What Assets Can You Keep in a Chapter 7 Bankruptcy?
When we're facing overwhelming debt, Chapter 7 bankruptcy can offer a fresh start. It's one of the most common forms of bankruptcy in the United States and allows us to discharge many unsecured debts, such as credit cards, medical bills, and personal loans.
But for many, the fear of losing everything keeps them from taking that critical first step. That fear, however, is often based on misunderstanding. In reality, most people who file for Chapter 7 bankruptcy keep most—or all—of their property.
At Cannon Law Offices, PLLC, located in Greenville, North Carolina, we help clients protect what matters most during bankruptcy. The law provides a range of exemptions that allow individuals to retain necessary and meaningful assets while eliminating unmanageable debt.
With proper planning and legal support, bankruptcy isn’t about losing—it’s about preserving stability and moving forward with peace of mind.
How Exemptions Work in Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, the court appoints a trustee to sell—or “liquidate”—nonexempt property and use the proceeds to pay creditors. However, many types of property are protected under state or federal exemption laws. These exemptions are designed to let us maintain the basic necessities of life while resolving our debts.
North Carolina follows its own set of bankruptcy exemptions rather than the federal system. That means we must use the state-specific rules when filing for bankruptcy here. The good news? North Carolina’s exemptions are generous in many key areas.
Common Features of North Carolina’s Exemption System:
State exemptions must be used—federal exemptions are not an option
Married couples filing jointly may double certain exemptions
Exemptions apply to equity in property, not the total value
Most everyday household goods and work-related items are protected
Let’s take a closer look at what assets we may keep when filing for Chapter 7 bankruptcy under North Carolina law.
Your Home and the Homestead Exemption
For many of us, our home is the most important asset we own. Thankfully, North Carolina law allows us to protect a significant amount of home equity through the homestead exemption.
The homestead exemption in North Carolina allows us to exempt up to $35,000 in equity in our primary residence. If we’re 65 or older and our spouse is deceased, this amount increases to $60,000. If we're married and filing jointly, each spouse may claim the exemption, potentially doubling it—if both have an ownership interest.
Key Points About the Homestead Exemption:
Applies only to our primary residence
Up to $35,000 in equity for most individuals
Increases to $60,000 for qualifying seniors
May double when both spouses file jointly
If the equity in our home falls below the exemption threshold, we won’t risk losing it during bankruptcy.
Your Vehicle and the Motor Vehicle Exemption
Cars are often essential to getting to work, picking up children, and handling daily responsibilities. The motor vehicle exemption allows us to keep one vehicle with up to $3,500 in equity.
Equity is the difference between the vehicle's market value and any remaining loan balance. So, if we owe more on our car than it's worth, it’s considered to have no equity—and we can usually keep it. If we own it outright or have a modest loan, the $3,500 exemption helps protect it.
What the Vehicle Exemption Covers:
One motor vehicle per filer
Up to $3,500 in equity protected
Applies to cars, trucks, and motorcycles
Additional protections possible with wildcard exemption
Even if our car is worth more than the exemption, the trustee may allow us to keep it by paying the difference or through reaffirmation.
Household Goods and Personal Property
Many clients worry about losing household essentials like furniture, appliances, and clothing—but these items are often protected. North Carolina allows up to $5,000 in exemptions for household furnishings, clothing, books, appliances, musical instruments, and more. For each dependent, an additional $1,000 may be claimed, up to $4,000 total.
This exemption covers a wide variety of everyday personal property, helping us maintain a stable and dignified life during and after bankruptcy.
What Falls Under This Exemption:
Beds, sofas, dining tables, and chairs
Kitchen appliances and cookware
Televisions, computers, and entertainment systems
Personal clothing and children’s items
Books, hobby tools, and decorative items
Most of these items have a low resale value, meaning that even if they exceed exemption limits, trustees are rarely interested in seizing them.
Wages and Retirement Accounts
Protecting our current and future income is essential to financial recovery. North Carolina’s exemptions cover wages and retirement accounts, offering a safety net for our ongoing and long-term stability.
Wages earned but unpaid at the time of filing are exempt up to 60 days’ worth and must be necessary for household support. In addition, most qualified retirement accounts—including IRAs, 401(k)s, and pensions—are fully exempt under federal law, which still applies in this area.
Income and Retirement Protections:
Up to 60 days of unpaid wages protected, if needed, for living expenses
Fully exempt status for most retirement plans and pensions
Public benefits such as Social Security and unemployment also protected
Child support and alimony obligations remain untouched by creditors
These protections allow us to continue working and planning for the future while managing our debts.
Tools of the Trade and Business Property
If we work in a skilled trade or own a small business, our tools and equipment are vital. North Carolina allows us to exempt up to $2,000 in tools, books, and implements necessary for our trade.
This exemption applies whether we’re self-employed or use the tools as part of our job. From mechanic’s tools to hairstyling equipment, we don’t have to give up the resources we use to earn a living.
Examples of Work-Related Items We Can Protect:
Power tools and hand tools
Laptops, software, and business records
Salon or barber equipment
Farm implements or mechanic gear
Educational or reference materials
Keeping these tools helps us stay employed, which is key to recovery post-bankruptcy.
Life Insurance and Financial Accounts
Many people are concerned about life insurance policies and small savings accounts. North Carolina provides some protection in these areas as well.
Term life insurance has no cash value and is fully exempt. For whole life or universal policies with a cash surrender value, protections may vary depending on the beneficiary. If the beneficiary is a spouse or child, some or all of the policy may be protected.
What’s Typically Protected:
Term life policies (fully exempt)
Cash value life insurance (may be partially exempt)
College savings plans (limited exemptions apply)
Modest savings or checking accounts (may be protected under wildcard)
Government benefits or child support in accounts
The specifics of each financial account depend on its structure and purpose, but we’ll work to protect it as much as possible.
The Wildcard Exemption
When other exemptions fall short, North Carolina allows a “wildcard” exemption that gives us extra flexibility. If we don’t use the homestead exemption—or don’t use all of it—we may claim up to $5,000 to apply to any property of our choosing.
This wildcard can be applied to vehicles, savings accounts, valuable collectibles, or anything else not fully covered by other exemptions.
Ways We Might Use the Wildcard Exemption:
Protecting extra equity in a second vehicle
Covering jewelry or family heirlooms
Protecting valuable electronics or instruments
Shielding small bank accounts or refunds
Preserving partial ownership in personal investments
The wildcard exemption provides the added protection we need to keep what matters most to us.
Property That’s Not Exempt
While most essential assets are protected, some property may be subject to liquidation if it’s nonexempt. This generally includes luxury items or assets with high market value and no exemption coverage.
However, we’ll never be surprised by what’s at risk. When we work together, we’ll review every item and make strategic decisions before filing.
Examples of Potentially Nonexempt Property:
Valuable art or coin collections
Recreational vehicles (boats, ATVs, etc.)
Secondary homes or vacation properties
Expensive jewelry not covered by exemptions
Stocks, bonds, or large investment accounts
If we own nonexempt assets, we can discuss options such as reaffirmation, exemption stacking, or filing Chapter 13 instead.
What Happens if the Trustee Sells Nonexempt Property
If the trustee identifies property that isn’t exempt, they may sell it to repay creditors. But this process isn’t immediate or arbitrary—it follows a clear legal procedure. We’ll be informed in advance, given the opportunity to object, and may be able to buy back the property if we choose.
The trustee’s role is to maximize return for creditors, but many won’t bother with items that require too much effort to sell or yield little value after fees.
How Trustees Decide What to Sell:
Review of exemption claims and market value
Consideration of sale costs and net proceeds
Prioritization of assets with easy resale potential
Evaluation of partial ownership interests
It’s important to remember that many Chapter 7 filings are “no asset” cases, meaning the trustee finds nothing worth selling.
How a Bankruptcy Attorney Helps Protect Your Property
At Cannon Law Offices, PLLC, we help clients keep what matters while eliminating what weighs them down. Richard L. Cannon III uses decades of experience to identify the best exemptions, value assets properly, and respond to trustee challenges. From filing paperwork to court appearances, we're with you every step of the way.
Bankruptcy isn’t about loss—it’s about relief. We want you to feel empowered, not afraid, and that begins with knowing what you get to keep.
What We Do to Protect Your Property:
Identify applicable exemptions before filing
Help value your property accurately
Advise on timing and strategy
Handle negotiations with the trustee
Assist in reaffirmation or redemption if needed
Filing for bankruptcy can be one of the most liberating decisions we ever make—and we don’t have to lose everything in the process.
Contact The Cannon Law Offices, PLLC, Today
At Cannon Law Offices, PLLC, we’re committed to helping individuals and families throughout the Pitt County area—including Beaufort County, Craven County, Lenoir County, Martin County, and Greene County—move forward with dignity and confidence. When you're ready to make a fresh start, you can trust that the law offers both protection and possibility. Turn to our law office today to schedule a consultation with an experienced attorney.