Bankruptcy Exemptions

When you file an individual bankruptcy case under Chapter 7 or Chapter 13, you are permitted to retain your primary home and personal property with certain exceptions. Such assets or property you keep is referred to as exempt, and a creditor with a judgment against an individual cannot take or seize it to pay off the debt.

The value of the property you may keep in your chapter 7 bankruptcy or chapter 13 bankruptcy is determined by the exemptions you choose use. You may choose to use Federal bankruptcy exemptions or state bankruptcy exemptions. There are advantages to each and the selection should be made based on individual needs.

Federal v. Massachusetts Exemptions & the Homestead Exemption

The Massachusetts bankruptcy exemption for your home or the “homestead exemption” is much larger than the Federal bankruptcy homestead exemption. The “homestead exemption” permits you to protect the equity in your home from creditors. This only protects your interest in a primary residence and does not protect vacation homes or investment properties. If your primary residence is also a multi-unit dwelling, the exemption covers up to a four-unit dwelling. You must live in the home to claim this exemption.

If you file a homestead exemption form in your County’s Registry of Deeds, you may exempt up to $500,000 in equity. Otherwise, the exemption only covers the first $125,000 in equity. The Federal exemption only covers the first $23,675 in equity.

Common Massachusetts Bankruptcy Exemptions

The following is a brief outline of some of the major and most commonly used Massachusetts Bankruptcy Exemptions for personal property or assets:

  • $7,500 – Motor Vehicle
  • $1,225 – Jewelry
  • $15,000 – Household Furniture
  • $5,000 – Tools of Trade
  • $2,500 – Bank Deposits
  • Unlimited – Rights to receive alimony and child support
  • Unlimited – Life Insurance (if the proceeds are payable to a dependent)
  • Unlimited – Most Public benefits and Retirement Account or Benefits. Certain exceptions may apply to contributions to IRAs made prior to the bankruptcy filing.
  • Wildcard Exemption – Up to $1,000 plus $5,000 of the unused portion of your automobile, household furniture, and tools of trade exemptions.

Federal Bankruptcy Exemptions

The following is a brief outline of some of the major Federal Bankruptcy Exemptions for personal property or assets:

  • $3,775 – Motor Vehicle
  • $1,600 – Jewelry
  • $12,625 – Household Goods (furnishings, appliances, clothes, books, animals, crops, musical instruments). No individual item may exceed $600 in value.
  • $2,375 – Tools of the Trade (including implements and books).
  • $12,625 – Life Insurance Policy (loan value).
  • $23,675 – Personal Injury or Medical Malpractice awards with exceptions.
  • $1,283,025 – IRAs and Roth IRAs – Individual Retirement Accounts
  • Unlimited – Retirement Accounts (except IRAs) that are exempt from taxation.
  • Wildcard Exemption –
    • $1,250 plus $11,850 of any unused portion of your homestead exemption
    • The wildcard exemption may be applied to any property you own, and maybe used to avoid repaying the non-exempt equity in the property listed above.

There is no need to dip into savings. Being proactive with bankruptcy may protect your personal assets such as your home, car, and retirement accounts from your creditors.

If you are considering filing bankruptcy in Massachusetts, please contact the Law Offices of James Benjamin at 617-431-8071, to learn if bankruptcy is right for you.