Connecticut is one of 17 states that allows most residents to choose between its unique exemptions and federal exemptions. As you can’t “cherry pick” exemptions from both structures, it’s a good idea to compare how much property you can safeguard under both schemes. That way, you’ll be able to make an informed choice about whether to take advantage of Connecticut law or federal law when it comes to exemptions. Unless you’ve lived in Connecticut for less than 2 years, you can pick whichever structure is most financially advantageous for your unique situation. Detailed information concerning both options can be found below.
Written by Attorney Kassandra Kuehl.
Updated July 28, 2020
What are the Connecticut bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy?
It is a myth that filing for Chapter 7 bankruptcy requires individuals to sell most of their property to pay their creditors back.Exemption laws allow filers of Chapter 7 “liquidation bankruptcy” to safeguard most, if not all, of their property that isn’t unusually valuable from the risk that it will be sold to repay creditors. If you file for bankruptcy, your exempt property will remain yours and can’t be touched by your trustee or the bankruptcy court generally. As a result, it’s important to apply as many exemptions as you can to your assets so that they can remain in your possession. Depending on the kind of property you own, you may benefit from claiming Connecticut exemptions or federal exemptions.
Does Connecticut allow the use of federal bankruptcy exemptions?
Connecticut is one of 17 states that allows most residents to choose between its unique exemptions andfederal exemptions. As you can’t “cherry pick” exemptions from both structures, it’s a good idea to compare how much property you can safeguard under both schemes. That way, you’ll be able to make an informed choice about whether to take advantage of Connecticut law or federal law when it comes to exemptions. Unless you’ve lived in Connecticut forless than 2 years, you can pick whichever structure is most financially advantageous for your unique situation. Detailed information concerning both options can be found below.
Connecticut Bankruptcy Exemptions
When you’re reviewing the Connecticut exemptions outlined below, keep in mind that if you’re filing for bankruptcy jointly with your spouse, you can claim double the amount of the exemption values listed (unless otherwise noted) as long as the property you’re seeking to exempt is co-owned. If only one spouse owns the property, you’ll only be able to claim the single filer exemption value listed.
Real Property - the Connecticut Homestead Exemption
The greatest difference between Connecticut exemptions and federal exemptions can be perceived in the value limits allowed by their homestead exemptions. The homestead exemption allows homeowners and property owners to safeguard the equity in their primary residence. If you’re a homeowner, you’ll likely want to claim Connecticut exemptions, as the state homestead exemption covers far more equity than the federal exemption does. By contrast, if you’re not a homeowner, you’ll likely want to claim federal exemptions because you can use a significant portion of the homestead exemption to safeguard other property if you don’t need to protect a residence.
The federal exemption structure allows a single filer to claim a homestead exemption of up to $25,150. If you don’t need to use the total value of this exemption to protect your home or other eligible real property, you can apply up to $12,575 of the remainder to otherwise nonexempt property of your choice. By contrast, the Connecticut homestead exemption allows a single filer to protect up to $75,000 in equity for a primary residence and a married couple filing jointly to safeguard up to $150,000 in a primary residence. Equity is calculated by the amount of investment you’ve made in your home, as opposed to the value of your home loan or your home’s value. For example, if you bought your home for $200,000 and you’ve paid down $60,000 of that debt, your loan remainder is $120,000. The equity you have earned in your home is the $60,000 you’ve already paid.
Personal Property Exemptions
Connecticut offers personal property exemptions that are more generous than those offered in the federal Bankruptcy Code. This should be taken into account when weighing whether it makes more sense for you personally to claim generous personal property exemptions and a generous homestead exemption (Connecticut law) or a less generous set of personal property exemptions and a generous homestead remainder exemption that can be used like a wildcard exemption if you don’t need the funds to safeguard real estate equity (federal law).
Unless otherwise noted, the following Connecticut personal property exemptions cover the full value of the assets listed:
Appliances, bedding, clothing, food provisions, and household furniture – classified as “necessary,” so items of exceptional value or quantity may be treated as nonexempt
Arms, equipment, uniforms, and instruments for military personnel and militia members
Burial plot for filer and filer’s immediate family
Health aids (necessary)
Insurance proceeds for damaged exempt property
Motor vehicle – up to $3,500 in equity for a single vehicle (single filer) and up to $7,000 in equity for a single, shared vehicle (married filing jointly)
·Wedding and engagement rings
Additionally, the Connecticut “tools of the trade” exemption is farm-specific. It protects necessary tools, books, and farm animals necessary for the filer’s farming occupation. A separate exemption safeguards farm partnership animals and livestock reasonably required to operate a farm at which 50% or more of the partners are members of the same family.
In addition to protecting tangible assets, Connecticut law allows filers to exempt certain monetary, benefits-based, and insurance-related assets. Unless otherwise noted, the following Connecticut money benefits exemptions cover the full value of the assets listed:
Alimony or spousal support (subject to the wages exemption calculation noted below)
Crime victims’ compensation
Health and disability insurance payments
Interest in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the filer under which the insured is the filer or the filer’s dependent (not to exceed $4,000)
Pensions for municipal employees, state employees, and teachers
Residential and utility security deposits for one residence
Spendthrift trust funds necessary for the support of filer and resident family members
Social Security benefits
Transfers to a licensed debt adjuster
Other Connecticut Exemptions
Connecticut filers benefit from a modest “wildcard exemption.” If, after claiming every other exemption available to you, you have property that remains nonexempt (due to the type of property you own or the unusually high value of a piece of property subject to exemption value limits) you can use the Connecticut wildcard exemption to safeguard otherwise nonexempt property of your choice. The wildcard exemption amount available for a single filer is $1,000. By contrast, the only kind of “wildcard exemption” available under the federal Bankruptcy Code is the up to $12,575 of the homestead exemption that can be used to protect nonexempt property of your choice if you don’t need to use that portion of the exemption to safeguard equity in your home.
Connecticut bankruptcy exemptions aren’t the best option for all filers. Sometimes, it makes more sense to apply federal exemptions to a bankruptcy case. You won’t know which set of exemptions will be most financially advantageous for your unique situation until you compare the amount of property you’ll be able to safeguard by using state exemptions to the amount you can potentially protect by using federal bankruptcy exemptions.
If you choose to file bankruptcy prior to April 1, 2022, you can use the bankruptcy exemption figures noted below to figure out the types of property you could protect from your bankruptcy trustee, should you choose to apply federal exemptions to your case. Federal law allows for exemption figures to be updated every three years, so these numbers won’t be current after this date.
If you are married and filing jointly, note that the bankruptcy exemption amounts you can apply to your case are automatically doubled. For example, if you own a car, the federal Bankruptcy Code allows a single filer to exempt the value of a motor vehicle up to $4,000. However, if you’re married and filing jointly, the motor vehicle value exemption available to you and your spouse increases automatically to $8,000. Keep this in mind when assessing the figures noted below.
Finally, remember that (as noted above) the federal exemption structure allows a single filer to claim a homestead exemption of up to $25,150. If you don’t need to use the total value of this exemption to protect your home or other eligible real property, you can apply up to $12,575 of the remainder to otherwise nonexempt property of your choice.
Additional federal exemption values available include:
Alimony or spousal support (total value)
Child support (total value)
Crime victims’ compensation (total value)
Disability, illness, or unemployment benefits (total value)
Health aids and other health equipment (total value)
IRAS and Roth IRAs (up to $1,362,800)
Jewelry (up to $1,700)
Life insurance policy (loan value up to $13,400)
Life insurance policy for a lost loved one you depended on, which you currently need for support (total value)
Lost earnings payments (total value)
Public assistance and other public benefits (total value)
Personal injury recovery (up to $25,150 – exceptions made for pain and suffering, as well as pecuniary loss)
Personal property: Animals, appliances, books, clothing, crops, furniture, household goods, and musical instruments (up to $625 per item, up to $13,400 overall)
Retirement accounts that are tax-exempt: 401(k)s, 403(b)s, defined benefit plans, money purchase plans, profit-sharing plans, SEP and SIMPLE IRAs (total value)
Social Security benefits (total value)
Tools of Trade: Books, implements, and tools of the trade (up to $2,525)
Veteran’s benefits (total value)
Unmatured life insurance policy except credit insurance (total value)
Unemployment compensation (total value)
Wildcard ($1,325 total plus unused homestead exemption value up to $12,575)
Wrongful death recovery for loss of an individual you depended on for financial reasons (total value)
Filing Chapter 7 bankruptcy?
If you’re interested in filing bankruptcy but you have questions, know that you can reach out to a Connecticut bankruptcy attorney at any time. A lawyer can help you to determine whether filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy is the best option for your circumstances, can answer any questions you have about bankruptcy law, and can help you prepare your bankruptcy forms. Most attorneys offer free consultations to prospective clients, so be sure to take advantage of this opportunity if working with an attorney interests you or you simply need to ask a legal professional some questions on a one-time basis. Upsolve can help you connect with a bankruptcy attorney in Bridgeport, Hartford, New Haven, and other locations throughout Connecticut. If you can’t afford the services provided by a law firm, know that Upsolve provides free online resources for filers and may even be able to help you file your Chapter 7 bankruptcy case for free.