The Massachusetts motor vehicle exemption allows you to protect $7,500 of car equity; double that amount if you are over 60 or disabled. You can protect even more equity in your car, van, motorcycle, or other vehicle by using the Massachusetts wildcard exemption. Read on to learn more about protecting your car if you file for bankruptcy in Massachusetts.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
The Massachusetts Motor Vehicle Exemption and Your Car
Massachusetts’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Massachusetts’s car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
The Amount of Massachusetts’ Motor Vehicle Exemption
In Massachusetts, you can exempt up to $7,500 in equity in your car or other vehicle that you use for personal transportation or to find or maintain employment. If you are 60 years of age or older, or if you are disabled, you can exempt up to $15,000.
The Federal Motor Vehicle Exemption
Massachusetts allows you to choose between the state exemptions or the federal bankruptcy exemptions. The federal motor vehicle exemption amount changes every three years. To find the current amount, see our article The Federal Bankruptcy Exemptions.
Using the Massachusetts Wildcard Exemption to Protect Your Car
If the equity in your car is more than $7,500 (or $15,000 for debtors 60 and older or disabled), you may be able to cover the extra equity by using a wildcard exemption. Massachusetts law provides debtors with a $1,000 exemption to use on any personal property, which includes motor vehicles; further, debtors can use up to $5,000 aggregate of any unused furniture exemption or tools of the trade exemption.
Example. Say you are under the age of 60 and not disabled, and your car has $13,000 in equity. You can exempt $7,500 of that equity with the motor vehicle exemption and $1,000 with the wildcard exemption, for a total exemption of $8,500, leaving $4,500 nonexempt. The law provides a $15,000 exemption for furniture and a $5,000 exemption for tools of the trade. If you have $13,000 worth of furniture and $2,500 worth of tools used for work, you can use the $2,000 of unused furniture exemption and the $2,500 unused tools exemption to cover the rest of the equity in your car.
Can Married Couples Double Massachusetts’s Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Massachusetts law allows each debtor to have his or her own set of exemptions with regard to motor vehicles; therefore, each spouse is entitled to $7,500 for one motor vehicle (or $15,000 for spouses 60 and older or disabled).
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?
The motor vehicle exemption applies to any motor vehicle necessary for your personal transportation, looking for work, or maintaining a current job.
Checking Massachusetts’s Exemption Laws
You can find Massachusetts’s motor vehicle exemption at Mass. Gen. Laws Ch. 235, § 34 (16).