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Bankruptcy: Connecticut

Filing bankruptcy in Connecticut in designed to give honest petitioners relief from crippling debt and at the same time offer creditors a chance for repayment based on the value of the debtor’s property or dependability of earnings.  11,396 bankruptcies were filed in Connecticut in 2010, ranking the state 35th in the nation for the number of bankruptcy filings per capita.  90% of Connecticut bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Connecticut

Bankruptcy in Connecticut is governed by federal law and all bankruptcy cases are initiated in the US Bankruptcy Courts, which are located in Hartford and New Haven. Although federal courts have exclusive jurisdiction over bankruptcy proceedings, Connecticut law permits petitioners to use the exemptions found in the U.S. bankruptcy code or those provided under Connecticut law. The exemption systems cannot be mixed and matched. With the guidance of a bankruptcy attorney Connecticut petitioners can gain a full understanding of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Connecticut

Chapter 7 bankruptcies in Connecticut are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who don’t have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Connecticut’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Connecticut’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Connecticut Bankruptcy Exemptions

Connecticut bankruptcy laws designate specific property exemptions that allow debtors to keep certain personal property and assets in bankruptcy so they can recover from debt and be productive members of society. Bankruptcy in Connecticut allows debtors to choose exemptions from the state or federal lists, but not both.

Property exemption amounts are subject to change, so it is vital that petitioners consult a Connecticut bankruptcy attorney before proceeding with the filing.  Connecticut’s key exemptions include:

Connecticut Homestead Exemption

  • $75,000 total: Real property, co-op, including mobile or manufactured home (Husband and wife may double); applies only to claims arising after 1993
  • $125,000 total: in the case of a money judgment arising out of services provided at a hospital

Connecticut Personal Property Exemption

  • Appliances, clothing, food, furniture, bedding
  • Wedding and engagement rings
  • $1,500 total: Motor vehicle
  • Residential utility and security deposits for 1 residence
  • Health aids needed
  • Spendthrift trust funds required for support of debtor and family
  • Proceeds for damaged exempt property
  • Transfers to a licensed debt adjuster
  • Burial plot

Connecticut Tools of Trade Exemption

  • Tools, books, instruments, and farm animals needed

Connecticut Wage Garnishment Exemption

  • 75% of earned but unpaid weekly disposable earnings, or 40 times the state or federal hourly minimum wage, whichever is greater

Connecticut Public Benefits Exemption

  • Arms, military equipment, uniforms, musical instruments of military personnel
  • Social Security and Public assistance
  • Unemployment and Workers’ compensation
  • Veterans’ benefits
  • Crime victims’ compensation

Connecticut Insurance Exemption

  • Health or disability benefits and disability benefits paid by association for its members
  • Fraternal benefit society benefits
  • Life insurance proceeds or avails; Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
  • $4,000 total: Unmatured life insurance policy avails if beneficiary is dependent

Connecticut Pensions and Retirement Savings Exemption

  • Medical savings account
  • State and Municipal employees, and Teachers
  • ERISA-qualified benefits, including IRAs and Keoghs, to the extent wages are exempt

Connecticut Miscellaneous Exemption

  • Child support and alimony, to the extent wages are exempt
  • Farm partnership animals and livestock feed reasonably required to run farm where at least 50% of partners are members of same family

Connecticut Wild Card Exemption

  • $1,000: Any property

Chapter 13 Bankruptcy, Connecticut

10% of debtors petitioned for protection under Chapter 13 bankruptcy laws in Connecticut in 2010.  Chapter 13 bankruptcy in Connecticut requires a court-appointed Trustee work on behalf of the petitioner to reorganize debts and develop a 3-5 year repayment plan.  This plan will negotiate with creditors to allow the debtor’s future earning be used to pay off the debt.  Chapter 13 petitioners keep most – or all – of their property.

How to File Bankruptcy in Connecticut

Eligibility for property exemptions should play a leading role in the decision to file for bankruptcy. With a choice of federal or state exemptions to consider, the goal is to determine which system will allow the debtor to keep major assets and will qualify debts for discharge.  As every case is different, a Connecticut bankruptcy attorney can review the facts and advise whether Chapter 7 or Chapter 13 bankruptcy is the best option in your situation.

Bankruptcy Attorney: Connecticut

It is the debtor’s responsibility to know their rights and obligations as a bankruptcy petitioner.  A Connecticut bankruptcy attorney can interpret the federal laws and state exemptions in a simple, straightforward manner for those considering bankruptcy protection.  Personal bankruptcy cases can be complex and wearing.  In these situations, the advice and guidance of a trained Connecticut bankruptcy attorney is a worthwhile expense.