Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Massachusetts, bankruptcy exemptions play a crucial role in both Chapter 7 and Chapter 13 bankruptcy filings. These exemptions allow individuals to retain certain assets, with the homestead exemption being particularly significant for homeowners. As of the current regulations, the Massachusetts homestead exemption allows homeowners to protect up to $500,000 of equity in their primary residence. To claim this exemption, the homeowner must have filed a Declaration of Homestead with the appropriate Registry of Deeds. For those who have not filed a declaration, an automatic exemption of $125,000 is available. Additionally, Massachusetts offers a variety of other exemptions that protect personal property, retirement accounts, insurance, public benefits, tools of the trade, and more. The specific amounts and types of exempt property can vary, and some individuals may choose to use the federal exemption scheme instead of the state exemptions if it is more favorable to their situation. It is important to consult with an attorney to understand the best course of action based on individual circumstances and the most current exemption limits.