Vermont Bankruptcy Exemptions and Law

Federal law governs the general bankruptcy process. However, the U.S. Bankruptcy Code allows states to adopt their own laws to help bankruptcy filers protect some or all of their assets from creditors.

Regardless of which type of bankruptcy you file, you can avail yourself of either state or federal bankruptcy exemptions. It all depends on which set of exemptions better fits your situation. How much the exemptions help you also depends on whether you have any real or personal property of value.

In this article, we will explain Vermont’s bankruptcy laws, including the bankruptcy exemptions available in the State of Vermont. We will also briefly discuss the differences between Chapter 7 and Chapter 13 bankruptcy, so you know which type of case you wish to file.

If you’re contemplating filing bankruptcy but have questions about how it works, contact a Vermont bankruptcy attorney. They’ll review your financial situation and guide you through the bankruptcy process.

Types of Bankruptcy in Vermont

There are two types of personal bankruptcy: Chapter 7 and Chapter 13 bankruptcy. The type of bankruptcy you file will impact the exemptions you claim.

A Chapter 7 bankruptcy is ideal for debtors who want to eliminate their debt and start over. If you happen to own property, such as a home, you will have to choose between the federal and state exemptions.

Normally, if you have equity in your home, you will sell your house and use the proceeds to pay off your creditors. This is why many people refer to a Chapter 7 bankruptcy case as a “liquidation bankruptcy.”

In a Chapter 13 bankruptcy case, a debtor commits to a repayment plan that lasts for three to five years, depending on the person’s income. This is why this type of bankruptcy is often known as a reorganization bankruptcy.

Now, in a Chapter 13 bankruptcy, you would normally continue to make payments toward your mortgage and car loan. However, if you have a ton of home equity, your creditors may demand that you sell your property or create a repayment plan to pay them.

The good news is that, regardless of which type of bankruptcy you file, there are exemptions available to you. We will discuss the details of the Vermont exemptions below. However, know at the outset that the state exemptions in Vermont are much more generous than the federal homestead exemption.

The Automatic Stay Protects You During Bankruptcy Proceedings

The moment you file your bankruptcy petition, something called the “Automatic Stay” begins. The automatic stay prohibits your creditors from pursuing collection efforts. For example, if your mortgage company was moving toward foreclosure on your property, they will have to stop all foreclosure proceedings during the bankruptcy.

The same is true for other collection actions, including:

• Repossession
• Debt collection calls and letters
• Civil lawsuits
• Wage garnishments
• Bank account levies
• Collections on student loans

When you file your petition with the bankruptcy court, you must indicate whether you will be claiming any bankruptcy exemptions. During the course of your bankruptcy process, your trustee will review your debts and assets and determine if you should qualify for a bankruptcy discharge (Chapter 7) or a repayment plan through a Chapter 13 case.

If you can apply any exemptions to your principal residence or personal property, you will retain these assets after your bankruptcy. However, if your equity exceeds the amount of the exemptions or you don’t qualify for the exemptions for some reason, you may not be able to keep your property.

Dischargeable Debts in a Chapter 7 Bankruptcy

People file Chapter 7 bankruptcy to get rid of their debts and get a fresh start. When you file your Chapter 7 bankruptcy petition, you must include a schedule of your debts and assets. If you don’t list a particular debt on your schedule, the court will not discharge it.

Generally, in a Chapter 7, the judge will discharge your unsecured debt. Some of the most common types of unsecured debt include:

• Medical bills
• Past-due utility bills
• Credit card bills
• Past-due rent
• Personal loans with no collateral attached to them

While the court will most likely discharge your unsecured debt, there’s no guarantee it will discharge your secured debt. It depends on how much equity you have in the collateral and whether a state or federal exemption is large enough to protect that equity.

The most common types of secured debt include the following:

• Mortgage loans
• Car loans
• Personal loans with collateral attached (i.e., home equity loan, line of credit, etc.)

If your equity in the collateral attached to the above debts is low, the court will probably let you keep the property, as long as you agree to pay the debt post-bankruptcy. If, however, you have a lot of equity in the property, you’ll need to claim a bankruptcy exemption or be prepared to pay off your secured and unsecured creditors or sell off the property.

Debts That Are Rarely Dischargeable in Bankruptcy

There are certain debts that the court will not discharge no matter what type of case you file. These are debts that you must repay whether you file a Chapter 7 or Chapter 13.

Some of these nondischargeable debts include:

• Student loans
• Alimony
• Child support
• Recent tax debts

If you have questions about which debts you can include in your bankruptcy filing, consider meeting with a local bankruptcy attorney to discuss your options. You may decide that bankruptcy is not the best option for you. For example, if more than 80% of your debt is comprised of student loans and past-due domestic support obligations, bankruptcy won’t solve your problem.

What Happens to Your Secured and Unsecured Debt in Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy allows you to propose a plan to repay your creditors over a three-to-five-year period. The court must approve your plan and may force creditors to reduce or restructure your debt.

If you’re behind on your mortgage, you may be able to negotiate a repayment agreement with your mortgage lender. The same is true if you are behind on your car loan or other secured debt.

Once you pay your secured creditors, you can use your disposable income to pay back your unsecured creditors. Once you complete your repayment plan, the bankruptcy court will discharge whatever you still owe unsecured creditors.

Eligibility for Bankruptcy Under Vermont Law

To file a Chapter 7 bankruptcy in Vermont, you must pass a “Means Test.” According to this test, you must earn less than the median household income in your state.

According to the U.S. Trustee Program, the median incomes in Vermont as of 2026 are as follows:

• One-person household: $72,461
• Two-person household: $96,963
• Three-person household: $114,075
• Four-person household: $137,583

If your household income is above the amounts above, you may still qualify for Chapter 7 under the disposable income test. You can calculate your monthly disposable income by subtracting your monthly expenses from your monthly net income. If you have little or no money left after paying essentials, you may qualify for Chapter 7.

You can use the calculator below to estimate your Chapter 7 eligibility. If you don’t qualify, you may still have options under Chapter 13.

To file a Chapter 13 bankruptcy case in Vermont, you must demonstrate that you have sufficient regular income to commit to a reasonable three-to-five-year repayment plan. You must also show that your secured and unsecured debts fall under the federal limits.

To qualify for Chapter 13, you cannot owe more than the following amounts:

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

These thresholds are updated every three years.

When you first sit down with your Vermont bankruptcy attorney, be prepared to discuss your total debt with them. This will help them determine if Chapter 13 is an option for you. If your debt exceeds the above thresholds, you may have to file under a different bankruptcy chapter.

Vermont Bankruptcy Exemptions

A bankruptcy exemption is a specific amount of equity or value you can protect in your home and personal property. When you file your bankruptcy petition, you must declare whether you intend to claim your state exemptions or the federal bankruptcy exemptions. (You cannot select different exemptions from the two lists.)

Under Vermont bankruptcy law, married couples filing for bankruptcy jointly can double the exemption amount for joint property. However, they cannot double the Vermont homestead exemptions, even if the house is in both spouses’ names.

While the homestead exemption is the most critical one available in bankruptcy, there are other exemptions available under Vermont law. We will discuss some of these exemptions in more detail below.

Note: If just one spouse owns the property, the exemption is not doubled.

Homestead Exemption

Vermont will let you keep up to $125,000 of the equity you have in a home, mobile home, or condo. This amount is not doubled when married couples file jointly.

Vermont law also has a wildcard exemption that allows debtors to exempt up to $400 of any property, plus up to $7,000 of any unused amounts from specified personal property exemptions.

Wage Exemption

You will be allowed to keep up to 75% of your weekly disposable wages or 30 times the federal hourly minimum wage, whichever is higher. In some cases, the judge will allow low-income individuals to keep a higher percentage of their wages.

Motor Vehicle Exemption

Vermont lets you exempt the equity you have in one or more motor vehicles up to a combined total of $2,500.

Personal Property Exemptions

You may exempt the following items up to a combined value of $2,500:

• Clothing
• Appliances
• Furnishings
• Animals
• Books
• Crops
• Musical instruments

Additionally, you may exempt the following property:

• $700 of bank deposits
• $5,000 in livestock, coal, heating oil, firewood, and growing crops
• $500 of jewelry
• $500 of your wedding ring
• Heating unit
• Refrigerator and freezer
• Water heater
• Sewing machine

Tools of the Trade Exemption

Vermont grants an exemption of up to $5,000 for tools and books you use in your profession.

Wildcard Exemption

Vermont law offers a wildcard exemption of $400.00, plus up to $7,000.00 of any unused amount of specific personal property exemptions (e.g., motor vehicles, tools of the trade, jewelry, crops).

Insurance Benefits Exemption

The following benefits are completely exempt under Vermont bankruptcy law:

• Annuity benefits of up to $350 per month
• Disability benefits supplementing a life insurance or annuity contract
• Disability benefits if needed for your support
• Health benefits of up to $200 a month
• Life insurance proceeds for someone you depended upon
• The proceeds of a life insurance contract specifying that the proceeds can’t be used to pay creditors

Pension and Retirement Exemptions

The benefits of most pension and retirement plans are exempt in Vermont, including:

• Tax-exempt retirement accounts, including 401(k)s, IRAs, and defined benefits plans
• State employee, municipal employee, and teacher plans

Public Benefit Exemptions

The following public benefits are exempt:

• Social Security benefits
• Unemployment compensation
• Workers’ compensation
• Veterans’ benefits
• General assistance to aid the blind, aged, and disabled
• Crime victims’ compensation

Need Help Filing for Bankruptcy in Vermont?

If you are having trouble paying your bills, hiring an attorney to represent you in bankruptcy may seem like an expense you cannot afford. However, even simple bankruptcy cases can involve complex court filings and strict deadlines.

An experienced local bankruptcy attorney will help guide you through the filing process, represent you in court, and negotiate with creditors to ensure that you retain as many of your assets as the law allows.