One of the greatest misconceptions people have about filing bankruptcy is that all their property will be taken when they file. Consequently, many people struggling with debt will never even consider bankruptcy as a way to get out of debt. Our clients are often surprised to learn that they can get debt relief through bankruptcy and keep their house, furniture, car, retirement accounts, bank accounts and cash. In Massachusetts, people filing bankruptcy have the option to claim their property as exempt pursuant to either Massachusetts law, or the exemptions spelled out in the Bankruptcy Code. People filing bankruptcy can keep all of their exempt property and it cannot be reached by a bankruptcy trustee or creditors. The Massachusetts exemptions are generally most advantageous, especially for homeowners, since the Massachusetts Homestead Act allows debtors to protect up to $500,000 in home equity from creditors. All that is required to exempt your house in bankruptcy is that you: a) own your home on the date of the bankruptcy filing; b) live there or intend to live there in the future; and c) you have recorded a valid Declaration of Estate of Homestead with the registry of deeds where the property is located. In most cases, as long as those three things are true, you can keep your home with up to $500,000 in equity when you file for bankruptcy.
In addition to your home, the Massachusetts exemptions allow you to exempt $7,500 in value in a personal vehicle (trade-in value minus loan balance), household furniture of up to $30,000, cash and bank account balances up to $5,000 and unlimited amounts held in a qualifying retirement plan, such as a 401k, 403b, or IRA, and jewelry worth up to $1,225. There is even a “wild card” exemption of up to $6,000 which you can apply to any other type of property you own. For the vast majority of people who file Chapter 7 Bankruptcy in Massachusetts all of their property is exempt, and they do not have to surrender any property.
If you are struggling with debt and considering bankruptcy but are concerned about whether your property will be protected, call us today for a free consultation.