Major exemptions available when filing for bankruptcy in Vermont are listed below. Vermont is one of the few states which allow its residents to choose between federal and state exemptions. In Vermont, bankruptcy filers may choose from the following exemption systems or the federal exemptions.
Debtors cannot pick and choose between these systems. When the debtor uses the Vermont homestead exemption, all other exemptions must be used as well. Likewise, if the debtor uses the federal homestead exemption, the debtor must also use the federal exemptions for personal property.
A lawyer should be consulted to determine each exemption’s specifics and all available exemptions.
- Homestead
- Up to $125,000 in the principal residence, including a condo or mobile home.
- Married couples may not double.
- Equity in automobile
- Up to $2,500 in one motor vehicle.
- Up to $5,000 for married couples.
- Personal property
- Up to $2,500 in appliances, furnishings, clothing, books, crops, animals, and musical instruments.
- Up to $5,000 in crops.
- Up to $700 in bank deposits.
- Up to $500 in jewelry.
- A stove, heater, refrigerator, freezer, water heater, and sewing machine.
- Various livestock.
- Coal, heating oil, and firewood.
- Health aids.
- Wedding ring.
- Tools of the trade
- Up to $5,000 in tools or books used in trade or profession.
- Insurance
- Up to $350 per month in annuity contract benefits.
- Up to $200 per month in health benefits.
- Life insurance proceeds from a person debtor was dependent on.
- Life insurance proceeds that cannot be used to pay debtor’s creditors.
- Life insurance proceeds if the beneficiary is not the insured.
- Unmatured life insurance contract, other than credit life insurance.
- Disability or illness benefits if the debtor needs them for support.
- Pensions
- ERISA-qualified benefits needed for support.
- Tax-exempt accounts, such as 401(k) or 403(b).
- Up to $1,245,475 in IRAs and Roth IRAs.
- IRAs and other self-directed accounts, but only for contributions made one year before filing.
- State and municipal employees.
- Teachers.
- Public retirement benefits.
- Public benefits
- Wages
- The garnishment of some wages is prohibited. While in bankruptcy, the debtor cannot use the protected wages.
- Alimony and child support
- Amount reasonably necessary for the support of debtors and dependents.
- Wildcard
- Any unused amount from motor vehicles, tools of the trade, jewelry, furniture, household appliances, or crops. The unused amount in the wildcard cannot exceed $7,000.
$400 in any property.
How Does the Wildcard Exemption Work?
A debtor can use the wildcard exemption to save any property, including property not covered by the other exemptions. A debtor can only save $400 plus unused value from motor vehicles, tools, jewelry, furniture, appliances, and crop exemptions. There is a limit of $7,000 on the unused value of these exemptions, so the largest wildcard a debtor could claim is $7,400.
Suppose a debtor (a single/bachelor) wants to protect their second car from bankruptcy. The car is valued at $6,000. The debtor would have $5,600 extra credit to use if they don’t use the crop exemption, jewelry exemption, and tools exemption. With the $400 already exempt, the debtor would have $6,000 – enough to save their car.
Assume the same car is worth $8,000 instead. After the second car is sold on behalf of creditors, the debtor can still cash in the wildcard exemption for $6,000 if the wildcard exemption is not enough to save the second car.
What Is Consumer Bankruptcy?
A bankruptcy proceeding is initiated when an individual or business is unable to meet its financial obligations. There are different types of bankruptcy, all of which are under federal law. Consumer bankruptcy is filed when an individual cannot pay back their debts for personal needs.
After a bankruptcy proceeding is completed, the individual is no longer responsible for the debts they incurred. The bankruptcy court will enter a discharge order releasing the debtor. After bankruptcy, an individual has a clean financial slate, but the bankruptcy will remain on their credit report for ten years.
The consequences of bankruptcy can last a lifetime. Only in extreme financial hardships should it be used. There are many considerations an individual should review before filing for bankruptcy.
What Is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy, also known as “liquidation bankruptcy,” allows an individual to discharge all debts that can be legally discharged. Who qualifies for Chapter 7 bankruptcy, how to file, and what types of debts can be discharged are all governed by certain rules.
The individual’s income must be equal to or below the median income in their state in order to qualify for Chapter 7 bankruptcy. There are different income requirements in each state. In cases where an individual’s income exceeds the requirement, the court will apply a “means test” based on the previous six months of income. An individual can’t file for Chapter 7 bankruptcy if they have the means to repay their debts.
Once an individual files for Chapter 7 bankruptcy, the court will issue an automatic stay. Creditors cannot collect debts as a result of this action. Furthermore, it prevents any pending lawsuits, wage garnishments, liens, or property seizures.
Most of a borrower’s property is taken in a Chapter 7 bankruptcy. A trustee appointed by the court oversees each case. To pay off creditors, the trustee will determine whether the sale of the property will produce enough money.
Once the borrower has completed and filed all paperwork, the trustee will schedule a creditors meeting, which is usually the only time the borrower has to appear in court. The case may be dismissed if the borrower fails to attend or provide the required information.
The bankruptcy court will hold a discharge meeting after the creditor’s meeting. The borrower’s unsecured debt is discharged at this meeting. Some debts, such as a car loan or a mortgage, may receive different treatment.
During bankruptcy, the debtor may choose one of the following options:
- Pay the creditor the replacement value of the property or item;
- Return the property, or;
- Reaffirm old payment terms or agree to new payment terms with the creditor.
Some types of debt remain after a bankruptcy discharge:
- Child support;
- Tax debt (some federal tax debt can be discharged if criteria are met);
- Debt created through fraud; and
- Student loans, unless a court determines there is undue hardship.
Creditors can no longer collect on discharged debts after the bankruptcy process has been completed.
What Is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy, known as wage earner’s bankruptcy, is a way for borrowers to restructure their debt and afford payments. Property owners who wish to keep their property usually choose this option.
Some debts may be dischargeable, while others may require payment in full through a payment plan, usually set for three to five years.
Chapter 13 bankruptcy is available to individuals who meet the following criteria:
- They are an individual or married couple, including if they own an unincorporated business or are self-employed;
- Their total secured debts are equal to or less than $1,184,200.00;
- Their total secured debts are equal to or below $ 394,725;
- They have not had a bankruptcy petition dismissed within the last 180 days due to failure to appear or comply with the court; and
- They receive credit counseling through an approved counselor within 180 days of filing their petition.
You should always consult with an experienced bankruptcy attorney if these requirements change.
Chapter 13 bankruptcy differs from Chapter 7 bankruptcy in that the borrower keeps or attempts to keep the most property while still making payments. It is important to consider the pros and cons of filing for bankruptcy.
As with Chapter 7, Chapter 13 bankruptcy can affect your credit for up to ten years after filing.
During the Chapter 13 bankruptcy payment plan process, the borrower must adhere to a strict budget without lines of credit. Borrowers often abandon the payment plan.
Do I Need a Bankruptcy Lawyer?
Filing an exemption incorrectly in bankruptcy can result in the property being seized, even if it would have been exempt had the exemption been filed correctly. For Vermont bankruptcy exemptions, either the Vermont bankruptcy exemption statute or the federal bankruptcy exemption system can be used.
Having a bankruptcy lawyer on your side can help you decide what chapter of bankruptcy is right for you and ensure that your exemptions are filed correctly. A qualified bankruptcy lawyer in Vermont can provide you with more information if there is a legal basis for your bankruptcy case.
