Massachusetts Bankruptcy Exemptions: What Can You Keep?

The many advantages of bankruptcy center on a few basic concepts. First of all, filing bankruptcy is a powerful tool which can be used to stop creditor harassment due to the automatic stay and which forbids most creditors from continuing collection efforts. That also means that bankruptcy can stop foreclosure proceedings in many instances and can provide homeowners with further options for keeping their homes.

Most important for many borrowers is the fact that the bankruptcy process in Massachusetts allows many applicants to keep much of their property and personal possessions. While Chapter 7 bankruptcy is commonly known as the "liquidation" process, Massachusetts law provides a long list of exempt types of assets that do not have to be given up to satisfy creditors.

New Listings of Exempt Property in Massachusetts in 2011

Massachusetts real property and personal property laws recently changed to better reflect current economic realities, and this led to significant changes in the homestead exemption. The legally allowed bankruptcy exemptions in Massachusetts range from a certain amount of equity in one's home to personal property and various cash benefits, including:

  • Up to $500,000 in the value of one's homestead (including a portion of jointly held property - although rules differ for elderly and disabled applicants); or rent up to $2,500 per month
  • Necessary clothing and bedding, plus a furnace, stove, refrigerator, freezer, hot water heater and up to $500 per month to pay utilities, as well as provisions up to $600 in value and cash or savings up to $2,500
  • Household furniture up to $15,000, plus books up to $500 and jewelry up to $1,225 in value
  • Up to $7,500 in the wholesale resale value of an automobile (up to $15,000 for disabled or elderly persons) - this amount has increased considerably from the previous threshold of $700
  • Tools of a trade or business up to $5,000 in value, as well as another $5,000 worth of materials and stock, and uniforms; as well as the value of boats, tackle and nets of a fisherman up to $1,500
  • Funeral plots
  • Interest in annuities, pensions, profit sharing or other retirement plans (some exceptions apply)
  • Benefits and proceeds from disability and life insurance policies, with certain specific limits, as well as public benefits such as AFDC, unemployment compensation and workers' compensation
  • A "wild card" for any personal property of up to $1,000 and up to $5,000 of unused automobile, household furniture and tools of the trade exemptions

As many borrowers will recognize, working on a detailed assessment of exempt assets with a Massachusetts bankruptcy lawyer can lead to protection of a significant share of a typical person or family's property.

A comprehensive assessment based on the latest legal developments can help a couple or individual make the most of the bankruptcy process. In some cases, an applicant will be better served by using the federal exemption list, an option that is available to bankruptcy petitioners in most states.

Opting to Use the Federal Bankruptcy Exemption Set

A Massachusetts bankruptcy attorney can help a client assess whether federal exemptions may provide a better outcome. There are some significant differences to be considered when confronted with weaker homestead exemption provisions, but other factors might make this option preferable for an individual debtor or couple seeking protection.

Just as important, most bankruptcy applicants will want to consider whether the Chapter 13 bankruptcy process better serves their future interests, even if they qualify under the Chapter 7 means test. Chapter 13 requires a debt repayment plan that involves consolidation of eligible debts, and it may present significant advantages for debtors due to complex tax issues, diverse property interests or other factors that emerge when assessing a client's financial picture.

By working with an experienced legal professional, borrowers who are struggling to overcome a significant debt load can explore their full range of legal options. While some obligations such as child support or alimony may not be subjected to a discharge under the bankruptcy process, a comprehensive debt relief strategy can take all factors into account and lead applicants in the right direction toward a stable and prosperous financial future.