Chapter 7 and Massachusetts Exemption Laws

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Massachusetts allows their citizens to choose between state exemption laws and federal exemption laws when filing a bankruptcy under a Chapter 7. The couple in the illustration below wants to know how state exemption laws apply in their particular situation.

A chapter 7 can be filed by an individual, a partnership, or a corporation, and if an individual files, they can choose to file jointly with a spouse or as an individual. The wife in the illustration below is considering filing a Chapter 7 as an individual, apart from her husband.

Questions Raised in a bankruptcy Story

A man shared his wife’s bankruptcy story on a bankruptcy forum website in 2012. When his wife revealed she was going to file a Chapter 7, the husband wrote: “My wife is likely going to have to file bankruptcy. She has $50k in credit card debt and about $20k in medical expenses. I have only about $10k in credit card debt and would like to avoid bankruptcy over that small of an amount. Question is, are most exemptions doubled? I understand the homestead exemption would not be doubled. Our state allows for a $7500 vehicle exemption (doubled to $15,000 for a disabled individual). We have two vehicles with approximately $18,000 in positive equity. My wife is disabled by social security guidelines. So if I am lucky and the vehicle exemptions are doubled both of our vehicles are safe, correct? Both vehicles are now and have always been in my name only.
Also, for purposes of calculating our income is the amount my wife receives on behalf of our two children counted as income? She receives $1500 monthly (SSDI) for herself and then approx $750 monthly for our children.”

Question Concerning Exemption Laws

The answer to the husband’s question concerning exemption laws for vehicles can be answered in two ways.

First, Massachusetts, new exemption laws say that a filing debtor has an automobile exemption of $7500 based on the wholesale value of the vehicle or vehicles involved. The exemption is doubled for a disabled filer. In this case, the wife is disabled and gets the $15,000 exemption. Since the equity in the vehicles is $18,000, more than likely the wholesale value of the vehicles combined will be less than the exemption value.

Secondly, Massachusetts is not a community property state. That means if the husband in the illustration who solely holds title on the two vehicles has not had a co-signor on the loan or paid for the vehicles in full, the bankruptcy court cannot come after the vehicles because they belong to the husband.

Question Concerning Income and the Means Test for a Chapter 7

Any individual who wants to file a Chapter 7 must either pass the means test or have a family income below the median income for the same size family within the state in which they live. Therefore, the husband wants to know if the $1500 per month the wife draws from SDDI and the $750 the children draw monthly will effect the means test.

Any Social Security related income cannot be considered for the means test of bankruptcy. Both the wife’s and the income of the children seem to fall into that category. Therefore, the income should not be considered in the means test.

The complex questions the husband raised are good reasons for the couple to seek out answers from an experienced bankruptcy attorney.


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