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 Vermont, 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 important for homeowners. As of the current regulations, Vermont allows a debtor to exempt up to $125,000 of equity in their primary residence under the homestead exemption. This means that if the equity in the home does not exceed this amount, it is protected from being sold to satisfy creditors' claims in a bankruptcy proceeding. It's important to note that the exemption amount is subject to change and can vary based on legislative updates. Additionally, Vermont offers other exemptions that protect various types of property, such as personal property, tools of the trade, insurance, pensions, public benefits, and more. Debtors in Vermont have the option to choose between state-specific exemptions and federal bankruptcy exemptions, but they cannot mix and match between the two systems. An attorney can provide guidance on the most beneficial set of exemptions to use based on an individual's circumstances.