Exempt vs. Non-Exempt Property

When a bankruptcy case is filed, everything the filer owns becomes property of the bankruptcy estate under 11 U.S.C. §541. Exemptions are the rules that pull most of it back out. Exempt property stays with the filer. Non-exempt property is what a Chapter 7 trustee can sell for creditors, or what a Chapter 13 filer has to pay the value of through the plan. The difference is a list, and which list applies depends on where the filer has lived.

Key points

• The federal figures below are for cases filed April 1, 2025 through March 31, 2028, set by the Judicial Conference's January 30, 2025 notice, 90 FR 8941. They adjust every three years.
• Which list applies is fixed by the 730-day domicile rule in §522(b)(3)(A), not by where the filer lives on the filing date.
• Exemptions protect equity, not the whole item. A $20,000 car with an $18,000 loan has $2,000 of equity to protect.
• The federal wildcard, $1,675 plus up to $15,800 of unused homestead exemption, is why renters using the federal list can often protect a large tax refund or bank balance.
• The U.S. Courts state that most individual Chapter 7 cases are no-asset cases, meaning the trustee finds nothing worth selling.

The federal exemption list (§522(d)), verified figures

Two mechanics on top of the table. Under §522(m), the exemptions apply separately to each spouse in a joint case, so a married couple filing together can generally protect twice each figure. And the (d)(5) wildcard stacks: a renter with no homestead claim has the full $1,675 plus $15,800, or $17,475, to spread across cash, a tax refund, a second car, or anything else.

Opt-out: which list applies to you

The 20 states this site has researched, with the applicable statute in each guide:

Opt-out states (state list required): Arizona, California (which offers two state systems of its own), Colorado, Florida, Georgia, Illinois, Indiana, North Carolina, Ohio, South Carolina, Tennessee, and Virginia.

States allowing the federal list: Massachusetts, Michigan, New Jersey, New York, Oregon, Pennsylvania, Texas, and Washington.

The state guides hub lists all 20. Even in an opt-out state, certain federal non-bankruptcy exemptions, such as those for Social Security and federal retirement benefits, remain available under §522(b)(3)(B).

The 730-day domicile rule

Under §522(b)(3)(A), the exemptions that apply are those of the state where the filer was domiciled for the 730 days before filing. If the filer moved during that window, the law of the state where they lived for the greater part of the 180 days before that 730-day period applies. A person who moved from Texas to Florida 18 months ago files under Texas exemption law. If the old state's law is not available to a non-resident, the federal list applies as a fallback under the closing sentence of §522(b)(3).

What trustees actually sell

The Chapter 7 trustee's duty under §704(a)(1) is to collect and reduce to money the property of the estate. In practice, the assets that most often produce money in consumer cases are not houses and cars. They are:

• Tax refunds. The portion of a refund attributable to pre-filing income is estate property. A refund of a few thousand dollars with no wildcard to cover it is the single most common asset trustees collect.
• Bank balances on the filing date. Money in checking on the day the petition is filed, including a paycheck deposited that morning, is estate property.
• A second vehicle, a boat, or recreational equipment with equity above the applicable exemption.
• Non-exempt home equity where the exemption is small. See Will I lose my house in bankruptcy?.
• Money owed to the filer: a personal injury claim above the cap, a lawsuit, a security deposit, an inheritance received within 180 days after filing under §541(a)(5).
• Business interests and accounts receivable for self-employed filers.

What trustees generally do not sell is used household furniture, clothing, ordinary electronics, or a single modest car. The resale value is too low to justify the cost. Section 554 allows the trustee to abandon property that is burdensome or of inconsequential value, and a no-asset report is the result.

Chapter 13: non-exempt property is kept, but paid for

Chapter 13 filers do not surrender non-exempt property. Instead, §1325(a)(4) requires the plan to pay unsecured creditors at least as much as they would have received in a Chapter 7 liquidation. A filer with $10,000 of non-exempt equity in a boat keeps the boat and pays at least $10,000 to unsecured creditors over the plan. That "best interest of creditors" test is why exemption planning matters in Chapter 13 too: every dollar of non-exempt value raises the minimum plan payment.

Common mistakes to avoid

• ✕Valuing household goods at replacement cost. Exemptions and trustees use current resale value, which for used furniture is a small fraction of purchase price.
• ✕Forgetting that a tax refund earned before filing is estate property. Filing in February without exempting the refund hands it to the trustee.
• ✕Assuming the exemption list of the current state applies after a recent move. The 730-day rule may point to the old state or to the federal list.
• ✕Mixing lists: claiming the state homestead exemption and the federal wildcard. It is one list or the other.
• ✕Moving money into a retirement account the week before filing to exempt it. Recent transfers to exempt assets draw objections and can be unwound.
• ✕Leaving assets off Schedule A/B because they seem worthless. Undisclosed property is a discharge-denial issue under §727(a)(4), even when it would have been exempt.

Frequently asked questions

What is the difference between exempt and non-exempt property in bankruptcy?

Exempt property is protected by a state or federal exemption statute, up to a dollar limit per category, and stays with the filer. Non-exempt property is anything with value above those limits or outside the listed categories. In Chapter 7 the trustee can sell non-exempt property for creditors; in Chapter 13 the filer keeps it but must pay at least its value to unsecured creditors through the plan.

What are the federal bankruptcy exemption amounts in 2026?

For cases filed April 1, 2025 through March 31, 2028: homestead $31,575; vehicle $5,025; household goods $800 per item and $16,850 total; jewelry $2,125; wildcard $1,675 plus up to $15,800 of unused homestead; tools of the trade $3,175; life insurance cash value $16,850; personal injury $31,575. Retirement accounts are exempt, with IRAs capped at $1,711,975. The figures come from the Judicial Conference notice at 90 FR 8941.

What is the wildcard exemption?

The federal wildcard in 11 U.S.C. §522(d)(5) lets a filer protect $1,675 of any property, plus up to $15,800 of the homestead exemption they did not use. A renter using the federal list therefore has up to $17,475 to apply to cash, a tax refund, a second vehicle, or anything else. Many opt-out states have their own wildcard, often smaller, and some have none.

Which states let you use the federal bankruptcy exemptions?

As of 2025: Alaska, Arkansas, Connecticut, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin, plus the District of Columbia. Every other state has opted out under §522(b)(2), and its residents must use the state list. The filer picks one list in full; the two cannot be combined.

What property does a Chapter 7 trustee usually sell?

In consumer cases, the assets that most often produce money are pre-filing tax refunds and bank balances on the filing date. Next come a second vehicle or recreational equipment with equity above the exemption, non-exempt home equity, and claims or inheritances owed to the filer. Used furniture, clothing, and a single modest car are rarely sold because their resale value is too low. Most individual Chapter 7 cases end with a no-asset report.

Do I lose non-exempt property in Chapter 13?

No. Chapter 13 filers keep all their property. Under §1325(a)(4), though, the plan must pay unsecured creditors at least what they would have received if the non-exempt property had been sold in Chapter 7. Non-exempt value therefore sets a floor on the plan payment rather than causing a sale.

When to talk to a professional