Possibly. Whether you’re able to keep your home in Chapter 7 bankruptcy will depend on whether you can protect the home equity with a bankruptcy exemption. If you can’t, the Chapter 7 trustee will sell the home, return the exemption amount to you, and use the remainder to pay your creditors, sales costs, and the trustee’s commission.

Most states, as well as the federal exemption system, have a homestead exemption you can use to protect a certain amount of equity in your principal residence. However, homestead exemption amounts vary significantly from state to state. If your homestead exemption is not enough to cover the entire value of your house, you might be able to combine it with a wildcard (which can be used for any type of property) to protect your house. Or, you might want to consider filing for Chapter 13 bankruptcy (you can keep all of your property in this chapter).

Example. Logan’s house is worth $100,000. He doesn’t have a mortgage and owns the house free and clear. Logan’s state has a $125,000 homestead exemption. If he files for Chapter 7 bankruptcy, he can keep his house because he can fully exempt its entire $100,000 value using his homestead exemption.

Learn more about keeping your house and car in bankruptcy.

In some cases, yes. If your mortgage balance (and other liens, such as tax liens) exceeds the value of the house, the Chapter 7 trustee won’t take it for sale in bankruptcy. The trustee must pay off the mortgage and liens, and won’t bother selling the home if there won’t be anything left for other creditors.

Example. Marjorie owns a house valued at $200,000. Her mortgage balance is $225,000. Since she has no equity in the property, the Chapter 7 trustee won’t bother selling it. She can keep the house.

That doesn’t necessarily mean that your home is safe in bankruptcy, however. You’ll still need to keep up with your mortgage payment. Otherwise, the lender can take the home through foreclosure, either by:

• filing a motion during the bankruptcy case asking the court to lift the automatic stay that stops creditors from collecting, or
• waiting until the Chapter 7 case ends.

If you’re behind on your payment when considering bankruptcy, and you want to keep your home, Chapter 13 bankruptcy will likely be a better choice. For more information, read Secured Claims in Chapter 13 Bankruptcy: Can I Catch Up on My House or Car Payment?

Probably not—but it’s possible. Nothing in the law specifically forbids you from keeping a second home in your Chapter 7 bankruptcy. However, if you have equity in a second home, vacation home, or investment property, it’s more likely than not that you won’t be able to keep it if you file for Chapter 7 bankruptcy.

You aren’t expected to give up the things you’ll need for a fresh start. You’ll be able to protect necessary property through the use of bankruptcy exemptions. However, states don’t have specific exemptions for real estate other than your residence or your dependents' residence. So, unless you can cover all of the equity in the second home with a wildcard exemption—an exemption that you can use for almost any type of property of your choosing—you’ll have to turn the home over to the bankruptcy trustee.

If you can afford to pay for the nonexempt equity through a repayment plan, you can keep the second house by filing for Chapter 13 bankruptcy. Since filing this chapter is more expensive in many ways, you might want to find out how much filing for Chapter 13 bankruptcy costs.

Possibly. Your ability to keep a luxury car in Chapter 7 bankruptcy will depend on:

• whether you can cover the equity in your car with a bankruptcy exemption, and
• if you have a car payment, whether you can afford to pay for it.

If your car is paid in full and you can cover the equity with an exemption—the law that tells you which property you can protect—you can keep it in Chapter 7 bankruptcy. Both state and federal laws provide bankruptcy exemptions for certain types of property (but your state decides which system you can use).

If you can’t protect the car with an exemption, the bankruptcy trustee can sell it and use the proceeds to repay other creditors. You’ll have to pay an amount equal to the nonexempt value or file for Chapter 13 bankruptcy if you want to keep it.

Example. James has a luxury SUV that he bought when times were better. He owns it free and clear and the fair market value is $25,000, but he can exempt only $6,000. If he wants to keep his car, he’ll need to pay the trustee $19,000. If he gives up the car, the trustee will pay him his $6,000 exemption and use the rest to repay creditors.

If you're still paying a car loan, you’ll only be able to keep it if you can exempt the equity, and have enough money to:

• redeem it (pay the full market value of the vehicle in one lump sum), or
• you can reaffirm the debt (agree to repay the loan according to your original loan agreement).

In some areas, you can simply continue paying your car payment. Your lender will allow you to keep it as long as you remain current. However, after bankruptcy, you won’t have a contract in place, so your lender could repossess it at any time, even if you’re caught up.

If you decide to reaffirm the loan—enter into a contract with your lender to keep the car—the court (or your attorney) will have to approve of the agreement. Reaffirming a large car payment isn’t easy, because you have to show you can pay for it, and such extra money would normally go to repay creditors.

Example. Chris and his wife own two cars—a luxury vehicle and a mid-priced sedan. They have one child. Chris's car payment is $700 per month. The court would likely rule that the expense is unnecessary and unreasonable because having a luxury vehicle isn’t required for family purposes. It would also be unusual for Chris to meet another standard—demonstrate that he could pay for it. To do so, his bankruptcy paperwork would need to show that he had $700 in income available for the luxury car payment. If his paperwork revealed that amount of discretionary income, his case would likely have been converted to a Chapter 13 bankruptcy.

It depends. You can keep any property that you can protect with a bankruptcy exemption. Most states’ exemption schemes allow a filer to keep a certain amount of equity in a vehicle. You’ll need to determine:

• the amount of equity in your car, and
• whether the equity is fully exempt.

If the exemptions cover the vehicle (you might be able to use a vehicle exemption and a wildcard exemption), you’re in luck—you can keep it. If, however, you can protect only a portion of the equity, the bankruptcy trustee will sell the vehicle, give you the exemption amount, and use any balance to pay creditors. Some trustees, however, will let you keep the car if you pay the amount they’d net after a sale.

Example 1. Ethan’s car is worth $5,000. His state has a $7,000 motor vehicle exemption. Since Ethan’s car is worth less than $7,000, he can fully exempt the entire value of the car.

Example 2. Avery has a $10,000 car, but her state only offers a $5,000 motor vehicle exemption. However, her state also has a $5,000 wildcard exemption. Avery can exempt $5,000 with her motor vehicle exemption and use the wildcard exemption to exempt the remaining $5,000 to keep her car.

Example 3. Scarlett’s car is worth $13,000 but the motor vehicle exemption is $3,000. After the car gets sold, Scarlett would receive $3,000, and the remaining portion would be used to pay creditors and the trustee’s fee.

If you owe money on your car when you file Chapter 7 bankruptcy, you have three choices with regard to your car loan. You can choose to:

• surrender the car (you’ll get to wipe out the debt in exchange for giving up the car),
• reaffirm the car loan debt (you keep the car and agree to repay the loan as if you hadn’t filed for bankruptcy), or
• redeem the car (pay its value in one payment).

To successfully redeem your vehicle, you must:

• propose the amount you will pay (the value of the car)
• get the creditor to agree to the value or go to court for a judge to decide, and
• pay the amount within a specified period.

Once you have the car's value, you must come up with the money to pay the full value in one payment. The creditor must release its lien, and you will own the car free and clear.

Example. Jacob files Chapter 7 bankruptcy. He owes $10,000 on his car, but he knows Kelley Blue Book lists the retail value of the car at $6,000. Jacob indicates in his bankruptcy paperwork that he intends to redeem the vehicle and offers the lender $6,000 for the car. The lender argues that the car is worth more, and they go to court. The judge decides that the retail value is $7,000. Jacob pays $7,000 to the creditor, keeps his car, and receives title.

It depends. In Chapter 7 bankruptcy, you get to keep income you earn after you file your case. However, if you earned the income or bonus before you filed for bankruptcy, and received the money after you filed, the money will likely belong to your bankruptcy estate.

You’ll need to look at your state’s bankruptcy exemption laws to determine whether you’ll need to turn over some of your pre-filing wages or bonus to the trustee. Some states have exemptions designed specifically to protect a certain amount of earned wages or bonuses. If your state doesn’t have a specific exemption that applies to your bonus payment, you might be able to use a wildcard exemption (which can typically be used to exempt any type of property) to protect it.

Yes. Social Security benefits are exempt property you can keep, you won’t lose them if you file for Chapter 7 bankruptcy. Your state decides which type of property you can keep; however, federal law says that all of your Social Security funds are exempt. So no matter what state you live in, you get to keep Social Security money.

However, you’ll want to be aware of these important tips.

• Don’t commingle Social Security funds with other money. You’ll want to maintain your benefits in a separate account, however, because many other funds in a bank account aren’t protected by a bankruptcy exemption. Once commingled with other money, it will be difficult to prove that the funds come from Social Security benefits rather than another source. It’s likely a bankruptcy judge wouldn’t allow the exemption, and you’d lose the funds.
• If you’ve already commingled Social Security funds. If you haven’t filed bankruptcy yet, consider exhausting the commingled funds before filing bankruptcy by using them to pay for necessary items, such as rent, utilities, and food. If you can’t wait to spend the funds on necessities, you might be able to use another exemption. For instance, most states have a wildcard exemption that allows you to protect any property you wish or a certain amount of cash or bank account funds.

It depends. If you file for bankruptcy and have a checking or savings account with a credit union or bank, whether you can keep that account will depend on whether you intend to pay back any money you owe the credit union and the policies of the bank. Check the institution’s policies.

If you don't owe the credit union money—such as for a car loan or a credit card—the credit union will likely allow you to keep your account. Your specific credit union's policy might state otherwise, but generally, if you don't cause the credit union a loss, the credit union will not close your account.

If you agree to pay back all the money you owe the credit union despite your bankruptcy, the credit union might allow you to keep your account, because it will not suffer a loss if you maintain the terms of your original loan agreements. So if you have a car loan and a credit card with the credit union and sign agreements that you will repay the loan and the credit card, the credit union will let you keep your checking and savings accounts.

Important tips. If you owe a credit union or bank money when you file for bankruptcy, the institution might be able to withdraw funds from your account to pay toward your debt in what is known as a setoff. Also, many banking institutions won’t open an account for you soon after you file for bankruptcy.

It’s common for filers to stop paying creditors so that they can pay for bankruptcy attorneys’ fees. Find out how much you’ll need in How Much Does It Cost to File Chapter 7 Bankruptcy?

It depends. You can use your tax refund to pay for necessary items you need, such as groceries, utility bills, and car repairs. Any portion of your tax refund that remains will need to be protected with a bankruptcy exemption. Unprotected returns will be used to pay creditors.

Bankruptcy exemptions are state specific; however, no matter where you live, it is unlikely that you’ll find an exemption for a tax refund. As a result, if you want to exempt your tax refund, you must typically use a cash or wildcard exemption (a wildcard exemption usually allows you to exempt any type of asset, although some have limitations).

Unfortunately, not all states offer these exemptions, and in many cases, they might be too small to cover your entire refund.

It depends. When you file bankruptcy, any income tax refunds payable to you become part of your bankruptcy estate. If part of your tax refund is comprised of an earned income tax credit (EITC), you might be able to exempt some or all of the EITC in your bankruptcy case, depending on the state you live in.

The type and amount of exemptions you can apply against the EITC refund will depend on the laws of your state, and the type of exemption scheme that you have opted to use:

• state bankruptcy exemptions, or
• federal bankruptcy exemptions.

Caution: Child Tax Credit. If part of your refund is based upon the state or federal child tax credits, then that amount might not be similarly exempt in bankruptcy. Ultimately, it will depend on whether the laws of your state that protect EITC also exempt refunds arising from state or federal child tax credits. For example, if you live in Florida, you may exempt your entire EITC. However, Florida law does not exempt child tax credit. The amount of your refund traceable to the child tax credit will still be included in your bankruptcy case and is potentially subject to seizure by your bankruptcy trustee, to the extent that you cannot apply other available exemptions against it.

Usually. Whether you can keep your jewelry in bankruptcy will depend on:

• how much your jewelry is worth, and
• the bankruptcy exemptions available to you.

In Chapter 7 bankruptcy, you wipe out most or all of your debts. Whether you get to keep your jewelry in Chapter 7 hinges on whether you can claim it as exempt property. The bankruptcy trustee will take and sell your nonexempt property to repay your unsecured creditors.

All states have lists of bankruptcy exemptions—property you get to keep in bankruptcy. Some states allow you to use the federal bankruptcy exemptions instead. To find out if your jewelry is exempt, check your state exemption amounts, and if you can use the federal exemptions, check those as well.

Here are some exemptions that you may be able to use to keep your jewelry in Chapter 7 bankruptcy.

• Jewelry exemptions. Some states have a special exemption for jewelry. If the value of your jewelry is equal to or less than the exemption amount, you’ll get to keep it. If it’s more, you might have to pick and choose what you keep.
• Wildcard exemptions. Many states also have a wildcard exemption—an exemption that can be applied to any type of personal property.
• Wedding ring exemptions. Some states allow debtors to protect a wedding ring up to a limited or unlimited value.

If you can’t protect your jewelry with an exemption, you might be able to reimburse the bankruptcy trustee for the jewelry’s value. The trustee will then use this money to repay creditors. Or, you can always keep your property by filing for Chapter 13 bankruptcy (but you’ll pay for the nonexempt portion in a repayment plan).

Yes, in almost every case. Don’t worry, you’re not going to lose your rescue cat or dog, and the chances are high that you’ll be able to keep your hamster, finch, and lizard, too. Unless you have an unusually valuable pet—such as a show dog or an income-generating racehorse—or your monthly ongoing pet expenses are unreasonably high, you’ll get to keep your pet. Here’s why.

Like the rest of your property, you’ll get to keep pets in Chapter 7 bankruptcy if:

• you can protect your animal with a bankruptcy exemption (laws that tell you what property you can keep)
• the bankruptcy trustee abandons it because selling it won’t generate money for creditors, or
• you pay for it with post-bankruptcy income or a loan.

Not many state exemptions for pets exist (although several states have exemptions for livestock). But most states have a wildcard exemption that can usually be applied to any personal property, up to a certain dollar amount.

Even so, pets typically don’t have much market value, if any, and for a good reason—free pets are easy to find, and shelters are full. So, even if you don’t have an exemption that specifically covers your pet, its value will likely be low. For instance, it isn’t unusual to value a goldfish at $1 and a rescue cat at $25. In such cases, the trustee isn’t going to sell your animal.

Now, of course, if your animal is valuable, and you can’t protect it, then your pet might be at risk of being sold into a new home unless you can pay to keep it.

Be aware of costly pet expenses. You must list your monthly expenses on Schedule J: Your Expenses in the bankruptcy paperwork. If your pet expenses are high, the bankruptcy trustee might object to them. If the trustee successfully convinces the court that the pet expense money should be paid to creditors, your case might be converted from a Chapter 7 to a Chapter 13 bankruptcy.

Yes. Most people filing for bankruptcy will be able to exempt (keep) their clothes. However, if you are filing for Chapter 7 bankruptcy and have designer clothing or furs, you might have to give those up.

Here are some state exemptions that you might be able to use.

• Clothing exemptions. Some states have a specific exemption for clothing. Nebraska is an example.
• Clothing lumped with other items. Many states lump clothing in with household goods, appliances, furniture, and the like. Usually, those states allow you to exempt up to a certain total value for these items.
• Wildcard exemptions. Many states also have a wildcard exemption (an exemption that can be applied to any type of personal property). If your state has a wildcard, you can use it to protect clothing if your clothing is not protected by another exemption.

Most states put a dollar limit on clothing exemptions. While your regular clothing will probably fall within these exemption amounts, costly items might not.