Few things in life are as stressful as being deeply in debt. Fortunately, consumers can find relief in bankruptcy, a right conferred under federal law. Debtors can have their obligations discharged in Chapter 7 or pay back their creditors under a court-approved repayment plan in Chapter 13. Federal rules and regulations govern bankruptcy, but Vermont residents should know that certain relevant facts apply in their state.
Filing in Vermont
You can file a bankruptcy petition in the United States Bankruptcy Court, District of Vermont, in either Rutland or Burlington. You can check the court's online website for more specific information.
Who Can File for Chapter 7?
Many debtors can file for Chapter 7 bankruptcy protection, but you do have to meet the income eligibility requirements. You can file if your average monthly income is less than Vermont's median income. If your average monthly income is equal to or exceeds Vermont's median income, however, you can only file Chapter 7 if you can pass a stringent means test.
How Many Months is a Chapter 13 Plan?
A Chapter 13 repayment plan depends on your average monthly income. If it's less than Vermont's median income, your Chapter 13 Plan cannot exceed 36 months unless you can show the court that there's good cause for extending it to up to 60 months. If your average monthly income equals or exceeds Vermont's median income, then your Chapter 13 Plan will generally be 60 months in length.
Do I Lose Any Property?
Vermont allows you to retain certain items of personal and real property, depending on the nature of the property and its value. The state has its own exemption laws, but you can choose between state exemptions and those provided under federal law. If you choose state exemptions, you can use the applicable amounts in the federal non-bankruptcy exemptions as well. Otherwise, however, you can't mix and match federal and state exemptions. Federal and state exemptions include the following items of property:
- Homestead equity
- Household furniture, clothing and jewelry
- Engagement and wedding rings
- One vehicle
- Burial plot
- Tools of your trade
- Tax exempt retirement accounts
- Unemployment, workers' compensation and welfare benefits
- Life insurance proceeds
- Certain amount of wages
- Wildcard for any property, subject to limits
There are value differences between federal and state exemptions, some of which are substantial. For example, the federal homestead exemption is $21,635 for an individual, or double for joint filers, but Vermont's homestead exemption is $75,000. Tenancies by the entirety are exempt without limit as to the debts of one of the spouses. Vermont's motor vehicle exemption is $2,500, but the federal exemption is $3,450.
Consult an Attorney
Since bankruptcy laws in Vermont are complicated, please contact a Vermont bankruptcy lawyer for specific information regarding your situation.