Vermont is one of 16 states (and the District of Columbia) that allows residents to choose between claiming the state-specific exemptions (coupled with some federal nonbankruptcy exemptions) or the federal exemptions. Each structure is independent, meaning that you can only claim one or the other and may not “cherry pick” those that you like best from each approach. It’s important to compare each structure to determine which will benefit your situation more completely. Note that if you have lived in Vermont for less than 2 years, you may need to apply bankruptcy exemption law from your state of prior residence.
Written by Attorney Kassandra Kuehl.
Updated July 28, 2020
What are the Vermont bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy?
Some Americans resist the idea of filing for bankruptcy because they have heard the myth that when processing their case, the bankruptcy court will sell all of their personal property. This myth is not grounded in reality. Yes, when you file for Chapter 7 bankruptcy the court will assign a trustee to your case and that trustee is empowered to sell your nonexempt property to satisfy your creditors. However, by claimingbankruptcy exemptions under either state or federal law, you’ll be able to safeguard most (if not all) of your real estate and personal property from the risk of being sold by your trustee.
Does Vermont allow the use of federal bankruptcy exemptions?
Vermont is one of 16 states (and the District of Columbia) that allows residents to choose between claiming the state-specific exemptions (coupled with some federal nonbankruptcy exemptions) or the federal exemptions. Each structure is independent, meaning that you can only claim one or the other and may not “cherry pick” those that you like best from each approach. It’s important to compare each structure to determine which will benefit your situation more completely. Note that if you have lived in Vermont forless than 2 years, you may need to apply bankruptcy exemption law from your state of prior residence.
Vermont Bankruptcy Exemptions
If you choose to file bankruptcy jointly with your spouse, it’s important to note that you and your spouse are both entitled to a full set of bankruptcy exemptions under Vermont law. With the exception of the homestead exemption value, you are essentially entitled to double whatever bankruptcy exemption amount is available to single filers (unless otherwise noted). Therefore, when you’re evaluating the exemption amounts listed below, keep in mind that with the exception of the homestead exemption and any other outliers flagged for your reference, you and your spouse can claim double the single filer exemption amounts listed in this guide. With that said, if only one of you owns a specific piece of property, you’ll be limited to claiming the single filer exemption amount for that specific asset. “Doubling” only applies to jointly held property.
Real Property - the Vermont Homestead Exemption
Vermont law allows residents to exempt up to $125,000 in equity value for a primary residence, including houses, condos, and mobile homes. Equity essentially means the amount of money you’ve already invested in paying off your mortgage. For example, say that a lender approved your mortgage for $300,000 and you’ve paid $100,000 of that mortgage down. That $100,000 investment is your equity. In this example, the entirety of your home’s equity would be safeguarded from your trustee through the Vermont homestead exemption.
Personal Property Exemptions
Vermont law allows filers to exempt certain kinds of personal property up to a certain value. If you can’t exempt all of your personal property using the exemptions provided, know that you may be able to use some or all of your wildcard exemption for this purpose. That “catch all” exemption is discussed in greater detail later in this guide. Unless otherwise noted, the full value of the following personal assets may be exempted under Vermont law:
Animals, appliances, books, clothing, crops, furnishings, home goods, and musical instruments (up to $2,500 total)
Bank deposits (up to $700 total)
Jewelry; other than wedding rings (up to $500)
Motor vehicle (up to $2,500 in equity for one vehicle)
Sewing machine (1)
Tools of the trade necessary for your profession (up to $5,000)
Water heater (1)
Additionally, if you live in a rural area and the following assets apply to you, you may exempt them as well:
Bottled gas (up to 500 gallons)
Coal (5 tons) OR Oil (500 gallons)
Feed to last a single winter
Firewood (10 cords)
Grow crops (up to $5,000 total)
Plow and ox yoke
Swarms of bees and their honey (3)
Yoke of oxen or steers
Vermont law provides for generous monetary exemptions as well. Unless otherwise noted, the following monetary assets and benefits may be exempted up to their full value:
Alimony or spousal support
Annuity contract benefits (up to $350 per month)
Crime victims’ compensation needed for support
Disability or illness benefits needed for support
Disability benefits that supplement life insurance or an annuity contract
Fraternal benefit society benefits
Group life or health benefits
Health benefits (up to $200 per month)
Life insurance proceeds for someone you depended on
Life insurance proceeds (if the beneficiary is not the insured)
Life insurance proceeds (if the contract states that the proceeds can’t be used to pay the beneficiary’s creditors)
Lost future earnings for you or someone you depend on
Municipal employee pensions
Other qualifying pensions as detailed under Vermont Code §12-2740(19)(J)
Other qualifying retirement accounts (as provided for under federal law)
Personal injury recoveries for you or someone you depend on
Public assistance and benefits (including aid to the blind, aged, and disabled and general assistance)
Retirement accounts that are self-directed – including IRAs, Roth IRAs, and Keoghs (limited to contributions made at least one year before filing for bankruptcy)
Social Security needed for support
State employee pensions
Unmatured life insurance contract (excluding credit life insurance contracts)
Veteran’s benefits needed for support
Wrongful death recoveries for someone you depended on
Other Vermont Exemptions
If you have property that remains nonexempt after you’ve claimed every exemption value listed above, you may be able to exempt some additional assets using Vermont’s wildcard exemption. This provision allows you to exempt an additional $400 in value for any property of your choice. Additionally, you can use any unused value of the following exemption categories as wildcard exemption values (up to $7,000 total) as well: appliances, clothing, crops, household furniture, jewelry, motor vehicles, and tools of the trade.
While many people benefit from claiming Vermont bankruptcy exemptions, choosing this exemption structure is not the best option for everyone. Before you commit to claiming either federal bankruptcy exemptions or Vermont bankruptcy exemptions, you’ll want to compare the exemption amounts and property types allowed by each. Depending on the kinds of personal property you own, you may be able to claim more exempt property under one structure or the other.
Just as state exemptions are updated periodically, federal exemption law is updated every three years. The figures noted below will remain current until April 1, 2022. Please remember that if you are married and filing jointly, your federal bankruptcy exemption values are automatically doubled, unless otherwise noted. For example, under the federal structure, a single filer can claim the exemption value of a motor vehicle up to $4,000. However, if you’re married and filing jointly, the motor vehicle exemption value available to you and your spouse increases to $8,000. Keep this in mind when evaluating the federal exemption amounts listed below.
In addition to the motor vehicle exemption amount noted above and the personal property and monetary benefit exemptions noted below, federal exemptions (for a single filer) include a homestead exemption of up to $25,150 to cover equity in your home. If you either aren’t a homeowner or otherwise don’t need to use that total value, up to $12,575 of the available homestead exemption can be applied to other property that can’t be otherwise exempted. Additional exempt monetary benefits and personal property values under the federal exemption structure include:
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, 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 contract 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 hoping to achieve a fresh start by filing for Chapter 7 or Chapter 13 bankruptcy, identifying all of the federal or Vermont bankruptcy exemptions you can potentially claim is only one of the considerations you’ll have to account for. Filing bankruptcy is a potentially complex process, which is why it’s generally a good idea to take advantage of a free consultation with a Vermont bankruptcy lawyer in your area as you’re preparing to begin working on your case. Even if you can’t afford legal advice from a bankruptcy attorney once your free consultation is complete, seeking experienced guidance upfront can make the Vermont bankruptcy process easier to navigate. If you need additional assistance but can’t afford to retain a lawyer’s services, Upsolve may be able to help you file your Chapter 7 bankruptcy forms for free.