What Happens to Things I Own If I File for Bankruptcy?
This article is part of a comprehensive guide to bankruptcy in Oregon. Go here to read the guide and see related articles.
Filing for bankruptcy can be stressful, especially if you're worried about losing your home, car, or other important belongings. But bankruptcy doesn't mean losing everything. Many essential items are protected. If you own a house or car, in some cases, you may be able to keep it while you get back on track.
This article covers how bankruptcy affects your property, what you can keep, and what to consider before filing.
How bankruptcy affects property
When you go through bankruptcy, the things you own are divided into two categories:
- Exempt property: These are items you can keep and are protected from bankruptcy.
- Nonexempt property: These might be taken or sold to pay off your debts.
Exempt (protected) property may include:
- Clothing and personal items
- Furniture and household appliances
- Some home equity (equity is the value of your home after subtracting what you owe on your mortgage)
- One car, up to a certain value
- Work tools and equipment needed for your job
- Retirement accounts like a 401(k) or IRA
Nonexempt (unprotected) property may include:
- Extra cars or second homes
- Valuable jewelry, artwork, or collectibles
- Stocks, bonds, and other investments
- High-value items purchased around the time you file
There is also a special type of protection—called a wildcard exemption—that you can use to protect things not fully covered by other rules, like money in the bank, an extra car, or other valuable items.
The two sets of rules that decide what you keep:
There are two sets of rules for what is—and is not—exempt or protected in bankruptcy: the federal rules and the Oregon rules.
- Each set of rules protects property differently.
- The rules also give you a different amount of wildcard protection.
You may have a choice between Oregon and federal rules.
- If you have lived in Oregon for at least two years, you may be able to choose either Oregon's rules or the federal rules for what property you can keep—but not both.
- Go here to see a chart comparing the protections under the federal rules and Oregon rules.
What happens to my property that is not protected?
What happens to possessions or property that isn't protected will depend on the type of bankruptcy you file.
- In Chapter 7: The person overseeing your case, called the bankruptcy trustee, may sell your unprotected property to pay off your debts. In some cases, however, you may be able to keep or buy back certain items.
- In Chapter 13: You usually get to keep all your property, even if some is not protected. However, your payment plan may require you to pay your creditors (the people or businesses you owe) an amount that is equal to the value of that unprotected or nonexempt property.
Can I keep my car?
It depends on how much your car is worth, whether you still owe money on it, and if it is covered under the property rules (the federal or Oregon exemption rules) that apply in your case.
Note: If you and your spouse file for bankruptcy together, these limits may double.
In Chapter 7:
If you own your car (it's fully paid off):
- If your car's value is under the limit set by your exemption rules, you can keep it. Under the Oregon rules, for example, the current limit is $10,000.
- If it is worth more than the limit, the trustee may sell it to help pay debts.
If you still owe money on your car, it depends on your equity. Your equity is what the car is worth minus what you still owe on your loan.
- If your equity is under the limit for your exemption rules, you can keep the car if you continue making your payments.
- If your equity is above the limit, the trustee may sell the car. You'll get to keep the amount the law says you can protect, and the rest of the money will be used to pay your debts.
In Chapter 13:
- You can keep your car if you pay back any missed payments as part of your repayment plan.
Can I keep my house?
If you own a home, whether you can keep it depends on how much equity you have and whether you can continue making your mortgage payments. Your equity is the home's value minus what you still owe.
Note: If you and your spouse file for bankruptcy together, these limits may double.
In Chapter 7:
- You can keep your home if your equity is under the protected limit and you continue making mortgage payments.
- If your home equity is more than the limit, the trustee may sell it to pay creditors and give you an amount equal to the protected limit.
In Chapter 13:
- You can keep your house if you pay any missed mortgage payments as part of your repayment plan.
- This type of bankruptcy may help you catch up on late payments and avoid foreclosure.
Want more details on home and car limits? Scroll down to the FAQs below.
What if I sell or give away property before I file for bankruptcy?
Be careful about selling, giving away, or moving money or belongings before you file for bankruptcy. The bankruptcy trustee (the person managing your bankruptcy case) will review the transactions to make sure they were fair.
The court may take back something you sold, gave away, or paid out if it looks like you were trying to prevent creditors from getting it.
This could be a problem if you did any of these before filing:
- Gave or gifted money or property, or sold property to anyone for much less than it was worth.
- Paid off one creditor before others (like a credit card or loan).
- Paid back a friend or family member before others.
How far back can the trustee look?
- Between 2 and 4 years if they believe you gave something away or sold it for less than its worth to avoid paying creditors.
- Up to 1 year if they believe you paid off a debt to a friend or family before other creditors. Payments or gifts to people close to you usually get more attention.
- Up to 90 days if they believe you paid a creditor before others. This applies when one creditor gets more than their fair share.
If you're not sure whether a recent sale, gift, or payment could be a problem, consider talking to a lawyer before you file.
Other Frequently Asked Questions
Both Oregon rules and federal rules protect many essentials from being taken to pay your debts. But there are important differences.
The Oregon rules:
- Let you protect more home equity (the value of your home minus what you owe).
- Offer higher limits for work tools.
- Include specific protections for items like pets and livestock, firearms, and books and music—items that either aren't listed or are grouped into broader categories under the federal rules.
The federal rules:
These protect many of the same types of property, but the types of items and the dollar amounts protected can be different. One major difference is the wildcard exemption, which lets you protect property not covered under other categories.
- Under the federal rules, the wildcard exemption lets you protect up to nearly $17,500 in property.
- Under the Oregon rules, the wildcard exemption protects only $400 in property.
A new Oregon law increases the amount of property you can protect under Oregon’s bankruptcy rules. These updates apply to cases filed on or after January 1, 2025. This comparison chart shows the difference between federal exemptions and the new Oregon exemptions.
If you use the federal rules:
- Home: Up to $31,575 of equity, or $63,150 for couples.
- Car: Up to $5,025 of equity per person.
If you use Oregon's rules and:
- You filed before January 1, 2025:
- Home: Up to $40,000 of equity is protected if you file alone or $50,000 if you file with someone else.
- Car: Up to $3,000 of equity in one vehicle is protected per person.
- On or after January 1, 2025:
- Home: Up to $150,000 of equity is protected if you file alone or $300,000 if you file with someone else.
- Car: Up to $10,000 of equity in a vehicle is protected per person.
Equity means what your home or car is worth, minus what you still owe on it.
Wages (money you receive in your paycheck for work):
- In Chapter 7, wages earned after filing are yours to keep.
- In Chapter 13, part of your income (including wages) goes toward your repayment plan.
Tax refunds:
- In Chapter 7, part of your refund may be taken to pay creditors, especially if it's from before you filed. For the year you file, usually only the portion you earned before filing is at risk. Some parts of your refund, like the Earned Income Tax Credit (EITC) or money covered by an exemption, are usually protected.
- In Chapter 13, tax refunds may be included in the repayment plan.
Inheritances:
- In both Chapters 7 and 13, if someone leaves you an inheritance within about six months after you file, it may still be taken to pay creditors, even if your case is already closed.