Bankruptcy Exemptions by State 2026: What Property You Keep When You File

One of the biggest misconceptions about bankruptcy is that filing means losing everything you own. That is not how it works. Bankruptcy exemptions protect certain property from creditors, and the protected amounts vary enormously by state. In Texas and Florida, you can file for bankruptcy and keep a million-dollar home. In states with weaker exemptions, you might only protect $25,000 of home equity. Knowing your state's exemption system before you file can change your entire approach to the process.

What Bankruptcy Exemptions Actually Are

When you file for Chapter 7 bankruptcy, a trustee is appointed to review your assets and sell non-exempt property to pay your creditors. Exemptions are the categories of property that the trustee cannot touch. They represent society's judgment that certain assets are so fundamental to a fresh start that creditors should not be able to take them away through a bankruptcy proceeding.

In Chapter 13 bankruptcy, exemptions work differently. You keep all your property but must pay unsecured creditors at least what they would have received if you had filed Chapter 7. So exemptions in Chapter 13 determine the minimum amount you must pay through your repayment plan. Understanding your exemptions helps you decide which chapter makes more sense for your situation. Our bankruptcy calculator can help you compare the two paths.

Federal Exemptions vs State Exemptions

The federal bankruptcy code includes its own set of exemptions. The 2026 federal homestead exemption is $27,900 for an individual. The federal vehicle exemption is $4,450. The federal wildcard exemption allows you to protect $1,475 in any property plus up to $13,950 of unused homestead exemption applied to any property. These amounts adjust every three years for inflation.

About 20 states allow you to choose between the federal exemptions and your state's exemptions, whichever set is more favorable to you. The remaining states require you to use state exemptions only. Knowing whether your state allows the federal option is the first question to answer. If your state allows the choice, you need to compare both sets and pick the one that protects more of your actual property.

The Homestead Exemption: The Biggest Difference Between States

The homestead exemption protects equity in your primary residence. This is where state exemptions differ most dramatically. Texas, Florida, Kansas, Iowa, South Dakota, and Oklahoma have unlimited homestead exemptions for homes on properties within certain acreage limits. A Texan with $500,000 in home equity can file Chapter 7 and walk away from their debts while keeping their home. That is a genuinely remarkable protection.

At the other end of the spectrum, states like Maryland protect only $25,550 in home equity for an individual. New Jersey until recently had a $25,150 homestead exemption. In these states, homeowners with significant equity face a real risk of losing their home in Chapter 7 if their equity exceeds the exemption. This pushes many homeowners in those states toward Chapter 13, where they can keep their home by paying creditors through a multi-year plan.

California is particularly complex because it offers two different exemption systems, and you must choose one. System 2 (formerly called the homestead exemption) protects equity between $300,000 and $600,000 depending on your county's median home price. For homeowners with significant equity in high-cost areas, this system provides much better protection than the federal option.

Vehicle Exemptions by State

Vehicle exemptions protect the equity in your car, meaning the difference between what your car is worth and what you owe on it. The federal vehicle exemption is $4,450. Many states offer similar amounts. But some states are more generous. Texas and Florida have no explicit vehicle exemption because their wildcard exemptions are large enough to cover a vehicle outright. Massachusetts protects $7,500 in vehicle equity.

If you are making payments on a car and owe more than it is worth, the exemption amount is less important because there is no equity to protect. Where the vehicle exemption really matters is when you own your car outright. If you have a paid-off car worth $15,000 in a state with a $4,450 vehicle exemption, you may face pressure from the trustee to either pay the difference or surrender the vehicle. This is a situation where the choice between federal and state exemptions can matter if your state allows it.

Retirement Accounts: Among the Best-Protected Assets in Bankruptcy

Federal law provides robust protection for most retirement accounts in bankruptcy. Traditional and Roth IRAs are protected up to $1,512,350 per person under federal exemptions. 401(k), 403(b), pension, and profit-sharing plans have unlimited protection under federal ERISA law regardless of which state's exemptions you use. This means that if you have $300,000 in a 401(k) and file for bankruptcy, that money is completely off limits to creditors and the trustee.

This is one of the strongest arguments for prioritizing retirement savings even when you are in financial difficulty. Money in a 401(k) or IRA is largely untouchable in bankruptcy, whereas money in a regular bank account is not. People who withdrew their retirement savings to pay credit card debt before filing bankruptcy made the opposite of the optimal decision. The credit card debt would have been dischargeable in bankruptcy while the retirement savings would have been protected.

Wage Exemptions and Bank Account Protections

Most states protect a portion of wages from creditor attachment even outside of bankruptcy. In bankruptcy, the treatment of wages depends on timing. Wages earned before the bankruptcy filing are part of the bankruptcy estate. Wages earned after filing are generally yours to keep. Federal law protects 75% of disposable earnings from garnishment for most consumer debts, meaning creditors can only garnish the lesser of 25% of your disposable income or the amount by which your weekly disposable earnings exceed 30 times the federal minimum wage.

Bank accounts receive less protection in most states. Money sitting in a checking or savings account is often reachable by a bankruptcy trustee unless it falls under another exemption category. Some states protect certain types of deposits, like Social Security benefits deposited into a bank account, but general bank account balances are typically fair game up to the amount of your non-exempt assets.

Wildcard Exemptions: The Most Flexible Protection

A wildcard exemption is an amount you can apply to any property you choose, regardless of category. The federal wildcard exemption is $1,475 plus up to $13,950 in unused homestead exemption, for a total of up to $15,425 if you do not use the homestead exemption at all. Some states have their own wildcard exemptions. California's System 1 has a wildcard of approximately $1,550. Georgia offers a wildcard of about $1,200.

Wildcard exemptions become important when you have property that does not fit neatly into other categories, like valuable jewelry, electronics, art, or a business interest. They give filers flexibility to protect a few specific assets that might otherwise be vulnerable. Planning which property to protect with your wildcard exemption is part of the bankruptcy preparation process. See how different exemption choices affect your overall options with our bankruptcy calculator, and for a broader comparison of your options, read our guide to Chapter 7 vs Chapter 13 bankruptcy.

States with the Most Generous Exemption Systems

Texas and Florida stand out as the most debtor-friendly states for bankruptcy exemptions. Both offer unlimited homestead protection with acreage limits, strong wage and income protections, and exemptions for most personal property needed for daily living and work. Some creditor attorneys have noted that wealthy individuals occasionally move to Texas or Florida specifically to establish homestead protection before filing bankruptcy, though courts can challenge homestead transfers made with fraudulent intent.

Among states that allow the federal exemption option, choosing federal exemptions often makes sense for renters or people with little home equity, since the federal wildcard and personal property exemptions provide solid protection for personal assets without relying on a homestead exemption. The calculation depends entirely on your specific property, your state's exemption amounts, and whether your state offers the federal option. Getting this right before you file is one of the most valuable things a bankruptcy attorney can do for you in the weeks before your case is submitted.