People who need to file for bankruptcy may wonder what’s going to happen to their assets when they file. The answer to this depends on several factors, including the type of bankruptcy, the type of asset it is and the value of the asset.
Assets in bankruptcy are classified as either exempt or non-exempt. An exempt asset can’t be taken and liquidated by the bankruptcy court. A non-exempt asset can be seized by the bankruptcy trustee and liquidated to pay off a portion of the debt balance.
Are all non-exempt assets seized and liquidated?
The bankruptcy trustee must consider the available assets to determine if it will be worth the time and effort to seize and liquidate them. If the return isn’t going to cover a good portion of the debt balance, there’s a chance the trustee won’t take the assets. Because of this, many people who file bankruptcy don’t have any assets seized.
What assets are exempt in a Massachusetts bankruptcy?
Residents in this state can choose between federal and state exemptions, but they can’t pick and choose items from both lists. Those who choose state exemptions receive these exemptions:
- Primary residence: $125,000 of equity protection or $500,000 in equity protection if the property is a recorded homestead
- Current wages: 85% of current wages are protected
- Motor vehicles: Up to $7,500 in motor vehicle value is protected, but this increases to $15,000 for those who are older than 60 or disabled.
- Retirement accounts: Most retirement accounts are protected
- Personal property: Up to $20,000 in personal property is exempted on an as-is cash value basis
- Wildcard exemption: Up to $6,000 of luxury items might be protected
The exemptions are only one thing to consider if you’re thinking about bankruptcy. Working with someone who’s familiar with bankruptcy may help potential filers determine how to proceed.