything. The exemption laws were written to cover what an ordinary household owns: a modest car, furniture, clothes, a retirement account, and some equity in a home.
Exemptions protect equity
An exemption covers your equity in something, not its sticker value. Equity is what the item is worth minus what you still owe on it.
Take a car worth $12,000 with a $9,000 loan. The equity is $3,000, and $3,000 is the number the exemption has to cover. A car that's worth less than its loan has no equity at all, so there's nothing for a trustee to sell.
Two systems: federal and state
There's a federal list of exemptions in the Bankruptcy Code, and every state has its own list. Which one applies depends on the state:
- Most states require their own list. The federal bankruptcy exemptions aren't available to filers there.
- A minority of states let filers pick either the federal list or the state list.
Where there's a choice, it's one or the other for the whole case. Taking the homestead exemption from one list and the vehicle exemption from the other isn't allowed.
The lists are very different from each other. Homestead exemptions alone run from a few thousand dollars in some states to unlimited in others.
Which state's law applies
It isn't always the state you live in now. The rule looks back 730 days, which is two years. If you've lived in the same state that whole time, that state's exemptions apply. If you moved during those two years, the law looks at the 180 days before the 730-day period started and uses the state where you lived for most of that stretch.
So someone who moved from Ohio to Texas a year ago files in Texas and uses Ohio's exemption rules.
The common categories
- Homestead: equity in the home you live in.
- Motor vehicle: equity in a car or truck, usually one per filer.
- Household goods: furniture, appliances, clothing, and personal items.
- Tools of the trade: equipment you need for work.
- Retirement accounts: 401(k)s, pensions, and IRAs are protected almost everywhere, IRAs up to a high dollar cap.
- Public benefits: Social Security, unemployment, and veterans' benefits.
- Wildcard: a dollar amount that can go toward anything. Not every state has one.
Schedule C
Exemptions aren't automatic. They're claimed on Schedule C (Official Form 106C), one line per item: what the property is, what it's worth, how much of that value you're claiming as exempt, and the specific law that allows it. Property that's left off Schedule C isn't protected.
The trustee and creditors then have 30 days after the 341 meeting ends to object. If nobody does, the exemptions stand as claimed.
When property is worth more than the exemption
In Chapter 7, the trustee can sell an item with non-exempt equity. The filer gets the exempt amount in cash, any lender gets paid, and the rest goes to creditors. Trustees weigh the cost of selling against what the sale would bring in, and small amounts of non-exempt equity often aren't pursued.
In Chapter 13 nothing gets sold. The non-exempt value sets a minimum on what the plan has to pay unsecured creditors.
Where to find the current numbers: the federal exemption amounts adjust every three years, most recently in April 2025. States change theirs on their own schedules. The amounts are in your state's statutes and in the Bankruptcy Code at 11 U.S.C. § 522(d), and many court websites and legal aid organizations publish a plain-language summary for their state.
Why this is a common place for help: picking a system, valuing property, and matching each item to the right statute is where the law gets specific to the person. It's the part of a bankruptcy filing that attorneys and legal aid clinics are asked about most.
For the meaning of terms used here, see the glossary.