Can you keep your car and file for bankruptcy in Massachusetts? Debtors filing for bankruptcy in Massachusetts are entitled to a relatively small $700 car exemption. This means that any equity you have accumulated in your car that exceeds $700 is considered non-exempt and could expose your car to sale by the bankruptcy trustee.
Need an example? Let’s say that you own a 2004 Honda Accord worth $8,000. There is an outstanding loan balance on the car totaling $6,500. in this scenario, you have $1,500 of equity in your car, $800 of which would be non-exempt were you to file for bankruptcy in Massachusetts. In the event that you were unable to come up with enough cash to buy-out the non-exempt equity, the trustee could try to sell the car. Although it is questionable whether a trustee would sell a car to get at $800, the point is that Massachusetts bankruptcy laws only protect $700 of value in a car. Everything that exceeds that amount is left exposed.
The good news is that federal bankruptcy exemptions are also available to debtors in Massachusetts. Under federal bankruptcy exemptions, debtors can protect up to $3,225 of value in a car. In the Honda Accord example above, federal exemptions would protect all of the equity in the car with plenty to spare. Be aware, that while utilizing federal exemptions may allow more protection for your car, it will provide significantly less protection for your home. As long as the proper declaration has been filed, the Massachusetts homestead exemption allows debtors to protect up to $500,000 of home equity and still file for bankruptcy. By contrast, the federal homestead exemption only allows debtors to protect $21,625 of home equity. Therefore, it is important to consult with a bankruptcy attorney to fully understand how your assets will be affected and how best to protect them before you file.
RECENTLY MOVED? A recent move may impact which state’s bankruptcy exemptions apply to your case.
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