10 Common Bankruptcy Questions

What, if Anything, Can I Keep, Post-bankruptcy?
Under federal bankruptcy law, you can keep up to $12,250 worth of furniture, appliances and clothing. Fuse/Thinkstock

Both federal and state bankruptcy laws allow for specific exemptions -- property that cannot be sold by a Chapter 7 bankruptcy trustee to pay off creditors. (You're much less likely to lose property in a Chapter 13 case, because you agree to pay creditors over time.)

Your house is only worth liquidating in Chapter 7 if the trustee will actually make money selling it back to the bank. The federal homestead exemption is $22,975. If your home equity is equal or less than that figure, you'll probably keep your house. If not, the trustee will sell your house and give you $22,975 [source: Bulkat].

How about your car? Again, federal law exempts up to $3,675 of equity in a vehicle. If you own a car outright and it's worth more than $3,675, you might lose it in a Chapter 7 bankruptcy.

In terms of household goods, federal exemptions protect up to $12,250 of furniture, appliances and clothing. You can keep exactly one TV, one VCR (does anyone even have those anymore?) and one computer. Jewelry is protected up to $1,550, but wedding rings are fully exempt [source: Cornell University Legal Information Institute].

As for income, the trustee can't touch alimony payments, life insurance payments, Social Security benefits or other government assistance.

One important note is that each state sets its own exemption rules. Some are more generous than the federal rules, and some are more restrictive. In a few states, you can choose between using the state or federal exemptions, but most states require you to use their exemption rules.