What can I keep if I file bankruptcy?
Even though a Chapter 7 bankruptcy is a “no-asset” case, debtors are still allowed to keep limited “exempt” personal property. A major concern of debtors is that they would lose their car if they filed for Chapter 7 bankruptcy. This should not be the case for most debtors unless they are defaulting on their car loan and listing the account as an unsecured debt on their bankruptcy petition. Debtors who own their home and are using the Massachusetts homestead exemption qualify to have a $700 car, but even if a debtor owns several thousand dollars worth in a motor vehicle, it is unlikely to be seized as used cars would likely not fetch enough for it to be worth the trustee’s while. Federal law for non-homeowners allows a $3,450 car, with additional amounts also available using the wildcard exemption.
Life insurance policies are considered exempt if they are term policies, usually the type offered by employers, with only a death benefit available to beneficiaries and no cash-out value during the debtor’s lifetime. Whole policies are not exempt, but policies worth relatively small amounts may be covered by the wildcard exemption. Most retirement savings accounts would qualify for an unlimited amount of exemption under both state and federal law and the monies from these accounts would likely only be seized as preferential transfers if the debtor had taken large distributions out before filing bankruptcy while avoiding paying creditors.
