Wildcard Exemptions in Chapter 7 Bankruptcy

Exemptions play an important role in Chapter 7 bankruptcy by allowing you to protect property in a bankruptcy case. The wildcard exemption, in particular, can be very useful. It can help you save a specific piece of property that you wouldn't be able to keep in Chapter 7 bankruptcy otherwise. Find out more about the wildcard exemption and how it works in bankruptcy.

The Role of Chapter 7 Bankruptcy Exemptions

You don't lose everything you own when you file for bankruptcy. Debtors can keep the things needed to maintain a home and job, such as a modest car, household furnishings, and clothing.

However, you aren't allowed to decide which items are most needed. Instead, almost every state lists the property you can keep in the state's "exemption" statutes (not every state has exemption statutes), and some states allow you to use the federal bankruptcy exemptions instead of the state statutes if you believe the federal laws would protect more property.

In Chapter 7 bankruptcy, if an item of property is exempt, the Chapter 7 bankruptcy trustee appointed to oversee the case can't take it. You'll retain it after your Chapter 7 case ends. However, if you have property not covered by an exemption or "nonexempt" property, the trustee will sell it for the benefit of your unsecured creditors.

To learn more about exemptions and which states allow you to use the federal bankruptcy exemptions, see Bankruptcy Exemptions.

The Wildcard Exemption

Many state exemption schemes include a wildcard exemption that typically can be applied to any type of property, including real estate, although some wildcard exemptions exclude property such as real estate, cash, or wages.

The benefit of a wildcard exemption is that you can use it to protect otherwise nonexempt property, such as an expensive family heirloom or valuable collection. In many states, you can also add it to another exemption to increase the exemption amount. For example, assume that your state has a vehicle exemption amount of $2,500, but your car has $4,000 equity. You could use $1,500 from a wildcard exemption to exempt all vehicle equity and keep the car.

Wildcard exemption amounts are fixed, but not all states have a wildcard exemption. Also, wildcard amounts and how they're applied vary significantly between states. For instance, as indicated above, one state might not allow you to use its wildcard exemption to protect cash or real property. Another might let you use any unused homestead exemption amount (an exemption that protects equity in your home) as a wildcard exemption.

The Federal Wildcard Exemption

The federal bankruptcy exemptions provide a wildcard exemption of $1,675 and any unused homestead exemption amount up to an additional $15,800. It can be used to protect any property of your choosing. (11 U.S.C. § 522(d)(5).)

These figures reflect April 1, 2025, federal exemption amounts. The figures are revised every three years and will change again on April 1, 2028. You'll find the federal bankruptcy exemptions at 11 U.S.C. § 522; however, current amounts are published in the Federal Register.