What Are the Vermont Bankruptcy Exemptions?

What Are the Vermont Bankruptcy Exemptions and Why Are They Important in a Chapter 7 Bankruptcy? 

Some Americans hesitate to file for bankruptcy because they've heard the bankruptcy court will sell all of their personal property. But this isn't true. Bankruptcy exemptions allow filers to safeguard most (if not all) of their real estate and personal property from the risk of being sold by their trustee.  

Does Vermont Filers To Use Federal Bankruptcy Exemptions?

Vermont is one of 16 states (and the District of Columbia) that allows residents to choose between state exemptions (coupled with some federal nonbankruptcy exemptions) orfederal exemptions. Each set of exemptions is independent, meaning that you can only claim one or the other. You can't cherry pick the exemptions you like best from each set.

It’s important to compare both sets of exemptions to determine which is most beneficial for you. Note that if you've lived in Vermont for less than two years, you may be limited to using the federal exemptions.

Vermont Bankruptcy Exemptions

If you choose to file bankruptcy jointly with your spouse, 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 can double whatever bankruptcy exemption amount is available to single filers so long as you own the property together. Keep this in mind as you review the amounts in this article.

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. To calculate your equity, subtract what you still owe on your mortgage from your property's current fair market value. For example, if your home is currently worth $350,000 and you owe $300,000 on your mortgage, you have $50,000 in equity. Since this is less than $125,000, your home is protected by the state 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, you may be able to use some or all of your wildcard exemption for this purpose. The wildcard is a catchall exemption that we'll discuss more later.

The full value of the following personal property may be exempted under Vermont law:

• Freezer (1)

• Health aids

• Refrigerator (1)

• Sewing machine (1)

• Stove (1)

• Water heater (1)

• Wedding rings

The following personal property can be exempt up to the noted amounts:

• Tools of the trade necessary for your profession: up to $5,000

• Jewelry (other than wedding rings): up to $500

• Motor vehicle: up to $2,500 in equity for one vehicle

• Animals, appliances, books, clothing, crops, furnishings, home goods, and musical instruments: up to $2,500 total

• Bank deposits: up to $700 total

Additionally, if you live in a rural area, you may exempt the following as well:

• Bottled gas (up to 500 gallons)

• Chains (2)

• Coal (5 tons) or Oil (500 gallons)

• Chickens (10)

• Cow

• Feed to last a single winter

• Firewood (10 cords)

• Goats (2)

• Grow crops (up to $5,000 total)

• Halters (2)

• Harnesses (2)

• Horses (2)

• Plow and ox yoke

• Sheep (10)

• Swarms of bees and their honey (3)

• Yoke of oxen or steers

Money Benefits

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)

• Child support

• 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

• Teacher pensions

• Unemployment compensation

• Unmatured life insurance contract (excluding credit life insurance contracts)

• Veteran’s benefits needed for support

• Workers’ compensation

• 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.

Federal Exemptions

While many people benefit from claiming Vermont bankruptcy exemptions, choosing this set of exemptions isn't the best option for everyone. Before you commit to claiming either federal bankruptcy exemptions or Vermont bankruptcy exemptions, compare each carefully. Depending on the kinds of personal property you own, you may be able to claim more exempt property under one or the other.

Just as state exemptions are updated periodically, federal exemption law is updated every three years. The figures noted below are current as of April 1, 2022. Also, if you're 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 $4,450. However, if you’re married and filing jointly, the motor vehicle exemption value available to you and your spouse increases to $9,000. Keep this in mind as you evaluate the federal exemption amounts listed below. 

The federal homestead exemption (for a single filer) covers up to $27,900 of equity in your home. If you either aren’t a homeowner or otherwise don’t need to use the total homestead exemption, you can use up to $13,950 of the available homestead exemption to protect other property that isn't cover or fully covered by an available exemption.

Here are some of the other commonly used federal exemptions and their exemption amounts:

• IRAS and Roth IRAs: up to $1,512,350

• Jewelry: up to $1,875

• Life insurance policy: loan value up to $14,875

• Personal injury recovery: up to $27,900 – exceptions made for pain and suffering, as well as pecuniary loss

• Tools of Trade: Books, implements, and tools of the trade: up to $2,800

• Personal property: Animals, appliances, books, clothing, crops, furniture, household goods, and musical instruments: up to $700 per item, up to $14,875 overall

• Wildcard: $1,475 total plus unused homestead exemption value up to $13,950

The federal exemptions also cover the total value of the following:

• Alimony or spousal support

• Child 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

• Veteran’s benefits

• Unmatured life insurance contract except credit insurance

• Unemployment compensation

• Wrongful death recovery for loss of an individual you depended on for financial reasons

Filing Chapter 7 Bankruptcy? 

If you’re hoping to achieve a fresh start by filing for Chapter 7 or Chapter 13 bankruptcy, you'll want to consider which set of exemptions will protect you best. If you aren't sure which chapter to file or which exemptions to use, you can schedule a free consultation with a Vermont bankruptcy lawyer.

If you need additional assistance but can’t afford to pay a lawyer, you may qualify to use Upsolve's free filing tool to file your Chapter 7 bankruptcy forms for free.