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What are Bankruptcy Exemptions?

By Ullian Associates of The Law Firm of Ullian & Associates, P.C. on October 9, 2019

An exemption, in essence, is a value towards particular property which can be protected by the debtor.  This amount cannot be reached by the creditors and cannot be liquidated by the Trustee.  For example, if you own a watch worth $600.00 and you are entitled to an exemption of up to $1,600.00 if necessary, in jewelry, then you can keep the watch.  The amount of the exemptions are adjusted periodically.

There are federal and state exemptions available, and in Massachusetts you can choose which set of exemptions to take.  This choice is beneficial because your attorney can choose which set of exemptions protects your assets best.  For example, Joe has $200,000.00 of equity in his house - under the Massachusetts exemptions he can protect all of it, but under the Federal exemptions he can only protect $25,150.00. 

Exemptions are used to determine the liquidation value of your assets.  The liquidation value is the amount of money an asset would sell for minus the amount of your exemption.  If all your property cannot be completely exempted (meaning your liquidation value is greater than zero), what happens next will depend on whether you are filing a Chapter 7 or Chapter 13 bankruptcy. 

  • In a Chapter 7 bankruptcy the Trustee will take any nonexempt property, liquidate it, and pay out the proceeds to creditors.  You also could also try to buy the property back from the Trustee for the nonexempt amount.


  • In a Chapter 13 bankruptcy if you have property that is not exempt, the value of this property will be calculated in determining the minimum amount you need to pay to unsecured creditors in your Chapter 13 Plan. 


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