Bankruptcy Exemptions

Massachusetts Bankruptcy Exemptions vs. Federal Bankruptcy Exemptions

Unlike many states, Massachusetts residents filing bankruptcy can choose between either the federal or Massachusetts bankruptcy exemptions. Before you file for bankruptcy, it’s important that you understand how each set of exemptions will impact your claim.

What Are Bankruptcy Exemptions?

Exemptions protect certain types of property from bankruptcy proceedings. If you file for Chapter 7 bankruptcy, most of your property will be sold (and the proceeds are subsequently used to pay your debts). However, certain types of property are exempt from Chapter 7 bankruptcy proceedings — allowing you to keep these assets. In a Chapter 13 bankruptcy, the value of exempt property is not included when calculating your payment plan. (If you have questions about these different forms of bankruptcy, contact a Springfield bankruptcy lawyer.)

While most states require you to use state-specific exemptions, Massachusetts allows you to choose between either state or federal exemptions. Depending on your situation, one set of exemptions may be more advantageous than the other.

What Are the Differences Between Federal and Massachusetts Bankruptcy Exemptions?

Federal bankruptcy exemptions include:

  • Homestead (including your house, mobile home, co-op, or burial plots): up to $23,675,
  • Motor vehicle: up to $3,775,
  • Personal property (such as clothing, appliances, furniture, and books): up to $12,625 (with a maximum value of $600 per item),
  • Jewelry: up to $1,600,
  • Tools of your trade: up to $2,375
  • Pensions,
  • Public benefits (such as Social Security, Veterans’ benefits, and unemployment benefits),
  • Alimony and child support, and
  • Wildcard exemptions: $1,250 of any other chosen property, plus any leftover portion of the homestead exemption (up to an additional $11,850).

If you are married and filing a joint bankruptcy, you can double all of these exemptions.

Massachusetts bankruptcy exemptions include:

  • Home or principal residence: the exemption value depends on your situation. If you:
    • Filed a Declaration of Homestead: up to $500,000,
    • Did not file a Declaration of Homestead: up to $125,000,
    • Are elderly or disabled: $500,000 (regardless of whether you filed a Declaration of Homestead),
    • Rent your principal residence: up to $2,500 a month,
  • Cemetery and burial plots,
  • Motor vehicle: up to $7,500 (if elderly or disabled, up to $15,000),
  • All necessary clothing and beds for the family,
  • Necessary household furniture: up to $15,000,
  • One heating unit,
  • Books: up to $500,
  • Jewelry: up to $1,225,
  • Tools of your trade. Up to:
    • $5,000 in tools and other work-related equipment,
    • $5,000 of stock-in-trade, and
    • $1,500 in commercial fishing gear.
  • Pensions,
  • Public benefits (such as Social Security, Veterans’ benefits, and unemployment benefits),
  • Wages: up to 85% of your gross earnings or 50 times the Massachusetts minimum wage,
  • Wildcard exemptions: up to $1,000, plus any leftover portions of the motor vehicle, trade tools, and furniture exemptions (up to an additional $5,000).

If you are married and filing for joint bankruptcy, all of these exemptions (except your principal residence exemption) are doubled.

How to Choose Between Federal and State Exemptions

Before you select the federal or Massachusetts exemptions, you should consider how they would impact your assets. Importantly, you cannot pick and choose between the various state and federal exemptions — instead, you must choose one system or the other.

Your decision will typically hinge on what property you want to retain after a bankruptcy. For example, the Massachusetts bankruptcy exemptions are much more generous to homeowners than the federal exemptions. Moreover, the state exemptions allow you to retain a more valuable motor vehicle and more clothing, appliances, trade tools and furniture.

However, the federal bankruptcy exemptions allow you to keep more jewelry and offers a higher wildcard exemption. It can be difficult to fully understand your options without legal assistance. A Springfield bankruptcy lawyer can help you evaluate your debts and assets as well as formulate a comprehensive bankruptcy strategy.

Speak With a Springfield Bankruptcy Lawyer

If you need help assessing how Massachusetts bankruptcy exemptions impact your claim, contact the Law Office of Eric Kornblum for a consultation as soon as possible. Our firm has been helping Massachusetts residents obtain financial freedom for over 20 years. We look forward to speaking with you.