On Friday, January 7, 2011, the Massachusetts Governor signed a bill amending (and significantly increasing) the personal property of Massachusetts residents that is protected from seizure by creditors. These "exempt" assets cannot be reached by your creditors in an execution or sold in a bankruptcy proceeding. The changes go into affect on April 7, 2011.
More specifically in bankruptcy you can choose between the Federal exemptions and State Exemptions. The increases in the personal property state exemptions may have a significant impact on which option you choose. Below we have provided a comparison between the old and new exemptions along with our comments:
OLD Massachusetts Exemptions - Necessary wearing apparel, beds, bedding, and 1 heating unit.
NEW Massachusetts Exemptions - Necessary wearing apparel, beds, bedding, 1 heating unit, 1 stove, 1 refrigerator, 1 freezer, and 1 hot water heater.
Comments - It would appear that the Massachusetts' exemptions want you to list “fixtures” that would otherwise be included in the equity of your primary residence. Normally, we do not list fixture appliances separately, and the trustee has never taken issue with it. However, in order to maximize the exemptions you can take, you might consider listing these items and exempting them specifically.
OLD - The amount each month, not exceeding $75, reasonably necessary to pay for fuel, heat, water, hot water and light.
NEW - The amount each month, not exceeding $500, reasonably necessary to pay for fuel, heat, refrigeration, water, hot water and light.
Comments - An appropriate recognition of the increase in these expenses (at least to some extent).
OLD - Household furniture not exceeding $3,000.
NEW - Household furniture not exceeding $15,000.
Comments - Brings household goods and furnishings on par with the federal exemptions – a bit more generous, actually.
OLD - The bibles, school books and library, not exceeding $200.
NEW - The bibles, school books and library, not exceeding $500.
Comments - Not usually an issue, but maybe our clients are just not big readers.
OLD - 2 cows, 12 sheep, 2 swine and 4 tons of hay.
NEW - 2 cows, 12 sheep, 2 swine and 4 tons of hay.
Comments - No change. Good for farmers. Nobody else cares.
OLD - Tools for trade or business, not exceeding $500.
NEW - Tools for trade or business, not exceeding $5000.
Comments - A major and reasonable increase for tradesman, a more common issue then protecting your cows and swine.
OLD - Materials and stock for trade or business, not exceeding $500.
NEW - Materials and stock for trade or business, not exceeding $5000.
Comments - Ditto.
OLD - Provisions necessary for debtor or family, not exceeding $300.
NEW - Provisions necessary for debtor or family, not exceeding $600.
Comments - Normally, we do not list food on hand, and the trustee has never taken issue with this either. This suggests a greater level of detail may be expected in the future.
OLD - One pew in a house of public worship.
NEW - One pew in a house of public worship.
Comments - No change. Also hasn't been much of an issue for our past clients, maybe for the same reason they haven't been exempting their bibles.
OLD - Boats, fishing tackle and nets of fishermen actually used in their business, not exceeding $500.
NEW - Boats, fishing tackle and nets of fishermen actually used in their business, not exceeding $1,500.
Comments - Even tripling this deduction is not going to leave room for much of a boat. Looks like fisherman will not be left as well off as farmers after a bankruptcy.
OLD - The uniform of an officer or soldier in the militia and the arms and accoutrements required by law to be kept by him.
NEW - The uniform of an officer or soldier in the militia and the arms and accoutrements required by law to be kept by the officer or soldier.
Comments - A nice gender recognition update, but otherwise no change.
OLD - Rights of burial and tombs in use as repositories for the dead.
NEW - Rights of burial and tombs in use as repositories for the dead.
Comments - The words “in use” implies that the plot is only exempt if other family members are already buried there. If you purchase a plot, and no other family member is buried there prior to your petition date, this would mean it is non-exempt. It would still seem worth trying to exempt it, but we don’t know how that would turn out. In reality this doesn't seem like an asset the trustee is likely to auction for much.
OLD - One sewing machine, in actual use, not exceeding $200.
NEW - One sewing machine, one computer and one television, in actual use, not exceeding $300 each in resale value.
Comments - Even though a specific exemption has been added for a TV and a Computer, these items would also likely fit into the Household Furnishings exemptions. I'll also note that my mom, an avid quilter, would be happy about the sewing machine value increase (not that it matters to you, but maybe she'll be happy to get mentioned on our blog).
OLD - Share in Co-Ops, not exceeding $100.
NEW - Share in Co-Ops, not exceeding $100.
Comments - Also never needed this one. Not yet anyway.
OLD - Estates of homestead as defined in ch. 188 or, in lieu thereof, the amount of money each rental period, not exceeding $200 per month, necessary to pay the rent for the dwelling unit occupied by him and his family.
NEW - Estates of homestead as defined in ch. 188 or, in lieu thereof, the amount of money each rental period, not exceeding $2,500 per month, necessary to pay the rent for the dwelling unit occupied by him and his family.
Comments - Homestead exemption remains at $250,000. You get the full $500,000 if you’ve lived there for 3 years. In addition, the practical application of this section will be affected by the new MA Homestead Law.
OLD - Cash, savings, wages, not exceeding $125.
NEW - Cash or savings, not exceeding $2,500 (and wages equal to the greater of 85% of the debtor’s gross wages or 50 times the greater of the federal or the Massachusetts hourly minimum wage for each week or portion thereof).
Comments - The Trustee has opposed our characterization of accounts receivable as wages in the past, and required that they be considered an asset. These limitations should be considered if you are owed wages, and could perhaps affect the timing of your filing.
OLD - An automobile, not exceeding $700.
NEW - An automobile, not exceeding $7,500 (a handicapped person or a person 60 years of age or older shall be exempt up to $15,000 ).
Comments - This is a major increase, and is an issue in almost every case (because most people aren't riding their 2 cows to work). In fact, this increase is greater than the Federal Exemption ($3,225) and may play a big part in choosing the Massachusetts Exemptions in the future.
ADDITIONAL NEW SECTIONS- The debtor’s aggregate interest in any personal property, not to exceed $1,000 in value, plus up to $5,000 of any unused dollar amount of the aggregate exemptions provided under clauses Second (household furnishings), Fifth (tools) and Sixteenth (auto).
Comments - Again, this brings the Massachusetts Exemptions more in line with the Federal Exemptions (which contain a $1,075 catch-all).
ADDITIONAL NEW SECTIONS- The debtor’s aggregate interest in jewelry, not to exceed $1,225 in value.
Comments - Most often used for wedding rings (I guess people like to keep those if possible). $1,350 under Federal Exemptions.
Overall Comments - Many of these changes appear to be drafted with the intention of preventing or limiting wage garnishment or asset seizure in conjunction with collections cases. The bankruptcy code will allow them to be honored as exemptions, which, in many ways, are more generous than the federal exemptions. However, considering the frequency that the Massachusetts Exemptions are amended versus the frequency that the Federal Exemptions are amended, there will be a point where these figures will stagnate, and you will still be better served by the Federal Exemptions, which update often.
Click here to read the current Massachusetts Personal Property Exemptions (the Old Law) and here to read the New Law (effective on April 7, 2011).
I have a question. Can one's electronics be taken? Such as TVs, stereos, cell phones, and so on?ReplyDelete
Yes, any household furnishings exceeding the $15,000 exemption, including TVs and Stereos can be taken by the trustee. But that doesn't always mean the trustee will take the items. Any piece of personal property that does not fit into the above-described exemptions can be collected by the trustee and auctioned to pay creditors. It is unusual for a trustee to collect items of small value to auction, but it is within their discretion. Any items of great value will almost certainly be sold to pay creditors.
These changes were due considering the small amounts for some of the items.ReplyDelete
I have a 20,000 car loan, can a debt collection agency seize it for repayment on a 2,500 debt?ReplyDelete
That depends on the fair market value of the car. There is an exemption for $7,500 of equity. For example, if your car has a value of $30,000, and a $20,000 loan, then there is equity of $10,000. After your $7,500 exemption, it is still an asset of $2,500 which can be sized to satisfy a debt of that amount.Delete