Massachusetts law allows for most residents to choose between applying federal bankruptcy exemptions and state exemptions to property that could be affected by the bankruptcy process. The only time that this choice is not available is if a filer is a new Massachusetts resident and has lived in the state for less than two years. By examining each approach below, you can determine whether your case will be served best by applying Massachusetts exemptions or by claiming those available under federal law. Oftentimes, both schemes do an equally adequate job of safeguarding a filer’s property. But sometimes, it’s advantageous to choose one option over the other.
Written by Attorney Kassandra Kuehl.
Updated April 1, 2022
What Are the Massachusetts Bankruptcy Exemptions and Why Are They Important in a Chapter 7 Bankruptcy?
Many Americans shy away from filing bankruptcy because they’ve been told that the bankruptcy court will sell all of their assets to pay back their creditors. This is a myth.
Yes, if you file for relief under Chapter 7, the bankruptcy trustee assigned to your case can sell your non-exempt property to help satisfy your debts. But most Chapter 7 filers are able to protect most or all of their property from being sold by taking advantage ofbankruptcy exemptions. Exempt property can't be sold by your trustee. That's why it's important to learn all you can about which exemptions apply to your case.
Does Massachusetts Allow Filers To Use Federal Bankruptcy Exemptions?
Massachusetts law allows residents who've lived in the state for at least two years to choose between applying federal bankruptcy exemptions and state exemptions to property that could be affected by the bankruptcy process. If you've lived in Massachusetts for less than two years, you probably have to use the federal exemptions.
By examining each approach below, you can determine whether your case will be served best by applying Massachusetts exemptions or by claiming those available under federal law. Oftentimes, both schemes do an equally adequate job of safeguarding a filer’s property. But sometimes, it’s advantageous to choose one option over the other.
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Massachusetts Bankruptcy Exemptions
Unless otherwise noted, Massachusetts law allows married couples who are filing jointly to double the value of the exemption amounts available to them. There are two notable exceptions to this doubling benefit.
You can't double your exemption value amount if only one spouse owns the property in question. Property must be co-owned to benefit from value doubling.
You can't double the homestead exemption, as explained below.
As you evaluate the exemption values listed in each section of this guide, keep the doubling rule in mind if you're married and filing bankruptcy jointly. It will help to give you a better sense of how much property you can protect from the risk of being sold by your trustee.
Real Property: The Massachusetts Homestead Exemption
Massachusetts is unique in that, unlike most states, it doesn't generally allow married couples who are filing jointly to double the value of their homestead exemption. However, the state exemption is so much more generous than the federal homestead exemption ($27,900 in equity for a single filer) that the absence of the doubling rule doesn’t affect most low-income filers.
Whether you're a single filer or are married and filing jointly, you can exempt up to $500,000 of the equity value of your principal residence if you file a Declaration of Homestead. If you don’t file a Declaration of Homestead, you can exempt up to $125,000 in equity.
Note that if you're disabled or are an older adult, you may be eligible to exempt $500,000 in equity for your principal residence, whether or not you file a Declaration of Homestead. You should be eligible if you're physically disabled, mentally impaired, or are at least 62 years of age. If you're married, filing jointly, co-own your residence, and you and your spouse are older than 62 years of age, you can exempt $1 million in home equity.
Personal Property Exemptions
State laws vary significantly in their approach to personal property exemptions. So it's important to pay attention to the values you’re allowed to claim in each personal property category. If you’ve ever filed for bankruptcy in another state, you won’t be able to use that state’s personal property exemptions as a guide for what you can claim now.
Massachusetts personal property exemptions are truly unique. Note that personal property values are usually calculated using yard sale pricing.
Filers can exempt the full value of the following assets:
Military uniforms and arms
One pew in a house of worship
One sewing machine
One heating unit
Beds and clothing for the filer and resident family members
Cemetery rights – including burial plots and tombs
Livestock - including 2 cows, 2 swine, 12 sheep, and 4 tons of hay
Filers can also exempt:
Books – up to $500
Food provisions - up to $600
Household furniture – up to $15,000
Jewelry – up to $1,225
Shares in a cooperative – up to 100
Tools of the trade – up to $5,000 in tools, implements, and fixtures necessary for a profession; $5,000 in stock-in-trade; and $1,500 in business-related fishing gear
Additionally, filers may exempt up to $7,500 in equity for a primary vehicle used for personal transportation purposes. If the vehicle is either owned or used by a person with disabilities or an adult over the age of 60, the exemption amount increases to $15,000.
Unless otherwise noted, filers are also permitted to exempt the full value of the following monetary-based assets:
Alimony or spousal support
Annuity contracts payable to the insured’s spouse or dependent
Disability benefits – up to $400 per week
Displacement benefits – including moving expenses if you must move due to eminent domain
Fraternal Benefit Society benefits
Healthcare provider self-insurance funds
Pensions – excluding benefits subject to claims under orders of support
Rented residential property – Rent for a primary residence (not to exceed $2,500 per month)
Retirement benefits – excluding benefits subject to claims under orders of support
Social Security benefits
Utilities – up to $500 per month
Other Massachusetts Exemptions
If you're a member of a business partnership, know that specific partnership property is exempt under Massachusetts law.
Finally, Massachusetts allows all filers to benefit from a $1,000 wildcard exemption. This exemption allows filers to safeguard property that's otherwise considered non-exempt because it exceeds its exemption limit or it doesn't fall under an exemption. The
Additionally, if you don’t use all of the exemption values allowed by the exemptions for motor vehicles, household furniture, and/or tools of the trade, you can use up to $5,000 of the remaining values as wildcard exemption amounts.
The Massachusetts bankruptcy exemptions may allow you to safeguard all of your property. But if they don’t, it’s worth comparing their value limits to those provided by federal law. Depending on the kind of property you own (and the value of that property), this structure may allow you to protect more of your assets than the state structure would. Federal bankruptcy exemptions are updated every three years, the figures below are current as of April 1, 2022.
The broadest federal exemption available is the homestead exemption. A single filer can claim up to $27,900 in value for a home or other eligible real estate. If you don’t own real estate, you can claim the federal wildcard of $1,475 plus an additional $13,9050 for otherwise non-exempt property of your choice. This allows most filers who aren’t homeowners to exempt most, if not all, of their personal property.
Married couples who are filing jointly benefit from bankruptcy exemption amounts that are automatically doubled. For example, a single filer may claim the value of a motor vehicle up to $4,450. However, the motor vehicle exemption amount for married couples is automatically doubled to $8,900. Keep this doubling in mind as you assess additional federal exemptions available to you (and your spouse, if applicable).
Federal exemptions cover the total value of the following:
Alimony or spousal support
Crime victims’ compensation
Disability, illness, or unemployment insurance benefits
Health aids and other health equipment
Life insurance policy for a lost loved one you depended on, which you currently need for support
Lost earnings payments
Public assistance and other public benefits
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
Social Security benefits
Unmatured life insurance policy except credit insurance (total value)
Wrongful death recovery for loss of an individual you depended on for financial reasons (total value)
Federal exemptions also cover:
IRAS and Roth IRAs up to $1,512,350
Jewelry up to $1,875
Life insurance policy with a loan value up to $14,875
Personal injury recovery up to $27,900 – with exceptions for pain and suffering, as well as pecuniary loss
Personal property: Animals, appliances, books, clothing, crops, household furniture and other goods, and musical instruments up to $700per item and up to $14,875 overall
Tools of Trade: Books, implements, and tools of the trade up to $2,525
Wildcard up to $1,475 plus unused homestead exemption value up to $13,950
Filing Chapter 7 Bankruptcy?
If you’re still unsure about whether you’ll be able to safeguard more property by claiming federal exemptions or Massachusetts bankruptcy exemptions, that’s okay. The Chapter 7 bankruptcy process can be complex. Thankfully, most Massachusetts law firms offer free consultations with their bankruptcy attorneys. Upsolve can connect you with a qualified bankruptcy lawyer in Massachusetts.
Taking advantage of this no-cost opportunity will allow you to ask questions and get a better sense of your debt relief options. For example, you may learn that filing for Chapter 13 bankruptcy is a better option for your situation. If, after you schedule a free consultation, you determine that you can’t afford to maintain an attorney-client relationship with the firm of your choice, Upsolve may be able to help you file a Chapter 7 bankruptcy case for free.