What Are the Montana Bankruptcy Exemptions?

What Are the Montana Bankruptcy Exemptions?

When you file for Chapter 7 bankruptcy in Montana, exemptions play a crucial role in protecting your property. Bankruptcy exemptions allow you to keep certain property safe from being sold by the trustee. The majority of Chapter 7 filers will find that all of their property is protected by exemptions and none of their property can be sold by the trustee. Still, it’s important to be aware that this is a possibility if you own an expensive home, car, or other piece of property.

Each state has its own set of exemptions, and the federal government has exemptions as well. In Montana, you can’t use federal exemptions when you file bankruptcy. You must use the state’s exemptions. If you haven’t lived in Montana for at least two years, you may need to use exemptions from your previous state or the federal exemptions. Learn more here: Can I File For Bankruptcy After Moving To A New State?

Can You Use Federal Bankruptcy Exemptions if You File in Montana?

No. Montana is not one of the 17 states that allow residents to choose between state or federal exemptions. If you’ve lived in Montana for at least two years and you’re filing Chapter 7 bankruptcy, you need to claim Montana’s state-specific exemptions to protect your property.

This makes the process of claiming bankruptcy exemptions fairly straightforward, as you don’t have to choose between the federal exemption scheme and the Montana exemptions. Simply claim every exemption that applies to you under state bankruptcy law, and you’ll keep as much of your property safe from your trustee as possible.

Montana Bankruptcy Exemptions Explained

If you are filing as a single individual, you’ll use the exemption values listed below. However, if you are married and filing jointly with your spouse, each of you can claim a full set of exemptions, as long as the property you're exempting is jointly owned.

For example, if you and your spouse jointly own a motor vehicle, you can exempt up to $8,000 in equity in that vehicle. But if only one of you owns the vehicle, you can only exempt $4,000 in equity. Keep this "doubling" strategy in mind to make the most of your exemptions.

Real Property: The Montana Homestead Exemption

The Montana homestead exemption is particularly generous. The exemption amount is detailed in Montana Code Annotated 70-32-104, which states that the homestead value limit is $350,000 as of 2021, with an annual increase of 4% each subsequent year. To claim this exemption, you may need to file a homestead declaration before submitting a formal bankruptcy petition to the court. The homestead may encompass up to 320 farm acres, one-quarter of city acreage, or a single residential acre if the homestead is located outside a municipality.

For more information, you can refer to the full text of the Montana Code on the Montana Legislature's website.

Note that in addition to this homestead exemption value, you may protect proceeds from condemnation, insurance, or sale of your qualifying residence for a maximum of 18 months. When this 18-month period expires, your funds will lose exemption status, so you may want to speak with an attorney about how to best use this grace period to your benefit without taking a financial “hit” when the expiration period ends.

See Montana Code Annotated § 70-32-104, § 70-32-201, § 70-32-209

Personal Property Exemptions in Montana

You can protect up to $4,000 of equity in a single motor vehicle. Equity is the value of the vehicle after subtracting any loans or liens. For example, if your car is worth $10,000 and you owe $6,000 on it, your equity is $4,000.

You can protect the full value of a burial plot, cooperative association shares, and health aids prescribed by a physician.

Finally, filers may exempt up to $1,250 per item in the following categories up to $7,000 total. Note that the values of these items are generally calculated using “garage sale” pricing, so you can likely protect much more personal property under this provision than it might seem like at first glance:

• Animals

• Appliances

• Books

• Clothing

• Crops

• Feed

• Firearms

• Household furnishings

• Jewelry

• Musical instruments

• Sporting goods

Note also that filers may exempt up to $4,500 in books, implements and other “tools of the trade” necessary for their profession, as well as uniforms and other items required to carry out government functions.

See Montana Code Annotated §§ 25-13-608(1)(c), 25-13-608(1)(h), 25-13-608(1)(f), 25-13-609(2), 25-13-609(1)(a), 25-13-609(3)

Money Benefits in Montana

Although Montana law doesn’t boast particularly generous personal property exemptions, it makes great allowances for monetary benefits. Unless otherwise noted, the following monetary benefits may be exempted in full:

• Alimony or spousal support

• Child support

• Crime victims’ compensation

• ERISA qualified benefits (subject to some time and value caps)

• Firefighters’ retirement benefits

• Fraternal group society benefits

• Group life insurance proceeds

• Hail insurance benefits

• Life insurance proceeds (other than to the insured)

• Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors

• Medical care and hospital care benefits

• Medical savings accounts

• Police officers’ retirement benefits

• Property belonging to a business partnership

• Public assistance and public benefits

• Public employee retirement benefits

• Retirement benefits protected under federal law, including certain IRAs and Roth IRAs

• Silicosis benefits

• Social Security

• Teachers’ retirement benefits

• Unemployment compensation

• University system employees’ retirement benefits

• Unmatured life insurance contracts

• Veterans’ benefits

• Workers’ compensation

In general, retirement accounts are protected in bankruptcy, whether they are privately held or government-sponsored. According to the Montana Code, benefits from retirement, pension, stock bonus, profit-sharing, annuity, or similar plans or contracts due to illness, disability, death, age, or length of service are protected. However, there is an important exception: any contributions made by an individual within one year before filing for bankruptcy that exceed 15% of their gross income for that year are not protected.

Finally, a minimum of 75% of earned but unpaid wages may be exempt, although a bankruptcy judge may choose to authorize a more sizable exemption for low-income filers.

Other Montana Exemptions

Many states allow filers to exempt certain property of their choice that wouldn't normally be protected under standard bankruptcy laws. This is known as a wildcard exemption.

Unfortunately, Montana does not offer a wildcard exemption. Therefore, it’s crucial to use the specific exemptions listed above to protect as much of your property as possible.

Need Help Filing Chapter 7 Bankruptcy? 

If you decide to file Chapter 7 bankruptcy, you can see if you’re eligible to use Upsolve’s free filing tool. Upsolve has helped thousands of people discharge over $700 million in debt, and our services are 100% free. If you’d prefer to speak to a bankruptcy lawyer, you can schedule a free consultation to get more information about how to approach your bankruptcy case.