Will Chapter 7 Take My Savings? What You Need to Know Before Filing

If you’re struggling with debt and considering bankruptcy, you may be asking a crucial question: “Will Chapter 7 take my savings?” It’s a common concern for individuals trying to protect the money they’ve worked hard to set aside.

At K Fox Law PLLC, we help clients throughout New York understand how Chapter 7 bankruptcy affects their assets, including savings accounts, and what steps they can take to protect them. Here’s what you need to know.

How Chapter 7 Bankruptcy Works

Chapter 7 bankruptcy—also called “liquidation bankruptcy”—is designed to eliminate unsecured debts like credit card balances, medical bills, and personal loans. In exchange, a court-appointed bankruptcy trustee may liquidate (sell) certain assets to repay creditors.

But not all assets are subject to liquidation. Federal and state laws provide exemptions to help you keep essential property—and in some cases, even your savings.

Will Chapter 7 Bankruptcy Take My Savings?

It depends. Savings accounts and cash on hand are considered non-exempt assets unless protected by an exemption.

1. Exemptions That May Protect Your Savings

Both federal and New York state exemption laws allow you to protect certain assets.

• Wildcard Exemption: If you don’t use the homestead exemption for real property, you may use a “wildcard exemption” to protect cash and savings. Under federal law, this exemption is up to $1,475 plus up to $13,950 of any unused homestead exemption (as of 2025).

  
  

• State Law Variations: In New York, exemptions differ. Some may protect small amounts of cash or bank account balances, but the protection is limited compared to federal wildcard rules.

The amount you can exempt will depend on which system (federal or state) applies to your case.

2. What Happens if Your Savings Exceeds the Exemption?

If your savings exceed the exemption limits, the trustee can take the non-exempt portion to pay your creditors. For example:

• Savings balance: $10,000

• Exemption protects: $3,000

• Trustee may take: $7,000

This is why it’s critical to speak with a bankruptcy attorney before filing.

What About Retirement Accounts? Are They Safe?

The good news: Most retirement accounts are protected in Chapter 7 bankruptcy.

This includes:

• 401(k) accounts

• Traditional and Roth IRAs (up to a federal limit of $1,512,350 as of 2025)

• Pensions and other qualified retirement plans

Your standard savings and checking accounts, however, don’t have the same protection unless covered by exemptions.

How to Protect Your Savings in Bankruptcy

• Work with an Experienced Attorney: A lawyer can help maximize exemptions and guide you on what to do before filing.

  
  

• Avoid Large Withdrawals or Transfers: Moving money out of savings accounts before filing can be seen as fraudulent and could jeopardize your case.

  
  

• Understand Your Exemptions: Your ability to protect savings depends entirely on the exemption system in your state and your specific financial situation.

Why Chapter 13 May Be a Better Option

If you have substantial savings that can’t be exempted, Chapter 13 bankruptcy may allow you to keep your assets. Instead of liquidating property, Chapter 13 sets up a repayment plan over 3–5 years.

FAQ: Chapter 7 Bankruptcy and Savings

1. Can I keep my emergency fund in Chapter 7?

Maybe. If the amount falls within exemption limits, it’s protected. Otherwise, the trustee may take part or all of it.

2. Are checking accounts treated the same as savings?

Yes. Any cash in checking or savings accounts is part of the bankruptcy estate unless exempted.

3. What about money received after filing?

Funds acquired after your bankruptcy filing—like wages or gifts—are generally not part of the bankruptcy estate.

Protect Your Savings with K Fox Law PLLC. Call now for a case evaluation.