If a creditor, or anyone, obtains Judgment against you, they are motivated to collect on the Judgment. When someone decides to file for Chapter 7 Bankruptcy, the Bankruptcy Trustee is legally obligated to recover as much as he / she can for the creditors. If the debtor is cash poor, one-way creditors and Trustees can collect is to liquidate the debtor’s assets.
The good news for debtors is that much of their property is safe. There are Federal Bankruptcy Exemptions that protect certain property when someone files Bankruptcy. The State of Connecticut also provides protection from collection by Creditors outside of Bankruptcy. In some cases, the Connecticut exemptions are more beneficial than the Federal Bankruptcy Exemptions. When this is the case, a Debtor in Bankruptcy can elect to use the Connecticut exemptions in lieu of the Federal Exemptions.
Below is a list of the Connecticut exemptions. Some of these exemptions have been increased. Some provide significantly better protection than existed prior to October 1, 2021. Connecticut General Statute Sec. 52-352b (Exempt property) was amended effective October 1, 2021, by Public Act No. 21-161 – House Bill No. 6466.
Two of the most important changes help debtors better protect their residence and vehicles.
Prior to October 1, 2021, a Debtor could protect one vehicle to the value of $3,500.00 (up to two vehicles with a value of $7,000.00 for a married couple). Now a Debtor can protect two vehicles to an aggregate value of $7,000.00 (four vehicles to an aggregate value of $14,000 for a married couple). See Connecticut General Statute Sec. 52-352b(j) in bold below. Note, the exemption applies to the equity in the vehicle. Thus, if the vehicle is worth $20,000.00 and is subject to a lien for $13,000, the $7,000 exemption protects the vehicle from judgment creditors and the Bankruptcy Trustee. However, the Debtor must continue to pay on the car loan, or the lienholder can repossess the vehicle.
Prior to October 1, 2021 a Debtor could protect their residence to a value of $75,000.00 ($150,000.00 for a married couple). Now a Debtor can protect their residence to a value of $250,000.00 ($500,000.00 for a married couple). See Connecticut General Statute Sec. 52-352b(t) in bold below. Again, the exemption applies to the equity in the residence. Thus, if the home is worth $750,000.00 and there is a mortgage and or other liens for $250,000, the $500,000.00 exemption protects the home from judgment creditors and the Bankruptcy Trustee. However, the Debtor must continue to pay on the mortgage, or the lender can foreclose.
Sec. 52-352b The following property of any natural person shall be exempt:
(a) Necessary apparel, bedding, foodstuffs, household furniture and appliances;
(b) Tools, books, instruments, farm animals and livestock feed, which are necessary to the exemptioner in the course of his or her occupation, profession or farming operation;
(c) Burial plot for the exemptioner and his or her immediate family;
(d) Public assistance payments and any wages earned by a public assistance recipient under an incentive earnings or similar program;
(e) Health and disability insurance payments;
(f) Health aids necessary to enable the exemptioner to work or to House Bill No. 6466
(g) Workers’ Compensation, Social Security, veterans and unemployment benefits;
(h) Court-approved payments for child support;
(i) Arms and military equipment, uniforms or musical instruments owned by any member of the militia or armed forces of the United States;
(j) Up to two motor vehicles to the value of seven thousand dollars in the aggregate, provided value shall be determined as the fair market value of the motor vehicles less the amount of all liens and security interests which encumber them;
(k) Wedding and engagement rings;
(l) Residential utility deposits for one residence, and one residential security deposit;
(m) Any assets or interests of an exemptioner in, or payments received by the exemptioner from, a plan or arrangement described in section 52-321a, as amended by this act;
(n) Alimony and support, other than child support, but only to the extent that wages are exempt from execution under section 52-361a;
(o) An award under a crime reparations act;
(p) All benefits allowed by any association of persons in this state towards the support of any of its members incapacitated by sickness or infirmity from attending to his usual business;
(q) All moneys due the exemptioner from any insurance company on any insurance policy issued on exempt property, to the same extent that the property was exempt;
(r) Any interest of the exemptioner in any property not to exceed in value one thousand dollars;
(s) Any interest of the exemptioner not to exceed in value four thousand dollars in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the exemptioner under which the insured is the exemptioner or an individual of whom the exemptioner is a dependent;
The cash surrender value of any life insurance policy issued upon the life of a citizen or resident of this state, unless the life insurance policy was assigned to or was affected for the benefit of the creditor or unless the purchase, sale, or transfer of the life insurance policy is made with the intent to defraud the creditor;
(t) The homestead of the exemptioner to the value of two hundred fifty thousand dollars, provided value shall be determined as the fair market value of the real property less the amount of any statutory or consensual lien which encumbers it, except that, in the case of a money judgment arising out of a claim of sexual abuse or exploitation of a minor, sexual assault or other willful, wanton, or reckless misconduct committed by a natural person, to the value of seventy-five thousand dollars; and
(u) Irrevocable transfers of money to an account held by a debt adjuster licensed pursuant to sections 36a-655 to 36a-665, inclusive, for the benefit of creditors of the exemptioner.