Bankruptcy Exemptions

Have you received a wage garnishment, bank attachment, or lien on your real estate? Are your creditors threatening to do so? Here is the reality: there is no such thing as debtor’s prison, but the courts will allow your creditors to place certain attachments on your property if you owe them money. To get these attachments, the creditor will generally have to give you notice or sue you and be awarded a judgment by the court. If a creditor is threatening or has already gotten a lien, you still have an option for relief through bankruptcy.

Bankruptcy Exemptions

When you file for bankruptcy, the court does not just take all your possessions to pay your creditors. There are certain items that are “exempt” that the court will not touch.

The court will appoint a “Trustee” who is a contracted attorney assigned to your case to make sure that you are being truthful about the assets and income you listed on your bankruptcy petition. One of the Trustee’s main tasks is to determine what property you might have that can be liquidated for the benefit of your creditors.

Property that is “exempt” by statute and cannot be touched by the Trustee. There is a list of Federal Exemptions under 11 U.S.C. 522 and there are state specific exemptions in both Massachusetts (M.G.L. c. 235) and New Hampshire (RSA 511:2).

There is some overlap between the Federal and state exemptions, however, the debtor cannot “mix and match” from the state and federal exemptions. They must choose one category and use it for all their property disclosed in their petition. Meaning, if the debtor is filing in Massachusetts, they must choose from the list of Massachusetts exemptions OR the Federal Exemptions.

Some of the Most Frequently declared Federal, Massachusetts, and New Hampshire Exemptions

Federal Exemptions:

• Homestead – Value of real property up to $25,150. The unused amount of a homestead up to $12,575 can be used for other property claimed;
• Car/Automobile up to $4,000;
• Household goods, animals, crops, clothing, up to to $625 per item, for a maximum exemption of $13,400;
• Jewelry up to $1,700;
• Wrongful death benefits for a dependent;
• Personal injury award up to $25,150;
• Tools of the trade up to $2,525;
• 401ks;
• IRAs up to $1,362,800
• Public assistance, Social Security benefits, Veteran’s benefits, and unemployment compensation;
• Alimony and child support;
• Tools of the trade up to $2,525;
• Unmatured life insurance; and
• Wildcard of $1,325 that can be used for any property and the unused amount from the homestead exemption up to $12,275.

Massachusetts Exemptions:

• Homestead – Value of real property up to $125,000, $500,000 if Declaration of Homestead is file with Registry;
• Car/Automobile up to $7,500, $15,000 if disabled or above 60 years old;
• Retirement benefits;
• Clothing up to $15,000;
• Jewelry up to $1,225;
• Books up to $500;
• Deposits of money up to $2,500;
• Tools of the trade up to $5,000;
• Veterans benefits, unemployment compensation, workers compensation, and public benefits; and
• Wildcard of $1,000 plus an additional $4,000 that can be used for property including furniture, tools of the trade, and automobile.

New Hampshire Exemptions:

• Homestead – Value of real property up to $120,000.
• Car/Automobile up to $10,000;
• Tools of the trade up to $5,000;
• Furniture and appliances up to $3,500;
• Fuel up to $400;
• Books for personal use up to $800;
• Jewelry up to $500;
• Fowl up to $300;
• Life insurance proceeds;
• Public employee, Police, and Fire benefits;
• Public benefits, worker’s compensation, and unemployment compensation; and
• Wildcard of $7,000 that can be used for property including books, furniture, tools of the trade, automobile, and jewelry.

Why do Exemptions Matter?

Exemptions matter because they decide what property you get to keep or what you pay back over time. In a Chapter 7 Bankruptcy, the Trustee can theoretically take any nonexempt property. They will take that property and sell it to pay your creditors. In a Chapter 13 Bankruptcy, you will pay the greater of (1) your disposable income or (2) the monetary value of your nonexempt assets over three to five years.

The rules regarding exemptions and what qualifies are not always clear and in one place. That means, you need an experienced bankruptcy attorney to help you navigate the rules. If you do not know what you are doing, you risk having the Trustee grab your property when it should have been exempt. You need a trusted advocate on your side.

Give us a call today for a free consultation, (978) 458 – 1229.