Because of common myths, bankruptcy often sounds more frightening than it is. Many Massachusetts residents delay getting legal advice because they have heard that filing bankruptcy means losing their home, giving up their car, or turning over everything they own.
Those concerns are understandable, but they are not necessarily accurate. Massachusetts bankruptcy myths often overlook an important part of bankruptcy law: exemptions.
Exemptions are laws that allow a debtor to protect certain property from creditors taking and liquidating it. Massachusetts permits bankruptcy filers to use either the Massachusetts exemptions or the federal bankruptcy exemptions, subject to the applicable eligibility rules. The choice could make a significant difference in your case.
Myth #1: “If I file Chapter 7, I will lose my house.”
Reality: Your home may be protected by the Massachusetts Homestead Act.
Massachusetts law provides important homestead protection. Under M.G.L. c. 188, a properly recorded declaration of homestead can protect up to $500,000 of qualifying home equity. Massachusetts also provides a $125,000 automatic homestead in certain circumstances when there is no valid recorded declaration. Homeowners seeking the full statutory protection generally need to know whether a recorded declaration is appropriate.
This exemption protects equity, not the entire value of your house. For example, your Massachusetts home may be worth $600,000, and you may owe $500,000 on your mortgage. Your gross equity is approximately $100,000. If you qualify for the $500,000 declared homestead exemption, that equity may be fully protected.
That does not mean every homeowner with a $500,000 homestead can automatically keep the house, regardless of its value or mortgage balance. Liens, mortgages, ownership interests, timing, and other circumstances matter. The Massachusetts Homestead Act also contains exceptions, including certain mortgages, taxes, pre-existing liens, and other specifically identified claims. Speak with a local bankruptcy lawyer to learn more.
Myth #2: “Bankruptcy means I have to give up my car.”
Reality: Massachusetts law provides a motor vehicle exemption.
Under M.G.L. c. 235, § 34, an automobile that’s necessary for personal transportation or to secure or maintain employment is exempt up to $7,500 in wholesale resale value. The exemption increases to $15,000 for a vehicle owned or substantially used by a person who is 60 or older or has a disability.
That does not mean a person with a car worth more than $7,500 automatically loses it. The analysis looks at the vehicle’s value, the amount owed on a secured car loan, available exemptions, and other applicable property exemptions. A vehicle with significant outstanding financing may have little or no nonexempt equity.
Myth #3: “If I make too much money, I cannot file Chapter 7.”
Reality: Income is important, but the means test is more complicated than a simple income cutoff.
The Chapter 7 means test looks to household income, household size, and applicable expense standards. The U.S. Trustee Program updated the median-income figures effective April 1, 2026, and updated IRS expense data applies to cases filed on or after July 15, 2026.
If your household income is below the median, generally you may be able to file for Chapter 7. If your income is above the median, additional calculations determine whether you can file for Chapter 7. Being above median income does not automatically mean you cannot file Chapter 7.
Myth #4: “The bankruptcy trustee can take anything I own.”
Reality: Exemptions can protect your important property.
Common Massachusetts exemptions can cover property such as:
- A qualifying residence, through the homestead exemption explained above
- A necessary vehicle within the statutory limit, as detailed above
- Household furniture and certain appliances
- Tools and property necessary for a trade or business
- Certain cash and bank deposits
- Certain personal property
- Clothing and other basic household necessities
Review the available Massachusetts exemptions carefully with your bankruptcy lawyer, because each exemption has its own requirements and dollar limits.
Myth #5: “If I own valuable property, bankruptcy is automatically impossible.”
Reality: Chapter 13 may provide another option.
Chapter 7 is not the only form of consumer bankruptcy. Chapter 13 allows an eligible person with regular income to propose a repayment plan. It can be particularly important when someone has enough income to make payments over time and may not be eligible to file Chapter 7 bankruptcy.
If you’re deciding which type of bankruptcy to file, speak with a lawyer to understand your options. Key questions include what your assets are worth, what you owe against them, which exemptions apply, and which bankruptcy chapter fits your financial circumstances.
The Bottom Line
If you’re looking for information on Massachusetts bankruptcy myths, do not make a decision based solely on what you have heard from friends, family, or the internet.
Before assuming that you will lose your house or car, work with a lawyer to determine:
- What your property is actually worth
- How much you owe on secured debts
- Which Massachusetts exemptions apply
- Whether federal exemptions would provide different protection
- Whether you qualify for Chapter 7
- Whether Chapter 13 would better protect your property
Bankruptcy exemptions can be complicated, particularly when real estate or significant equity is involved. A Massachusetts bankruptcy attorney can review your assets and debts before you file and explain what property may be protected.
Frequently Asked Questions
If I file Chapter 7 bankruptcy in Massachusetts, will the court take my home equity?
Not necessarily. A Massachusetts homestead exemption may protect qualifying home equity. Whether your home is fully protected depends on factors including its value, mortgage balance, ownership structure, applicable homestead protection, and other circumstances.
Which assets are completely exempt from creditors under Massachusetts bankruptcy law?
Some property is protected under Massachusetts law, but the exemption is not necessarily unlimited. The statute contains specific dollar limits for many categories of property. A bankruptcy attorney should review your complete asset list before filing because you must properly claim exemptions, and different rules may apply depending on the circumstances.
Your Local Chapter 7 and 13 Bankruptcy Lawyers
Are you looking for a dependable, experienced bankruptcy lawyer who can help you file a Chapter 7 or 13 petition? You’ve come to the right place. Daigle Law Office’s attorneys can provide you with experienced Massachusetts bankruptcy advice. We help clients with complicated situations who need solid, reliable information from knowledgeable local lawyers. Daigle Law Office’s attorneys consult with clients on Cape Cod and in eastern Massachusetts. To schedule a free initial consultation, call 508-771-7444 or use our convenient Contact Form.
