Connecticut is one of the original states that was pivotal to the American Revolution and forming of our federal government. Although it’s technically the southernmost state in New England, several of its cities are considered part of the bustling New York-New Jersey metropolitan area. Generally a well-to-do state, Connecticut had the highest per-capita personal income in the country of over $71,000 just last year. That does not mean, however, that it doesn’t have its share of economic problems. Connecticut’s economy grew less than that of the country overall in 2016, while capital city Hartford was considering declaring bankruptcy in May.
Connecticut, unfortunately, has been one of the slowest states to recover jobs since the recession, regaining less than 77% while its neighbors have recovered to and grown past those levels. In February of this year alone, the state lost 1,600 jobs, mostly from the private sector.
Clearly, a job loss or other hardship can impact many people in Connecticut and the rest of the U.S. Some of these people have found relief without losing their property by filing for Chapter 7 bankruptcy, which is detailed under Title 11 of the U.S. Code.
Below, we’ll go over some of the basics of Chapter 7, what Connecticut’s bankruptcy exemptions are, and how you can get help filing for bankruptcy.
The Basics of Chapter 7 Bankruptcy
Chapter 7 is a liquidation bankruptcy (as opposed to a reorganization in Chapter 13), and one of a few options you can use to help take control of your debt. In a Chapter 7 bankruptcy, the bankruptcy trustee can sell the debtor’s non-exempt property in order to help pay their creditors.
Your exempt property is safe from the bankruptcy trustee, and that’s why determining what property is exempt is so important. In many cases, you can only exempt property in a category up to a certain value. The limits on the value apply to the equity in the property, not the value of the property as a whole. The U.S. Bankruptcy Code provides a list of exemptions, but each state can establish their own alternative list of exemptions.
In Connecticut, you have a choice regarding which set of exemptions to use.
Connecticut’s Special Requirements for Filing for Bankruptcy
If you have lived in Connecticut for most of the last six months (at least 91 days), you may file for bankruptcy there. However, in order to use the state’s law for exemptions, you must have lived in Connecticut for the last two years before you filed. If not, your exemptions will fall under the rules of the state you lived in for most of the six months before the two-year period prior to filing.
There are some rules specific to Connecticut that you must follow. You must:
- Show that you received credit counseling from an agency approved by the U.S. Trustee in Connecticut within the six-month period before you file for bankruptcy.
- Take a debtor education course from an approved Connecticut credit counseling agency before you get a bankruptcy discharge.
Connecticut vs. Federal ExemptionsThe top 5 exemptions under Connecticut law compared to federal law.
|Type of exemption||Connecticut law||Federal law|
|Homestead||$75,000 of equity in principal place of residence, including mobile homes; married and filing jointly increases to $150,000||$23,675 of equity in principal place of residence|
|Personal property||Food, clothing, health aids, spendthrift trust funds, and more, plus $1,000 wildcard exemption||$12,625 aggregate value on household goods, plus federal wildcard exemption applicable ($1,250 plus $11,850 of any unused portion of your homestead exemption)|
|Wages||75% earned, or 40 times state or federal minimum wage, whichever is higher||Income you've earned but not yet received becomes part of your bankruptcy estate|
|Pension/retirement||State/municipal employees, teachers, and medical savings covered||Exempt, with a cap of about $1.28 million on IRAs and Roth IRAs|
Connecticut Bankruptcy Exemptions
Before you even start to fill out your bankruptcy forms with the help of an experienced bankruptcy attorney, you’ll want to decide whether or not to use federal exemptions that are part of the U.S. Bankruptcy Code or the state exemptions (Conn. Gen Stat. Ann. §52-352) provided by Connecticut law. You must be consistent and choose one method of exemptions; you can’t alternate between the two, such as using the Connecticut exemptions for your house but federal exemptions for your car.
Should you decide to go with Connecticut’s exemptions, you may also use additional exemptions that are called the federal non-bankruptcy exemptions, which may be found in various sections of the Bankruptcy Code. An attorney would review these with you. You cannot use these if you are using the federal bankruptcy exemptions.
Connecticut grants an exemption of $75,000 of equity in your owner-occupied home. This includes mobile homes. If you are married and filing jointly, the homestead exemption jumps to $150,000. In contrast, the federal exemption is only a $23,675.
Example: If you bought a $300,000 house in which you have $70,000 in equity, it will not be sold if you are single and using the Connecticut exemptions, which allow you up to $75,000. However, if you are using federal exemptions, there is a chance the trustee could sell the house to pay your debts, since the federal exemption of $23,675 is quite a bit less than your equity.
Connecticut allows an exemption for food, clothing, health aids, appliances, furniture, bedding, wedding and engagement rings, a burial plot, residential utility and security deposits for one residence, proceeds for damaged exempt property, and transfers made to a licensed debt adjustor. It also exempts spendthrift trust funds needed for support and tuition savings accounts. In addition to these, you can take a wildcard exemption worth $1,000 to protect any property you like.
The federal exemption gives you a $12,625 aggregate value on household goods, jewelry up to $1,600, health aids, wrongful death recovery for a person you depended on for support, and a personal injury judgment up to $23,675 with the exception of pain and suffering or pecuniary loss that can’t really be measured in money, such as loss of enjoyment. A wildcard exemption also is available under the federal exemptions; it’s $1,250 plus $11,850 of any unused portion of your homestead exemption.
For some people, it won’t make much difference regarding personal property whether or not they take the Connecticut exemptions or the federal exemptions. For others, it could make a great deal of difference since the federal exemption for household goods has a ceiling, but the wildcard exemption lets you exempt an amount of the unused portion of your homestead exemption. You will want to consult with your attorney to determine your best choice overall for the exemption method you choose.
Connecticut allows a motor vehicle exemption of $3,500 compared to the federal exemption of $3,775. If the equity in your car is less than the exemption of the method you have chosen, the car can’t be sold to pay off your debts. However, if your equity is a lot more than the exemption, then the bankruptcy trustee is likely to sell it.
Example: If you bought a car worth $20,000 but owe the dealership $17,000 on it, you have $3,000 equity in the car and can protect it under either the Connecticut or federal exemption. As you can see, there is only a $225 difference between the two.
Under the Connecticut exemptions, you will be able to keep 75% of the wages you earn or 40 times the state or federal minimum wages, whichever is higher.
Under the federal exemption, wages you earn after filing are not part of your bankruptcy estate. Income you’ve earned but not yet received do become part of your bankruptcy estate. Unless wages fall under an exemption, they can be taken by the bankruptcy trustee to pay your debts.
Pension and retirement money is generally exempt under Connecticut law, but there is a cap of $1,283,025 on IRAs and Roth IRAs. State employees, municipal employees, teachers, and medical savings accounts are specifically covered under Connecticut law.
Pensions and retirement money are also generally exempt under the federal code and also have the same cap.
Connecticut Bankruptcy Court Locations
Chapter 7 bankruptcy cases in Connecticut are filed in the U.S. Bankruptcy Court for the District of Connecticut. There is one district but three bankruptcy courts; the clerks’ offices for all three are open Monday through Friday, 9 a.m. to 4 p.m., except for federal holidays.
Address: Abraham Ribicoff Federal Building, 450 Main St., 7th Floor, Hartford, CT 06103
Address: Brien McMahon Federal Building, 915 Lafayette Blvd., Bridgeport, CT 06604
Address: Connecticut Financial Center, 157 Church St., 18th Floor, New Haven, CT 06510
Get Help Filing for Bankruptcy in Connecticut
You can find out more about bankruptcy in Connecticut at the Connecticut Law About Bankruptcy page on the Connecticut Judicial Branch Law Libraries website. But before taking action beyond gathering information, it would be wise to contact an experienced Connecticut bankruptcy attorney to discuss how the choices open to you will impact your individual financial situation.