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Debunking myths: You don’t lose everything in a Connecticut bankruptcy

Sadly, many individuals saddled with enormous debt fail to even consider bankruptcy as a way to get a fresh start due to their erroneous belief that they will lose all of their assets if they go through the process. In fact, many of those who eventually file for bankruptcy learn that most of their property will ultimately be exempted from the bankruptcy estate - meaning they can keep the property following the bankruptcy.Indeed, individuals filing for bankruptcy in Connecticut actually have several options available to them when it comes to protecting assets through bankruptcy exemptions.

Commonly used bankruptcy exemptions in Connecticut

Although the Federal bankruptcy code enumerates several specific exemptions, it also permits individual states to opt out of these exemptions and create their own. And, while Connecticut has not expressly opted out of the federal exemptions, state lawmakers have still created several of their own exemptions for those living in Connecticut.Basically, this means that individuals who file for bankruptcy in Connecticut can choose between either the federal exemptions or the state exemptions - but once they choose one system, they must stick to it for all exemptions. For instance, if a debtor elects to use the state exemptions, all exemptions claimed during a bankruptcy must be under state law and not federal law.

​One of the most important exemptions under Connecticut law is the homestead exemption. This particular exemption protects an individual's equity in his or her primary residence up to a value of $75,000 - or $125,000 if the individual is protecting his or her home against a money judgment related to hospital bills. For example, if a person owns a home valued at $250,000, with an outstanding mortgage balance of $175,000, he or she will be able to protect the $75,000 of home equity.

​It is also important to note that married couples filing a joint bankruptcy can stack their exemptions if they both own the property in question - essentially doubling the exemption amount in the process. For instance, a married couple can claim a homestead exemption of $150,000 if they jointly own the home and file for bankruptcy together in Connecticut.

However, the homestead exemption is not the only important exemption under Connecticut law. Persons filing for bankruptcy in Connecticut - and using the state exemptions - can also exempt, and thus keep, one motor vehicle valued up to $3,500. Additionally, Connecticut bankruptcy filers can also take advantage of the $1,000 "wildcard" exemption, which can be used to protect any property.

Ultimately, deciding whether to go with the federal exemptions or Connecticut exemptions heavily depends upon the circumstances of the individual debtor. Accordingly, if you are currently considering bankruptcy as an option to deal with insurmountable debt, it is often best to speak with a knowledgeable bankruptcy attorney. A skilled attorney can assist in reviewing your situation and help determine which exemptions will work best for you.