One of the most common fears of people who consider filing for bankruptcy is that the property they own will be taken from them. They do not want to lose their homes, cars, jewelry, etc. For most people there is nothing to fear. That is not to say that under no circumstances could some property be taken from them by the Bankruptcy Court. It is just that it is rare for the average person to lose anything. That is because the Bankruptcy Code allows people to keep certain things with varying values when they file for bankruptcy. These are called exemptions.

What are Exemptions and How Do They Work?

When you file for bankruptcy all your property and possessions technically become part of the bankruptcy estate. Exemptions are the exception to this rule. There is a whole list of things with varying values that a person who files for bankruptcy gets to keep. In Massachusetts, there are a couple of lists. Some of the exemptions are provided for by the Bankruptcy Code itself. There is also a different list which is made up of other Federal laws and some State laws. You would have to choose which list you want to work with. Each has its own advantages and disadvantages. As your attorneys we would help you decide which list or exemption scheme to choose from in order to best avoid losing any property your currently own.

It is also important to note, that when we talk about the dollar values available for specific exemptions, we are only talking about your equity in the particular piece of property, not its entire value. For example, if you have a car worth $30,000, but it has a loan of $25,000, then your equity would only be $5,000. You would likely have more than enough exemption available to be able to keep this car.

Some of the More Commonly Used Exemptions:

  • Homestead Exemption (protects equity in your primary residence)
    • Bankruptcy Code Exemption: $22,975
    • State & Non-Bankruptcy Code Exemption: Up to $500,000
  • Household Goods, Furnishings and Clothing
    • Bankruptcy Code Exemption: $12,750
    • State & Non-Bankruptcy Code Exemption: $15,000
  • Automobiles
    • Bankruptcy Code Exemption: $3,675
    • State & Non-Bankruptcy Code Exemption: $7,500 ($15,000 if you are over 60 or disabled)
  • Jewelry
    • Bankruptcy Code Exemption: $1,550
    • State & Non-Bankruptcy Code Exemption: $1,225
  • Most Retirement Accounts
    • Bankruptcy Code Exemption: No Limit
    • State & Non-Bankruptcy Code Exemption: No Limit
  • Tools of Trade
    • Bankruptcy Code Exemption: $2,300
    • State & Non-Bankruptcy Code Exemption: $5,000
  • Personal Injury Compensation Payments (i.e., car accidents, slip & falls, etc.)
    • Bankruptcy Code Exemption: $22,975
    • State & Non-Bankruptcy Code Exemption: No exemption
  • “Wildcard” Exemption (can be used for anything including cash & can be combined with other exemptions)
    • Bankruptcy Code Exemption: $12,725
    • State & Non-Bankruptcy Code Exemption: $6,000

This list is by no means a complete list of all exemptions. It is just to illustrate the more common types used for consumers. It is best to discuss any concerns about a specific piece of property with us, so that we may guide you to maximize your exemptions and keep your property safe.

It is also important to keep in mind that the exemption amounts are doubled for married couples who file jointly (with exception of Homestead Exemption).

We’re here to answer your questions and help you throughout the process

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