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Chapter 7 Bankruptcy Exemptions

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When you file for Chapter 7 bankruptcy, the property you will get to keep will depend on the type of property you have, how much it is worth, and the bankruptcy exemption available.

Filing for a Chapter 7 bankruptcy means almost all your assets and properties will go to the bankruptcy estate. A bankruptcy trustee will sell your assets to repay your creditors.


An exemption lets you keep an amount of your property so that you will have an opportunity to start all over again after bankruptcy. The asset or property you were able to exempt won’t be sold by the bankruptcy trustee to pay your creditors. These exemptions help a lot of Chapter 7 filers to keep most or all of their assets and properties.

How Much Can You Exempt?

The amount of property you can keep depends on where you live because there are different sets of exemption in each state and from the federal system. But generally you can keep a certain amount of your house’s equity and you personal property like your car or the money you have in the bank.

How Exemptions Work

The trustee will determine how much value your property is worth before going after it. If you have loans on your property like a mortgage or a car loan, the trustee will have to pay the creditor the sale’s loan amount. For example, if you have a $15,000-car, and it has a loan for $5,000, it means it is only worth $10,000 to the trustee.

Abandoning a Property

The trustee can abandon an asset that you can’t fully exempt if its value is just a bit higher than your exemption amount. The trustee will abandon it because the fees and the cost of selling it will eat up the equity, which means there won’t be much left for the creditors. If the trustee will abandon that property, it means you get to keep it.

If you want to use Chapter 7 bankruptcy exemption to your advantage, it is always best to consult or hire an attorney.

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