There Is No Single "Asset Limit" in Chapter 7
One of the biggest misconceptions about Chapter 7 is that there is a hard asset limit -- a dollar figure above which you cannot file. That is not how it works. Instead, the Bankruptcy Code uses a system of exemptions that protect specific types and amounts of property.
If all of your property falls within the applicable exemptions, you keep everything. If some property exceeds the exemption limits, the Chapter 7 trustee may sell the non-exempt portion to pay creditors. In practice, roughly 95% of Chapter 7 cases are "no-asset" cases -- meaning the trustee finds nothing worth selling.
Federal vs State Exemptions
The exemptions you can use depend on where you live. About 20 states allow filers to choose between the federal exemption system under 11 U.S.C. Section 522(d) and the state's own exemption laws. The remaining states have "opted out" of the federal system, meaning you must use the state exemptions.
You cannot mix and match. If you choose the federal system, you must use it for everything. If you use state exemptions, you use those for everything.
Two-year domicile rule: Under 11 U.S.C. Section 522(b)(3)(A), you must use the exemptions of the state where you lived for the 730 days (two years) before filing. If you moved states recently, you may be required to use your former state's exemptions. See state exemptions for details.
Key Federal Exemptions (Section 522(d))
| Property Type | Section | Amount |
|---|---|---|
| Homestead (equity in primary residence) | 522(d)(1) | $27,900 |
| Motor vehicle | 522(d)(2) | $4,450 |
| Household goods (per item) | 522(d)(3) | $700 per item, $14,875 total |
| Jewelry | 522(d)(4) | $2,000 |
| Wildcard | 522(d)(5) | $1,475 + up to $13,950 unused homestead |
| Tools of the trade | 522(d)(6) | $2,800 |
| Retirement accounts (IRA) | 522(d)(12) | $1,512,350 |
| ERISA plans (401k, pension) | Section 541(c)(2) | Unlimited |
Dollar amounts are adjusted for inflation every three years under Section 104(a). The amounts above reflect the current adjustment period.
Common Exemptions Explained
Homestead Exemption
The homestead exemption protects equity in your primary residence. The federal amount is $27,900 per filer ($55,800 for married couples filing jointly). But state exemptions vary enormously:
- Unlimited: Texas, Florida, Kansas, Iowa, South Dakota, and Oklahoma offer unlimited homestead exemptions (subject to acreage limits)
- High: Massachusetts ($500,000), Minnesota ($450,000), Nevada ($605,000)
- Low: New Jersey ($0 -- no state homestead exemption), Maryland ($25,150), Alabama ($16,450)
See our homestead exemption guide for a detailed state-by-state breakdown.
Vehicle Exemption
The federal vehicle exemption is $4,450, which protects equity -- not the car's total value. If you owe more on the car loan than the car is worth, you have no equity to protect, and the exemption is not needed.
Many states offer higher vehicle exemptions. Missouri allows $3,000, Kansas allows $20,000, and some states have no specific vehicle exemption but allow wildcard amounts to be applied. See our vehicle exemptions page.
Personal Property
Federal law protects household goods, furnishings, appliances, clothing, and similar items up to $700 per item and $14,875 in aggregate. In practice, used household goods have very low resale value -- your used couch and TV are worth far less than you paid for them. Trustees almost never pursue household goods.
Retirement Accounts
This is one of the strongest protections in bankruptcy law. ERISA-qualified plans (401(k), 403(b), defined-benefit pensions) are fully exempt with no dollar limit under federal law. This protection exists outside the bankruptcy exemption system entirely and applies in all states.
Traditional and Roth IRAs are exempt up to $1,512,350. Inherited IRAs are not protected after the Supreme Court's 2014 decision in Clark v. Rameker.
See our retirement account protections guide.
Wildcard Exemption
The federal wildcard exemption under Section 522(d)(5) can be applied to any property. It provides $1,475 outright, plus up to $13,950 of unused homestead exemption. If you rent and do not use any homestead exemption, your wildcard can be as high as $15,425 -- usable for cash, bank accounts, tax refunds, or any other asset.
What If Your Assets Exceed Exemption Limits?
If you own non-exempt property, you have several options:
- File Chapter 13 instead: In Chapter 13, you keep all property and repay creditors through a 3-5 year plan. The plan must pay unsecured creditors at least as much as they would have received in a Chapter 7 liquidation.
- Negotiate with the trustee: Sometimes the trustee will allow you to pay the non-exempt value in cash rather than surrendering the property.
- Claim different exemptions: If you are in a state that allows the federal exemption election, compare both systems carefully. One may protect your assets better than the other.
The "no-asset" reality: According to federal court data, approximately 95% of Chapter 7 cases result in no distribution to unsecured creditors. The trustee determines there is nothing worth administering. Most people's assets are fully protected by exemptions.
Cross-References
- bankruptcyexemptions.com -- Deep dive into federal and state exemption systems
- chapter7vs13.org -- Comparing Chapter 7 and Chapter 13 for asset protection
- bankruptcyfreshstart.org -- Planning your fresh start after bankruptcy
- 727a8.com state-by-state data -- Discharge outcomes by state