What Property Can You Keep In Bankruptcy

The property you own becomes your ”bankruptcy estate.” This includes property you own that is in someone else’s possession, for example, a car you own that your mother drives. Also included is property you are entitled to but haven‘t received yet, for an example, life insurance proceeds or an inheritance.

Because the purpose of bankruptcy is to give you a fresh financial start and not leave you destitute, federal and state laws allow you to keep certain “exempt” property up to specified values. Examples of exempt property are a house, car, furniture, appliances, and jewelry.

In Boston, Massachusetts, you have the option of choosing from either the federal or state list of exemptions depending on the property you want to keep. For example, Massachusetts allows you to keep up to $500,000 in home value while the federal exemption only allows you to keep up to $20,200 per spouse. However federal personal property (any property other than real estate) exemptions are more generous so that if you don’t own a home you will choose the federal exemptions.

The federal list includes a $10,125 “wildcard” exemption that can be used for non-exempt property (property you may not keep) or to increase the limit on “exempt” property. For example, if your car is worth $15,000 and you owe $7,000 on it, the $3225 Federal car exemption plus $4775 of the federal wildcard exemption will cover your $8000 ownership and prevent the sale of your car to pay creditors. The $5350 remaining on the wildcard is available to use for other property you want to keep that is not on the exemption list, like a boat.