Under chapter 7 bankruptcy laws, debtors are able to have certain types of property liquidated to satisfy creditors, while having the bulk of their consumer debt erased, with exceptions for alimony and child support, tax debts, and most student loans. However, there are specific types of property which are exempt from liquidation.
Federal law has some limitations on the dollar amount that can be exempt. However, certain states, including Montana, require that residents use state standards when claiming exemptions under chapter 7 bankruptcy, though federal standards allowing married couples filing jointly under chapter 7 to double their exemptions still apply under Montana law. Some of the specific laws governing bankruptcy property exemptions in the state of Montana go further to protect the assets of her citizens than federal laws in general. .
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- Montana state exemption – up to $2,500
Even though a portion of the value of Montana motor vehicles are exempt from liquidation, if the owner is still repaying a loan that is secured by that car, they must continue to keep up the payments. The lien holder still has the right to repossess the car if those payments are missed.
How to Keep Your Home
- Federal homestead exemption - $20,200
- Montana state exemption - $250,000 for real property or mobile homes
- Filers must be occupying the home at the time they file for chapter 7
- A homestead declaration must be recorded before filing
- Insurance, condemnation, or sale proceeds are exempt for 18 months
While a mortgage may be held or erased as a result of a bankruptcy, the lien is not. If a debtor fails to make regular payments, they may still face foreclosure.
Montana allows exemptions for other forms of personal property:
- Clothing, household goods and furnishings, appliances, jewelry, books, animals and feed, firearms, musical instruments, crops, and sporting goods – up to $600 per item and $4,500 total
- Proceeds for exempt property that is damaged or lost is exempt for 6 months after receipt
- Shares in a coop association – up to $500 in value
- Health needs
- Burial plots
- Tools of the trade
- Tools, books, and instruments of trade – up to $3,000
- Arms, uniforms, and accoutrements necessary for government functions – all
Filing Schedule C of a Bankruptcy Petition
A chapter 7 bankruptcy petition is not complete without Schedule C. This form details all of the exemptions the filer is claiming, along with the supporting state statutes. Without this form, all property exemptions will be denied. Included in the form is information about:
- The type of property claimed
- The state statute allowing that exemption
- The value of the property exemption
- The current value of the property (the assessed, not the market, value)
Always Talk to a Bankruptcy Lawyer First
While filing for bankruptcy pro se is always an option, the US Bankruptcy court strongly recommends every petitioner be represented by an experienced bankruptcy attorney to avoid missteps in the case which may lead to a dismissal, or loss of debtor rights, such as the automatic stay.
