What Are the Montana Bankruptcy Exemptions?

What are the Montana bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

If you file for Chapter 7 bankruptcy, you won’t be expected to reorganize your debt and pay it back over time like you would if you filed for Chapter 13 bankruptcy. Instead, the bankruptcy court will eliminate your eligible debts outright after the bankruptcy judge assigns a trustee to determine whether any of your personal property can be sold to partially repay your creditors. Applying either federal bankruptcy exemptions or Montana bankruptcy exemptions to your assets will protect them from the risk of being sold by the trustee assigned to your bankruptcy filing. Essentially, you’ll remain the owner of your exempt property, whereas your nonexempt property may be sold to benefit your creditors. This is why it is important to claim as many bankruptcy exemptions as you can.

Does Montana allow the use of federal bankruptcy exemptions?

Montana is not one of the 17 states that allow residents to claim federal exemptions instead of state-specific ones. As a result, as long as you’ve lived in Montana for at least two years, you’ll need to claim state-specific exemptions (as detailed by Montana law) to your property when filing for Montana bankruptcy.

This makes the process of claiming bankruptcy exemptions fairly straightforward, as you don’t have to choose between the federal exemption scheme and the Montana exemptions. Simply claim every exemption that applies to you under state bankruptcy law and you’ll keep as much of your property safe from your trustee as possible.

If you recently moved away from Montana and are now filing bankruptcy in another state, you may be eligible to use federal exemptions. To find out more, read our guide to filing bankruptcy after a move.

Montana Bankruptcy Exemptions

If you are filing as a single individual, all of the exemption values listed below will apply to your situation without any conditions attached. However, if you are married and you and your spouse are filing bankruptcy jointly, you are each entitled (unless otherwise noted) to a full set of exemptions – provided that the property you’re trying to exempt is jointly owned. For example, if you and your spouse jointly own a motor vehicle, you can exempt up to $9,000 in equity in that vehicle. However, if only one of you owns the vehicle you’re trying to exempt, the exemption value amount available to you is that of a single filer ($4,500 in equity). Keep this “doubling” standard in mind when evaluating the exemption amounts listed below if you’re married and filing jointly.

Real Property - the Montana Homestead Exemption

The Montana homestead exemption is particularly generous. It allows filers to exempt up to $250,000 in equity in their primary residence, provided that they file a homestead declaration before submitting a formal bankruptcy petition to the court. The homestead may encompass up to 320 farm acres, one-quarter of city acreage or a single residential acre if the homestead is located outside a municipality.

Note that in addition to this homestead exemption value, you may protect proceeds from condemnation, insurance, or sale of your qualifying residence for a maximum of 18 months. When this 18-month period expires, your funds will lose exemption status, so you may want to speak with an attorney about how to best use this grace period to your benefit without taking a financial “hit” when the expiration period ends.

Personal Property Exemptions

In addition to the homestead exemption, a relatively limited number of personal property exemptions are available for Montana bankruptcy filers. Unless otherwise noted, the following assets may be exempted up to their full value:

• Burial plot

• Cooperative association shares

• Health aids prescribed by a physician

• Motor vehicle (up to $4,000 of equity in a single vehicle)

Finally, filers may exempt up to $1,250 per item in the following categories up to $7,000 total. Note that the values of these items are generally calculated using “garage sale” pricing, so you can likely protect much more personal property under this provision than it might feel like at first glance:

• Animals

• Appliances

• Books

• Clothing

• Crops

• Feed

• Firearms

• Household Furnishings

• Jewelry

• Musical instruments

• Sporting goods

Note also that filers may exempt up to $4,500 in books, implements and other “tools of the trade” necessary for their profession, as well as uniforms and other accoutrements required to carry out government functions.

Money Benefits

Although Montana law doesn’t boast particularly generous personal property exemptions, it makes great allowances for monetary benefits. Unless otherwise noted, the following monetary benefits may be exempted in full:

• Alimony or spousal support

• Child support

• Crime victims’ compensation

• ERISA qualified benefits (subject to some time and value caps)

• Firefighters’ retirement benefits

• Fraternal group society benefits

• Group life insurance proceeds

• Hail insurance benefits

• Life insurance proceeds (other than to the insured)

• Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors

• Medical care and hospital care benefits

• Medical savings accounts

• Police officers’ retirement benefits

• Property belonging to a business partnership

• Public assistance and public benefits

• Public employee retirement benefits

• Retirement benefits protected under federal law, including certain IRAs and Roth IRAs

• Silicosis benefits

• Social Security

• Teachers’ retirement benefits

• Unemployment compensation

• University system employees’ retirement benefits

• Unmatured life insurance contracts

• Veterans’ benefits

• Workers’ compensation

Generally speaking, retirement accounts are protected – whether they be privately held or government sponsored. According to the Montana Code, accounts consisting of benefits “retirement, pension, stock bonus, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, excluding that portion of contributions made by the individual within 1 year before the filing of the petition in bankruptcy that exceeds 15% of the individual's gross income for that 1-year period” subject to some limited exceptions.

Finally, a minimum of 75% of earned but unpaid wages may be exempt, although a bankruptcy judge may choose to authorize a more sizable exemption for low-income filers.

Other Montana Exemptions

As you’ve been researching the bankruptcy process, you may have heard about “wildcard exemptions.” Most states provide filers with the option to exempt some property of their choice that would not otherwise be exempted under other bankruptcy law provisions. This option is often referred to as a wildcard exemption. Unfortunately, Montana law does not feature a wildcard exemption. As a result, it is particularly important that you try to exempt all the property you can according to the exemptions listed above, as there is no “wiggle room” available to exempt additional property under a wildcard option.  

Filing Chapter 7 bankruptcy? 

Whether you’re committed to filing for Montana bankruptcy or you’re still mulling over all of the debt relief options available to you, you may benefit from scheduling a free consultation with a bankruptcy attorney in your area. Seeking legal advice now can help you to clarify your next steps forward. As there is no obligation to continue working with a lawyer with whom you’ve had a free consultation, there is no risk involved in seeking guidance at this time, regardless of whether you hope to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Upsolve can help to connect you with a qualified attorney in your area. If you ultimately choose to file for Chapter 7 bankruptcy and can’t afford a lawyer’s services, Upsolve may be able to help you file your bankruptcy forms for free. Even if you aren’t eligible for our direct services, you can take advantage of many free bankruptcy-related informational guides on our website at any time.