Doubling Exemptions in Bankruptcy

Like all states, Massachusetts has its own set of exemptions that you may use when filing for Chapter 7 or Chapter 13 bankruptcy.  Bankruptcy exemptions determine what you are allowed to keep during and after Chapter 7 bankruptcy. If property (such as your home, car, or jewelry) is exempt, you may keep it. In Chapter 13 bankruptcy, exemptions determine how much you must pay certain creditors through your payment plan.

Some states “opt-out” of the federal exemptions, thereby prohibiting a debtor from applying federal exemptions.  However, in Massachusetts, an individual may choose from either the federal exemptions or the exemptions provided by state law.  Last year, Massachusetts modernized their state exemptions, making them broader and more beneficial to the average consumer, however there are times when choosing the federal exemptions is in the individual’s best interest.  For example, § 522(d) of the Code may be a better choice if you have expensive jewelry that you would like to keep, or if you expect a sizable recovery from a personal injury claim.  However, you cannot mix and match exemptions from Massachusetts state and federal law. Which exemptions will best work for you depends on the type of property you wish to protect.  Your attorney will determine which exemption scheme is better in your personal situation.

In cases where a joint petition is to be filed by a married couple, both spouses must agree to use the same exemption scheme; one cannot use federal law while the other uses state law. If you and your spouse cannot agree, you will be deemed to have chosen the federal law. You may also choose to file separately, in which case you will both be required to pay separate court filing fees. But, if you can agree to use the same law and you file a joint petition, it is generally possible to stack or double the amount of state law exemptions. Stacking or doubling an exemption is allowed in a joint bankruptcy case, but only if the property is jointly owned by both you and your spouse.  Filing for bankruptcy is a lot easier with the help of a local bankruptcy attorney.


Keeping Your Tax Refund in a Massachusetts Bankruptcy

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Many people depend on their annual tax refund to get caught up on bills or help pay for necessary living expenses.  Fortunately, here in Massachusetts, most people who file a Chapter 7 or Chapter 13 bankruptcy can keep their entire tax refund.

Like everything else in bankruptcy, it is important to be open and honest with your bankruptcy lawyer about whether you have filed you tax return and whether you have already received a tax refund or are expecting to receive a tax refund.

In bankruptcy, timing is everything.  If you file your bankruptcy case AFTER you receive your income tax refund and you spent your refund on things such as food, clothing, or to catch up on utility bills, your tax return will probably be safe.  However, if you pay off a loan from friend or relative, the Trustee could view the repayment as an insider preference and demand the money back from your friend or relative.

If you file your bankruptcy case BEFORE you get your income tax refund, it is important to disclose the anticipated tax refund in your bankruptcy schedules.  Your bankruptcy attorney will use the appropriate Massachusetts exemptions to help you keep your refund.  However, if the refund cannot be claimed as fully exempt, and it is not practical to delay filing bankruptcy until after the refund is received.

Tax refunds and bankruptcy can be tricky and it is important to consult with an experienced bankruptcy attorney to plan properly to help you keep your entire tax refund.

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