If you’ve found your way to this post, then you’re thinking about seeking bankruptcy protection. But you’re also worried about some of the preconceived notions about the harm bankruptcy can cause to your long-term financial standing. Sadly, many of these perceptions are inaccurate, driving people away from the debt relief that they truly need. We don’t want you to make that mistake, which is why in this post we’ll give some insight into one of the most advantageous aspects of the personal bankruptcy process: exemptions.
What are bankruptcy exemptions?
A lot of people think that even though personal bankruptcy can wipe out their debt, it’ll leave them with nothing upon which to build the next chapter of their life. But this simply isn’t the case. Federal and state laws allow individuals to exclude some of their property from the bankruptcy process. This means that if you seek a Chapter 7 bankruptcy, some of your property won’t have to be sold off to pay creditors. This ensures that you have some financial footing to rebuild your life post-bankruptcy.
What sort of bankruptcy exemptions can you take advantage of in your case?
If you’ve lived in Massachusetts for at least two years, then you can choose between utilizing federal bankruptcy exemptions or those exemptions provided by the state. Here are some of the state exemptions that can be most meaningful to you:
- The homestead exemption: If you have a Declaration of Homestead registered, then you can exempt up to $500,000 in home equity from the bankruptcy process. But even if you don’t have this registration, you can still keep up to $125,000 in equity. Those who are older, meaning 62 and up, can retain up to $1,000,000 in equity.
- The motor vehicle exemption: The law allows you to retain $7,500 worth of value in your vehicle. If you’re older or suffer from a disability, then that amount is doubled.
- The personal property exemption: Here, there are several categories of exemption that you can enjoy. For example, all your clothing and beds are exempted, while you can keep up to $15,000 in furniture and household goods and over $1,000 worth of jewelry. You can also keep a significant number of books that you may own.
- Tools of the trade exemption: With this exemption, you can keep up to $5,000 worth of tools and equipment that you need for work.
- The wildcard exemption: This is a $1,000 exemption that you can apply to whatever you want. Also, though, if you didn’t use the full amount of your tools of the trade exemption or your vehicle or personal property exemption, then you can use the remainder of that value as part of your wildcard exemption.
Keep in mind, too, that other assets may be fully exempt from the bankruptcy process. This can include your retirement accounts and any public benefits that you receive. By taking full advantage of these exemptions, you’ll hopefully position yourself to obtain the stability needed to build the next chapter of your life.
Do you have questions about what personal bankruptcy can do for you?
We know that the bankruptcy process can seem confusing. And you may be hesitant to move forward with the process without a full understanding of what it entails. That’s why before jumping into it, it’s wise to educate yourself as much as possible. By doing so, you’ll know how to fully protect your interests and give yourself a shot at the bright future you deserve. But if you have lingering questions about the best way to do that, then now may be the time to discuss your circumstances with your bankruptcy attorney.