Losing everything you own is one of the most common fears about bankruptcy. However, most individuals who file a Chapter 7 bankruptcy case can hold on to their home, vehicle and other assets. Federal law and Connecticut statutes both establish bankruptcy exemptions which govern the value of the assets you can keep when filing for bankruptcy.
In Connecticut, people who file Chapter 7 bankruptcy can choose either the federal or state exemptions. Learn how Connecticut law determines what type of property you can retain through Chapter 7 bankruptcy.
Homestead exemption
For the purpose of bankruptcy law, the term “homestead” describes a person’s primary residence. Under federal bankruptcy law, a person filing Chapter 7 can keep up to $23,675 in homestead equity. Connecticut increases the amount of exempt equity to $75,000 for an individual and $150,000 for a married couple. In either case, you must live in the home to claim the homestead exemption.
Vehicle and personal property exemptions
Federal law allows a person who is filing Chapter 7 to keep a vehicle worth up to $3,775. For Connecticut, the vehicle exemption is $3,500.
Connecticut designates health aids, food, clothing, household items and other specific categories of personal property as exempt. The federal exemption is an aggregate amount of $12,625 for all household items. In addition, both federal and state law have a wildcard category for household exemptions ($1,000 for Connecticut, $1,250 for federal).
Salary and pension exemptions
With the federal bankruptcy exemption for wages, the filer’s earned but unpaid salary will go toward debt repayment. The Connecticut bankruptcy laws allow the filer to keep the greater of 40 times the state minimum wage or 75% of his or her earned but unpaid salary.
Both the state and federal bankruptcy laws allow individuals to keep their retirement savings and pensions, although $1,283,025 is the limit for IRA and Roth IRA accounts.
Closely reviewing both the state and federal bankruptcy exemptions can help you plan a smart course of action if you are struggling with unpaid debt.
