Question 1

What is the difference between federal and state bankruptcy exemptions?

Accepted Answer

Federal bankruptcy exemptions are set by federal law and available in about half of US states (states that allow the 'opt-in' choice). State exemptions vary dramatically — Texas and Florida have unlimited homestead exemptions, while other states cap them at $25,000–$75,000. In states that allow choice, filers can compare federal vs. state exemptions and select the more favorable set. The calculator applies the relevant exemptions based on your state selection.

Question 2

Are retirement accounts protected in bankruptcy?

Accepted Answer

Generally yes, and often completely. ERISA-qualified retirement accounts (401k, 403b, pension plans) have unlimited federal protection in bankruptcy. IRAs are protected up to approximately $1.5 million under federal law (adjusted periodically). Roth IRAs have the same federal protection as traditional IRAs. State exemptions for retirement accounts are often even broader. In most cases, retirement accounts are the safest assets in a bankruptcy scenario.

Question 3

Can I protect my home equity in Chapter 7?

Accepted Answer

Up to your state's homestead exemption limit. If your home equity exceeds the limit, the Chapter 7 trustee can force a sale to capture the non-exempt equity — although trustees frequently negotiate alternatives when equity overage is modest. In states with low homestead exemptions (some states are as low as $25,000), homeowners with significant equity often choose Chapter 13 instead, where they keep the home by paying the non-exempt equity value to creditors over 3–5 years.

Question 4

What happens to non-exempt assets in Chapter 7?

Accepted Answer

Non-exempt assets become part of the bankruptcy estate and may be liquidated by the trustee to pay unsecured creditors. However, trustees have discretion — if the non-exempt equity is modest and liquidation costs would exceed recovery, trustees often abandon the asset. Assets with clear non-exempt equity above $2,000–5,000 are more likely to be liquidated. The key variable is the ratio of non-exempt value to unsecured debt being discharged.

Question 5

How does Chapter 13 protect more assets than Chapter 7?

Accepted Answer

Chapter 13 does not require liquidation of any assets. Instead, filers propose a 3–5 year repayment plan that must pay unsecured creditors at least as much as they would have received from a Chapter 7 liquidation of non-exempt assets. This 'best interests of creditors' test means you keep all assets — including non-exempt ones — in exchange for a structured repayment commitment. For homeowners with significant non-exempt equity, Chapter 13 is almost always the better choice.

Asset Protection Calculator: Which Assets Are Safe From Creditors?

Asset Values (Equity, Not Market Value)

Total Unsecured Debt to Discharge

Related Calculators

What is the difference between federal and state bankruptcy exemptions?

Are retirement accounts protected in bankruptcy?

Can I protect my home equity in Chapter 7?

What happens to non-exempt assets in Chapter 7?

How does Chapter 13 protect more assets than Chapter 7?

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