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 2 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 July 28, 2020
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 require them to 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 will be empowered to sell your nonexempt property to help satisfy your debts. However, most Chapter 7 filers are able to protect most, if not all, of their property from being sold by taking advantage of thebankruptcy exemption process. No assets properly classified as “exempt property” may be sold by your trustee. It is therefore important to learn all you can about applying available exemptions to your assets so that you can maintain ownership of your property.
Does Massachusetts allow the use of federal bankruptcy exemptions?
Massachusetts law allows for most residents to choose between applyingfederal 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 forless than 2 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.
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.” First, you may not double your exemption value amount if only one spouse owns the property in question. Property must be co-owned to benefit from value doubling. Second, doubling is not permitted regarding 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 are 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 does not generally allow married couples who are filing jointly to double the value of their homestead exemption. However, the exemption is so much more generous than the federal homestead exemption ($25,150 in equity for a single filer) that the absence of the doubling rule doesn’t matter much practically for most low-income filers. Whether you are 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 are 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 are physically disabled, mentally impaired, or are at least 62 years of age are eligible for this exemption. If you are 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. It is therefore important to pay particular 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. Unless otherwise noted, filers are permitted to exempt the full value of the following assets:
Beds for filer and resident family
Books – up to $500
Cemetery rights – including burial plots and tombs
Clothing for filer and resident family
Food provisions - up to $600
Heating unit – one
Household furniture – up to $15,000
Jewelry – up to $1,225
Livestock - including 2 cows, 2 swine, 12 sheep, and 4 tons of hay
Military uniforms and arms
Pew in a house of worship - one
Sewing machine - one
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 are 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 wildcard exemption. This exemption allows filers to safeguard property that would otherwise be considered nonexempt because it is either too valuable to be contained by category limits or it is a type of property that isn’t normally exempt. The Massachusetts wildcard exemption allows for an additional $1,000 in exempt property value. 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, so the figures noted below will only remain current until April 1, 2022.
The broadest federal exemption available is the homestead exemption. A single filer can claim up to $25,150 in value for a home or other eligible real estate. If you don’t own real estate, you can claim up to $12,575 in value (under the homestead exemption) for otherwise nonexempt property of your choice. This value, along with the “random” value available under the federal wildcard exemption, allows most filers who aren’t homeowners to exempt most, if not all, of their personal property.
Please note that 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 $4,000. However, the motor vehicle exemption amount for married couples is automatically doubled to $8,000. Please keep this “married and filing jointly” calculus in mind as you assess these additional federal exemptions available to you (and your spouse, if applicable):
Alimony or spousal support (total value)
Child support (total value)
Crime victims’ compensation (total value)
Disability, illness, or unemployment insurance 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, household furniture and other 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 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 Boston, Springfield, Worcester, and elsewhere 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.