Bankruptcy Exemptions, What Assets Can I Keep?

personal bankruptcy exemptions


Many people wonder if bankruptcy is the right choice. Without a doubt, it is a powerful consideration for those who find themselves drowning financially.

Depending on the circumstances, bankruptcy might seem like the only logical path that provides a fresh start and unburdens you from your debt.

In the last 15 years, federal bankruptcy laws in Massachusetts have changed and undergone updates.

In this article, we will look at those changes to help you determine if bankruptcy is right for you.

Common questions that people have before filing bankruptcy include:

  • Will I be able to stay in my house after bankruptcy?
  • What will happen to my car after I file bankruptcy?
  • Will my retirement account be compromised?

If these concerns sound familiar, you are not alone. The majority of individuals who file for bankruptcy have real fears about losing their homes, cars, and other valuable assets.

This is a real concern especially in a Chapter 7 bankruptcy filing in which some assets could potentially be sold or liquidated.

Fortunately, there are federal and state bankruptcy exemptions that protect some of your assets.

Filing Bankruptcy: Your Choices and What to Expect

Bankruptcy is the only option for many individuals who cannot pay their debts. A federal law, through the act of bankruptcy a person can discharge their debts (Chapter 7) or reduce their debts using a three or five-year payment plan (Chapter 13).

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy effectively wipes out almost all debts. Things such as credit card balances or medical bills are discharged. Qualification depends on your income.

Chapter 13 Bankruptcy

With a Chapter 13 bankruptcy, a partial repayment plan of debts is created with the balances of most of the debts undergoing discharge.

Chapter 13 is a good option for an individual who wishes to save their home or who experience tax problems.

What is an Automatic Stay?

With an automatic stay, the harassing calls of collection agencies stop. Once an automatic stay is filed then the collection agencies will stop calling you and all lawsuits or foreclosure proceedings are halted.

You will have time to figure out your financial affairs and let your attorney handle things to create a smooth experience.

At this time, you will have to choose between federal exemptions and exemptions offered under Massachusetts including the federal non-bankruptcy laws. In most cases, the determination hinges on the value of your property.

Exempt Assets

Under a Chapter 13 bankruptcy, the debtor is in agreement with creditors to pay debts under a three- to a five-year repayment plan.

As long as the debtor keeps up with this payment plan, he or she can keep many of their possessions and assets. After the payment plan is over, all remaining unsecured debt is discharged.

A Chapter 7 bankruptcy filing is different, however, because all unsecured debt is immediately discharged. There is also the potential for non-exempt assets to be sold.

In some situations, Chapter 7 is called a “no-asset” bankruptcy because the trustee does not think there is enough nonexempt asset value to merit selling.

Additional exemptions include:

  • 401ks
  • Certain retirement accounts
  • Social security benefits
  • Autos
  • Engagement and wedding rings
  • Furniture
  • Death benefits
  • Prescribed durable medical equipment (DME)
  • 401k
  • Veterans benefits
  • Workers’ compensation benefits
  • Unemployment benefits
  • Some personal property and pensions
  • Business assets

In January 2011, personal property exemptions were modernized and went into effect on April 7th, 2011. They give you a choice between federal or state exemptions. Basically, state exemptions tend to be better for most consumers and federal exemptions have not changed.

Homestead Exemption

If you choose Massachusetts exemptions, then it is typically the result of the homestead exemption. The homestead exemption is extremely important if you have equity in your home.

You will need to file a declaration of the homestead to exempt up to $500,000 of your equity on your primary residence. It is imperative that this is filed even if done only a short time before the bankruptcy filing.

Please be aware that there are new rules that do put a limit on the amount of the homestead bankruptcy which is set to $146,450 (the adjustment was entered on April 1, 2010, from $136,875).

It is only in effect if the property was acquired within 1215 days before the bankruptcy petition date. Please be aware that the 1215 law does not apply if the new home you purchased in the state was with the equity from your old home that you rolled right into the new home.

Bankruptcy cases filed after March 16, 2011, are given an automatic $125,000 homestead protection if the property is their primary residence and they do not have to file a homestead for the $500,000.

Contact Oberhauser Law Today to Learn More!

To find out more about what assets you can keep in your specific financial circumstances, it is important to contact Massachusetts bankruptcy attorney Gregory Oberhauser.

Bankruptcy law is very detailed and complicated, and exemptions can vary from individual to individual. Each bankruptcy situation is different and may be subject to Massachusetts and federal bankruptcy laws. An experienced lawyer can help navigate you through this difficult time and ensure that your assets are protected every step of the way.

Contact Us for a Free Initial Bankruptcy Consultation

  • Are you are looking to a fresh financial start?
  • Would you like to end the cycle of debt?
  • Are you tired of receiving harassing phone calls from creditors?

At Oberhauser Law, we provide experienced bankruptcy services, including both Chapter 7 and Chapter 13 bankruptcy.

Call us at 978-452-1116, today for a free initial consultation.