Bankruptcy Laws by State (2026): Exemptions & Means Test

Bankruptcy is a federal legal process that helps people who cannot pay their debts get a fresh start, either by erasing most debts or by reorganizing them into a payment plan. Although the Bankruptcy Code is federal, two of the things that matter most to filers vary by state: the exemptions that decide what property you keep, and the median-income figures used in the Chapter 7 means test. This guide explains how bankruptcy works and links our plain-English guide for each state. It is general legal information, not legal advice.

What bankruptcy is and the two main types

Bankruptcy is a federal court process for people and businesses that cannot keep up with their debts. For individuals, the two most common forms are Chapter 7 and Chapter 13. Chapter 7, often called liquidation, can erase most unsecured debts such as credit cards and medical bills in a matter of months, in exchange for the possible sale of non-exempt property, though in most consumer cases filers keep everything because their property is exempt. Chapter 13, often called reorganization, sets up a three-to-five-year plan to repay some or all debt, and it can let a filer catch up on a mortgage and stop a foreclosure. Which chapter fits depends on income, assets, the type of debt, and goals, which is why the choice is usually made with a lawyer.

The automatic stay

One of the most powerful features of bankruptcy is the automatic stay, which takes effect the moment a case is filed. The stay is a federal court order that immediately stops most collection activity: foreclosure sales, wage garnishment, vehicle repossession, lawsuits, and the constant calls and letters from creditors. For many people facing an imminent foreclosure or garnishment, the automatic stay is the main reason to file when they do. The stay is not always permanent or absolute, and creditors can ask the court to lift it in some situations, but it provides immediate breathing room while the case proceeds.

Exemptions: what you keep, and why your state matters

Exemptions are the rules that decide which property you can protect from creditors in bankruptcy, and they are largely a matter of state law, which is why two people with identical finances can have very different outcomes depending on where they live. There is a federal set of exemptions in the Bankruptcy Code, but each state decides whether its residents may use that federal set or must use the state's own exemptions. Most states have opted out, meaning their residents must use the state exemptions, while a minority let filers choose whichever set is better for them. The single most important exemption is usually the homestead exemption, which protects equity in a home and ranges from unlimited in a handful of states to a fixed and sometimes modest dollar amount in others. The state figure is not the whole story for someone who bought or moved recently. Under 11 U.S.C. 522(p), a filer who elects state exemptions may not exempt home equity acquired during the 1,215-day period (about 40 months) before the petition beyond a federal cap, which the statute sets at $125,000 and which is adjusted upward for inflation every three years under 11 U.S.C. 104, so the operative figure is higher than the statutory base. The cap does not apply to a family farmer's principal residence, and it does not count equity carried over from a previous principal residence in the same state. A related rule, 11 U.S.C. 522(o), reduces a homestead exemption to the extent its value came from property the filer disposed of within the previous 10 years intending to hinder, delay, or defraud a creditor. States also set exemptions for a vehicle, household goods, tools of a trade, and often a wildcard that can be applied to anything, and some amounts adjust for inflation. Each state guide lists the current figures.

The Chapter 7 means test

Since 2005, people who want to file Chapter 7 generally must complete a means test, which is designed to direct higher-income filers toward Chapter 13. The first step compares your household's income to the median income for a household of that size in your state. If your income is at or below the state median, there is no presumption of abuse (the rule that presumes a Chapter 7 case is an abuse when income left after allowed expenses reaches set thresholds) and you do not need to complete Form 122A-2, the second means-test form, but that alone does not make you eligible for Chapter 7. If it is above, a more detailed calculation of disposable income applies. The median-income figures are published by the U.S. Trustee Program and are updated periodically, so the number that applies depends on your state, your household size, and the date you file. Each state guide gives the current figures and links the official source.

What bankruptcy can and cannot do

Bankruptcy can erase most unsecured debts, including credit card balances, medical bills, personal loans, and many older debts, and it stops most collection through the automatic stay. It cannot erase everything. Most student loans are dischargeable only by proving undue hardship in a separate proceeding, and recent income taxes, child support, alimony, and most court fines and criminal restitution generally survive a bankruptcy. Secured debts like a mortgage or car loan can be handled in different ways depending on whether you want to keep the property. Before filing, the law requires a brief credit-counseling course from an approved provider, and a second debtor-education course is required before debts are discharged.

How long it takes and the effect on credit

The two chapters move on very different timelines. A typical Chapter 7 case is completed in about three to four months from filing to discharge, while a Chapter 13 case runs the length of its three-to-five-year repayment plan before the remaining balances are discharged. A bankruptcy filing is also reported on your credit, generally a Chapter 7 for up to ten years and a Chapter 13 for up to seven years from the filing date. Many people find their credit begins to recover well before then, once the underlying debts are resolved and they rebuild a positive payment history, because lenders weigh current income and recent behavior heavily. These timing and credit effects are part of the trade-off to weigh with an attorney, alongside the fresh start that discharge provides.

How to evaluate your options

Start by listing your debts, income, and the property you want to protect, then get a free bankruptcy evaluation from a lawyer in your state on which chapter fits and what you can keep (attorney advertising). Many bankruptcy attorneys offer a free or low-cost initial consultation. Bankruptcy is not the right answer for everyone, and alternatives such as negotiation or debt management sometimes make more sense, but for many people it is a powerful and legitimate tool for a fresh start. Pick your state below to see its specific rules. None of this is legal advice, and reading it does not create an attorney-client relationship.

Bankruptcy by state

The table links our guide for each state and the District of Columbia. Each guide covers that state's exemptions, whether it opted out of the federal exemptions, the homestead and vehicle exemption amounts, and the current means-test median income.

Northeast states

The table below covers 9 states in the Northeast.

Midwest states

The table below covers 12 states in the Midwest.

Southern states

The table below covers 16 states in the South, plus the District of Columbia.

Western states

The table below covers 13 states in the West.

Frequently Asked Questions

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 erases most unsecured debts in a few months and is sometimes called liquidation. Chapter 13 sets up a three-to-five-year repayment plan and can let you catch up on a mortgage to stop a foreclosure. Which one fits depends on your income, assets, and goals.

Will I lose my house or car if I file bankruptcy?

Often no. Exemptions protect a certain amount of equity in your home and vehicle, and the amounts depend on your state. Many filers keep their property, especially in Chapter 7 when their equity is within the exemption, and Chapter 13 can help you keep property by catching up on payments. Your state's guide lists the current exemption amounts.

Do all states use the same bankruptcy exemptions?

No. There is a federal set of exemptions, but each state decides whether residents may use it or must use the state's own exemptions. Most states have opted out and require their own exemptions, while some let you choose. The homestead exemption in particular varies enormously by state, though federal law caps how much home equity acquired in the 1,215 days before filing a state exemption can protect (11 U.S.C. 522(p)).

What is the bankruptcy means test?

The means test compares your household income to the median income for that household size in your state. If you are at or below the median, there is no presumption of abuse and you do not need to complete Form 122A-2, but that alone does not make you eligible for Chapter 7; if above, a more detailed disposable-income calculation applies. The U.S. Trustee Program publishes and updates the median-income figures.

What debts cannot be erased in bankruptcy?

Bankruptcy generally does not erase most student loans (absent proof of undue hardship), recent income taxes, child support, alimony, and most fines and criminal restitution. It does erase most credit card debt, medical bills, and personal loans.

Does filing bankruptcy stop foreclosure and garnishment?

Yes, at least temporarily. Filing triggers an automatic stay that immediately stops most collection, including foreclosure sales, wage garnishment, repossession, and creditor calls. Chapter 13 can provide a longer-term way to cure a mortgage default and keep the home.