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Massachusetts bankruptcy debtors who need to use the state-specific Massachusetts list of exempt property got some good news recently from Judge Hoffman, whose ruling in the Sutherland case may have effectively doubled the wild card exemption under state law.

The Sutherland case was reviewed here previously, where another aspect of the case looked at the odd issue of whether a motorcycle could be exempted under a provision for automobiles.

That wasn’t all that was at stake there, though, as the Sutherlands wanted to keep more than their Harley. The next problem to crop up was how much of a Massachusetts wild card exemption could they claim?

Debtors typically use the Massachusetts list of exemptions, instead of the more generous federal ones, when they need to protect home equity with a Massachusetts homestead declaration.

The question became whether Massachusetts will allow up to $5,000 in cash or bank accounts to be protected from creditors in the bankruptcy process.

Judge Hoffman said “yes,” because there are actually two independent Massachusetts statutes, each creating a $2,500 break.

First, there is Massachusetts General Law chapter 246, section 28A, which provides:

“Twenty-five hundred dollars of any natural person in an account in a trust company, savings bank, cooperative bank, credit union, national banking association or other banking institution doing business in the commonwealth shall be exempt from attachment by trustee process. A trustee summons served on any such institution shall describe the exemption with reference to this section. Upon service of a trustee summons, the trustee shall answer as subject to attachment only so much money of the defendant that exceeds $2,500.”

In addition to that gem, Chapter 235, section 34 of the General Laws allows:

The following property of the debtor shall be exempt from seizure on execution: ….., $2,500 in cash or savings or other deposits in a banking or investment institution, wages equal to the greater of 85 per cent of the debtor’s gross wages or 50 times the greater of the federal or the Massachusetts hourly minimum wage for each week or portion thereof and the full amount owing or paid to a person as public assistance…”

So according to Judge Hoffman, these sections can be combined, and produce an effective $5,000 Massachusetts wild card exemption.

The caveat, as always, is that bankruptcy court opinions aren’t binding on the other bankruptcy judges in the state — so if a case is assigned to any other judge, debtors will have to take that jurist’s temperature on the same issue.

Who said bankruptcy law isn’t fun?

By Doug Beaton

Practicing bankruptcy law in Massachusetts means you are always learning new things. A question that cropped up recently: Does a Harley – Davidson motorcycle count as a debtor’s automobile? And a little more broadly — is a motorcycle a vehicle?

These questions were one of the subjects in the Sutherland case, decided on July 16, 2013. The married debtors had used the appropriate Massachusetts exemption to try to protect one of their vehicles — a Harley-Davidson motorcycle worth an estimated $12,000.

The exemption law in question is the sixteenth paragraph of Massachusetts General Laws Chapter 235, section 34, which says:

An automobile necessary for the debtor’s personal transportation or to secure or maintain employment, not exceeding $7,500 of wholesale resale value; provided, however, that the equitable value of a vehicle owned or substantially used by debtor who is either a handicapped person or a person 60 years of age or older shall be exempt up to $15,000 in wholesale resale value……

The law is obviously intended to protect people’s vehicles so they can get to work, school, doctors, etc., but the word “automobile” in the first line created potential problems for the Sutherland’s Harley: would a motorcycle count as an automobile?

The second sentence of the law is a puzzler too, where a $15,000 exemption is given to debtors age sixty and over to apply to thier “vehicle.”

The result of the case? Since Mr. Sutherland was 62 when he filed the case, Bankruptcy Judge Melvin Hoffman interpreted the second sentence, and decided that a motorcycle is indeed a vehicle under Massachusetts law, and the Sutherlands could keep their Harley.

On the other hand, since the matter was now settled, Judge Hoffman declined to offer any opinion on whether a motorcycle was also an “automobile,” which could have an impact in future cases for debtors under sixty.

To top things off, Hoffman’s opinion, like all bankruptcy rulings, aren’t officially binding on the other judges in Massachusetts, so debtors with motorcycles in the Bay State could possibly face some bumpy roads ahead in bankruptcy court.

Stay tuned!

By Doug Beaton