Updated May 20, 2016
Most people filing for bankruptcy will be able to keep their clothes. However, if you are filing for Chapter 7 bankruptcy and have designer clothing or furs, you may have to give those up.
Read on to learn what happens to your clothes in Chapter 7 and Chapter 13 bankruptcy.
In Chapter 13 bankruptcy, you keep your property and repay all or part of your debts in a repayment plan that lasts for three to five years. Because you don’t lose property in Chapter 13, you’ll get to keep your clothing, even expensive designer items and furs.
If you do have expensive apparel, however, that will affect how much you will be required to repay unsecured creditors.
To learn more about Chapter 13 bankruptcy and the Chapter 13 repayment plan, see our Chapter 13 Bankruptcy area.
In Chapter 7 bankruptcy, you wipe out most or all of your debts. In return, the bankruptcy trustee will take and sell your nonexempt property in order to repay your unsecured creditors. (To learn more, see Chapter 7 Bankruptcy.) In most cases your clothing will be exempt property, which means you keep it. This may not be true, however, if you own expensive items of apparel.
All states have lists of exempt property – property you get to keep in bankruptcy. Some states allow you to use the federal bankruptcy exemptions instead of the state exemptions.
(To learn more about exemptions, which states allow you to use the federal exemptions, exemptions amounts in your state, and more, see our Bankruptcy Exemptions area.)
Here are some state exemptions that you may be able to use to keep your clothing in Chapter 7 bankruptcy.
Specific exemptions for clothing. Some states have a specific exemption for clothing. Nebraska is an example.
Clothing lumped with other items. Many states lump clothing in with household goods, appliances, furniture, and the like. Usually those states allow you to exempt up to a certain total value for these items. For example, in Montana you can exempt up to $4,500 total for these types of items, with a maximum per item value of $600 for jewelry and clothing.
Wildcard exemptions. Many states also have a wildcard exemption – an exemption that can be applied to any type of personal property. If your state has a wildcard, you can use it to protect clothing if your clothing is not protected by another exemption. (To learn more, see The Wildcard Exemption in Bankruptcy.)
Most states put a dollar limit on clothing exemptions. While your regular clothing will probably fall within these exemption amounts, expensive furs or designer items may not.
For purposes of bankruptcy, the value of your clothing is the retail replacement value. That is, what it would cost to replace a similar item, given its age and condition. Often, used items of clothing have a very low retail replacement value.
(To learn more, see How to Value Personal Property in Bankruptcy.)
If your state allows you to use the federal exemptions instead of the state exemptions, here are the exemptions you can use to keep your clothing.
Clothing lumped with other items. Under the federal exemptions, you can exempt up to $600 per item and $12,625 total of the following: clothing, animals, crops, appliances, books, furnishings, household goods, and musical instruments.
Wildcard. The federal exemption system has a $1,250 wildcard, and you can also apply any unused amount of the $11,850 homestead exemption to other property.
Even if some of your clothing is not exempt, the trustee is unlikely to take and sell those items (unless they are fairly expensive). If the trustee will recover very little money for the clothing items, he or she will probably not consider it worthwhile. Remember, the purpose of selling your nonexempt property is to use the proceeds to repay unsecured creditors.
(To learn more, see When Will the Trustee Abandon Property in Chapter 7?)