{"id":286904,"date":"2016-04-04T10:41:50","date_gmt":"2016-04-04T15:41:50","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/chapter-7\/exempt-vs-non-exempt-property-under-chapter-7.html"},"modified":"2026-06-08T10:36:47","modified_gmt":"2026-06-08T15:36:47","slug":"exempt-vs-non-exempt-property-under-chapter-7","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/chapter-7\/exempt-vs-non-exempt-property-under-chapter-7.html","title":{"rendered":"What Are Non-Exempt and Exempt Assets in Chapter 7 Bankruptcy?"},"content":{"rendered":"\n
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What Are Non-Exempt and Exempt Assets in Chapter 7 Bankruptcy?<\/h1>\n\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Debtors filing Chapter 7 bankruptcy<\/span> can keep exempt assets such as homes, motor vehicles<\/span>, and basic household items. Non-exempt assets<\/span> are luxury items such as second homes, valuable artwork, or investments which can be liquidated to pay creditors.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

In a Chapter 7 bankruptcy<\/span> (liquidation<\/span> bankruptcy<\/span>), a bankruptcy trustee<\/span> will take control of the filer<\/span>\u2019s assets to pay off their creditors. Bankruptcy law<\/span><\/a> protects some of a debtor\u2019s property from sale. These exemptions ensure that a debtor has some property left after a bankruptcy discharge.<\/p>\n

Bankruptcy gives debtors debt relief<\/span> and a chance at a fresh start. The U.S. Bankruptcy Courts<\/span><\/a>\u00a0and the\u00a0Bankruptcy Code<\/span><\/a>\u00a0give debtors protection from creditors by exempting some property from the bankruptcy process<\/span>. Exemptions can protect your home, your household possessions, and other essential property. This article describes exempt and non-exempt assets<\/span> when you file for bankruptcy<\/span>.<\/p>\n

How Bankruptcy Exemptions<\/span> Work<\/strong><\/h2>\n

When you file a bankruptcy petition<\/span>, you must list all your personal property<\/span> and assets. A bankruptcy trustee<\/span><\/a>\u00a0takes over this property (the bankruptcy estate<\/span><\/a>) and sells all non-<\/span>exempt property<\/span> to pay your creditors. The court discharges any remaining debt.<\/p>\n

Exempt property<\/span><\/a> is all property excluded from the bankruptcy estate<\/span>. This may include your primary residence<\/span>, necessities such as clothing and household items, and a car or other transportation. Non-<\/span>exempt property<\/span> includes luxury items like second homes, boats, or valuable artwork.<\/p>\n

Federal and State Exemptions<\/span><\/strong><\/h3>\n

The Federal Bankruptcy Code<\/span> contains a list of standard Chapter 7 exemptions<\/a>. Some states<\/a> have their own list of exemptions. For example, California has two lists (known as System 1 and System 2). Depending on the state, bankruptcy filers<\/span> may choose between\u00a0federal <\/span>bankruptcy exemptions<\/span>\u00a0and state exemptions<\/span>. State law<\/span> may limit them to the state\u2019s system only. A bankruptcy lawyer<\/span><\/a> can explain your state\u2019s exemption policy and how it applies in your case.<\/p>\n

Types of Bankruptcy Exemptions<\/span><\/strong><\/h3>\n

Both state and federal exemptions<\/span> include these types of property. The homestead exemption<\/span> is set by your state based on property values. Your attorney can determine what you may exempt on your petition.<\/p>\n