Massachusetts Bankruptcy Exemptions and Law

All bankruptcy cases are governed by federal law. While every state has its own bankruptcy laws, it’s the U.S. Bankruptcy Code that governs what you can and cannot do in your Chapter 7 or Chapter 13 case.

The good news is that state and federal bankruptcy laws offer exemptions that help debtors protect their assets. As long as you know what bankruptcy exemptions are available, you may be able to prevent the trustee from selling your home, motor vehicle, and personal property.

Here, we’ll briefly explain Massachusetts bankruptcy law, including the state’s bankruptcy exemptions. We will also discuss the requirements for filing a Chapter 13 or Chapter 7 case and explain how a Massachusetts bankruptcy lawyer can help with your case.

If you’re facing overwhelming debt and don’t know where to turn, filing bankruptcy may be the answer. An experienced bankruptcy lawyer can help you get the fresh start you need. They’ll also ensure you comply with the Bankruptcy Code and take advantage of the available bankruptcy exemptions.

Types of Bankruptcy

There are two types of personal bankruptcy: Chapter 7 and Chapter 13.

• A Chapter 7 bankruptcy, also known as a liquidation bankruptcy, helps people who are looking to eliminate their debt and get a fresh start.
• Chapter 13, or reorganization bankruptcy, is for debtors who want to restructure their debt and create a reasonable repayment plan.

The requirements and outcomes differ between the two types of bankruptcy. However, the exemptions you can claim are the same regardless of the type of bankruptcy you file.

Eligibility Requirements for Chapter 7 Bankruptcy

To qualify for a Chapter 7 bankruptcy case, you must pass something called the “Means Test.” This test requires that you earn less than your state’s median household income. The exact income threshold varies by household size. The U.S. Trustee Program adjusts these numbers two to three times a year.

As of September 2026, the median household income amounts for Massachusetts are:

• One-person household: $88,202
• Two-person household: $112,708
• Three-person household: $139,411
• Four-person household: $178,524

As long as your income for the six months preceding your bankruptcy filing falls below the above limits, you should qualify for Chapter 7 without issue. You can use the calculator below to estimate your eligibility for Chapter 7 bankruptcy in Massachusetts. 

You must also pay the requisite filing fee of $338 and prove that you completed a credit counseling course within 180 days of your bankruptcy petition.

Do You Qualify for Chapter 13 Bankruptcy?

Qualifying for a Chapter 13 bankruptcy case is a lot different from qualifying for a Chapter 7. As far as your income is concerned, the bankruptcy court will want to see that you have sufficient regular income to make the monthly payments under your Chapter 13 repayment plan.

You must also demonstrate that your total debt is below the maximum federal limits for both secured and unsecured debt.

As of 2026, these limits are as follows:

• Unsecured debt: $526,700
• Secured debt: $1,580,125

When you file your Chapter 13 bankruptcy petition, you must include your proposed repayment plan. Depending on your income, your plan will last for three to five years.

According to the U.S. Bankruptcy Code, 11 U.S.C. Section 101 (10A), if your current monthly income is greater than your state’s median income, your plan will be five years. The rationale behind the longer plan is that you can afford to pay more. Therefore, you will make two additional years of payments to your creditors.

If you earn less than your state’s median household income, you will have a three-year plan. If you don’t think you can afford your payments under a three-year plan, you can ask the Chapter 13 bankruptcy court to extend the plan to five years. You would pay the same amount of money to each creditor, but it would be divided over 60 monthly payments instead of 36.

The Automatic Stay: Protection from Creditors

The moment you file your bankruptcy petition, be it Chapter 7 or Chapter 13, the automatic stay takes effect. According to Section 362 of the Bankruptcy Code, the automatic stay prohibits creditors from taking adverse action against you, such as:

• Foreclosure
• Liens
• Repossession
• Wage garnishment
• Eviction
• Negative entries on your credit report
• Bank account levies
• Civil lawsuits
• Sheriff’s sale
• Utility shutoff

Technically, the automatic stay prohibits creditors from communicating with debtors, whether the communication is threatening or not. Many lenders and credit card companies stop sending you statements once they receive notice of your bankruptcy filing.

Many creditors also suspend ACH and other auto-pay arrangements. Once you file bankruptcy, you can no longer make payments to your unsecured creditors. You must still make payments on your secured accounts, such as your car loan and mortgage.

Banks tread carefully because the penalties for violating the automatic stay are quite severe. Furthermore, it’s nearly impossible for creditors to bypass the automatic stay. To do so, they must present an overwhelming case to the United States Bankruptcy Court.

Difference Between Secured and Unsecured Debt

Many people who file bankruptcy are overwhelmed by their debt. They feel that their creditors are looking over their shoulders, just waiting to sue them or attach their wages. Even in straightforward bankruptcy cases, people often have both secured and unsecured debt they want to eliminate or restructure.

In bankruptcy, secured debts take priority over unsecured debts. For example, when a Chapter 7 debtor has assets and the trustee sells them to pay creditors, the trustee pays secured creditors first. Unsecured creditors receive payment only if sufficient funds remain.

Some of the more common types of unsecured debt include:

• Credit card debt
• Medical bills
• Past-due utility bills
• Personal loans without collateral
• Payday loans

Secured debt, on the other hand, is backed by collateral. Examples of secured debt include:

• Auto loans
• Mortgages
• Home equity loans
• Home equity lines of credit
• Personal loans with collateral attached (i.e., boat loan, motorcycle loan, etc.)

When you file your bankruptcy petition, you must include schedules that list your debts and assets. You must list your secured debts separately from your unsecured debts. You must also fill out a separate form listing your priority unsecured debts, such as student loans, recent tax debts, and domestic obligations like alimony.

What Happens to Your Debt in a Bankruptcy Case?

If you file for Chapter 7, the judge will discharge most of your debt at the conclusion of your case. Of course, the court may deem some debts non-dischargeable. For instance, student loans are not dischargeable in bankruptcy (unless a showing of “undue hardship”). Neither is alimony or child support.

A person who files Chapter 7 bankruptcy may choose to reaffirm some of their debts. This commonly happens with car loans. Rather than surrender your motor vehicle, you may sign a reaffirmation agreement with your finance company.

The same is true for a mortgage. If, for some reason, the homestead exemption doesn’t protect all of your home equity, you may need to work something out with your mortgage lender.

In a Chapter 13 bankruptcy, the court doesn’t discharge any of your debts at first. This won’t happen until you complete your repayment plan. Even then, you may be left with nothing but dischargeable debts. It depends on the details of your repayment plan, total debts, and the types of debt.

As for the rest of your debts, you will make monthly payments to your creditors for the duration of your three-to-five-year repayment plan. You may pay the balance of your debts in that period. Or you may still have a significant amount of debt. Again, it depends on the specific facts of your case.

When you meet with your Massachusetts bankruptcy attorney, they will explain which of your debts will likely remain at the conclusion of your case.

Bankruptcy Exemptions: Protecting Your Assets

Many debtors fear filing bankruptcy because they don’t want to lose their assets. The good news is that the Bankruptcy Code provides debtors with something called “exemptions.” These exemptions help you retain your property during a bankruptcy.

The most important type of exemption is the homestead exemption. It lets you protect some or all of the equity in your principal residence. There are also exemptions for things like your motor vehicle, jewelry, and tools of the trade.

Every state offers a different set of bankruptcy exemptions. In many states, you can choose between your state exemptions and the federal exemptions. You can choose whichever set offers you the most protection.

Below, we discuss some common bankruptcy exemptions and explain how much protection Massachusetts bankruptcy law provides.

Massachusetts Bankruptcy Exemptions

Massachusetts bankruptcy law offers debtors some rather generous exemptions. For example, the Massachusetts homestead exemption offers homeowners up to $1,000,000 in bankruptcy protection. This number increases to $2 million if the person is over 62 years old or is disabled.

Even if you don’t intentionally file a “Declaration of Homestead,” you will still benefit from an automatic homestead exemption of $125,000.

In addition to the homestead exemption, Massachusetts bankruptcy law offers other exemptions, including:

• Motor vehicle exemption: You can protect up to $7,500 of the equity in your motor vehicle. This amount increases to $15,000 if you are disabled or over 60 years old. If your equity is less than this amount, then your vehicle will be deemed exempt property.
• Personal property: You can claim an exemption of up to $20,000 for household goods such as electronics, jewelry, furniture, and other types of personal property.
• Current wages: State law protects 85% of your current wages. This exemption helps debtors keep paying bills after they file bankruptcy. Without this protection, filing bankruptcy would force many debtors further into the hole. Massachusetts debtors may also exempt up to $2,500 a month in rental income.
• Retirement accounts: Unless there is a child support or other Family Support Obligation (FSO) lien, most retirement accounts are 100 percent exempt. So are most 529 college savings plans. Social Security benefits and other government benefits are exempt as well.
• Tools of the trade: You can claim up to $5,000 for equipment, tools, and other items necessary for your employment.
• Wildcard exemption: The wildcard exemption in the District of Massachusetts is $1,225. You can apply this to any property you want to protect.

To discuss your case and determine which exemptions are best for your financial situation, seek legal advice before you file your bankruptcy petition.

State Exemptions vs. Federal Bankruptcy Exemptions

Massachusetts residents can choose between the state bankruptcy exemptions and the federal exemptions. If you have significant equity in your home, you will likely choose the state exemptions.

The federal exemptions cover the same categories, but the amounts differ. These amounts are per filer and are as follows:

• Home equity: $31,575 ($63,150 for married couples)
• Motor vehicle: $5,025
• Personal property: $800 per item/Total exemption $16,850
• Life insurance dividends or equity: $16,850
• Retirement accounts: All funds (with limited exceptions)
• Jewelry: $2,125
• Tools of the trade: $3,175
• Wildcard: $1,675 and up to $15,800 of unused federal homestead exemption

An experienced Massachusetts bankruptcy lawyer can evaluate your case and recommend which set of exemptions you should claim.

An Experienced Massachusetts Bankruptcy Lawyer Can Help

If you’re thinking about filing a Chapter 7 or Chapter 13 bankruptcy case, you should contact an experienced Massachusetts bankruptcy attorney. They’ll review your financial situation and help determine the best type of bankruptcy to file. They’ll also ensure that you file the proper bankruptcy forms, pay the correct filing fees, and communicate with your bankruptcy trustee.

The bankruptcy process can be confusing, and navigating the bankruptcy courts isn’t always easy. A skilled bankruptcy lawyer can help make your Chapter 13 or Chapter 7 bankruptcy case go much more smoothly.