If you file bankruptcy in Vermont, the single most valuable protection is the state homestead exemption, which shields up to $125,000 of equity in your primary residence (12 V.S.A. § 5901; 27 V.S.A. § 101). Just as important, Vermont is one of a minority of states that lets you choose between the Vermont state exemption list and the federal bankruptcy exemptions under 11 U.S.C. § 522(d). Vermont has not "opted out" of the federal set, so you pick whichever system protects more of your property, but you must use one system or the other, not a mix-and-match of the best parts of each.
Vermont's Homestead Exemption: $125,000
Vermont's homestead exemption is among the more generous in New England. It protects up to $125,000 of equity in a house, condominium, mobile home, or the land it sits on, as long as it is your primary residence. Equity means the home's value minus what you still owe on the mortgage. If your equity is under $125,000, a Chapter 7 trustee generally cannot force a sale of the home to pay unsecured creditors.
A few practical points matter. The homestead protection applies to the residence you actually occupy, not a vacation camp or rental property. A married couple who both have an ownership interest can often each claim the exemption, effectively doubling the protection on a jointly owned home. The exemption does not erase a mortgage or a properly recorded lien, you still owe secured debts, but it shields your equity cushion from being seized by other creditors.
Vehicles, Household Goods, and the Wildcard
Vermont's main personal-property exemptions live in 12 V.S.A. § 2740. The commonly cited figures include:
- Motor vehicle: up to $2,500 in equity in one vehicle.
- Household goods: furniture, appliances, clothing, books, and similar items up to $2,500 in aggregate, plus specific protection for items like a cooking stove, heating appliances, a refrigerator or freezer, a water heater, and a sewing machine.
- Tools of the trade: professional or trade books and tools up to $5,000.
- Jewelry: a wedding ring without a dollar cap, plus other jewelry up to a limited amount.
- Bank deposits: a modest amount of money in a financial institution.
- Growing crops, certain livestock, and food/fuel reasonably necessary for the household.
Vermont also provides a wildcard exemption: $400 in any property, and on top of that you may apply up to $7,000 of any unused amounts from several categories (such as the vehicle, tools of the trade, jewelry, growing crops, and household furnishings) to property of your choice. This "spillover" wildcard is what makes Vermont's scheme flexible, because filers who do not own a car worth $2,500 or $5,000 in trade tools can redirect that unused exemption toward cash, a tax refund, or other assets that would otherwise be unprotected.
Because these dollar figures are statutory and can be amended by the Legislature, confirm the current numbers before you rely on them. The exact amounts in 12 V.S.A. § 2740 control, and a bankruptcy clerk, legal aid attorney, or the official Vermont Statutes Online text is the right place to verify them.
Other Protected Property
Several categories are protected beyond the everyday list. Most retirement accounts, including 401(k)s, pensions, and IRAs, are broadly protected in bankruptcy under both Vermont and federal law (IRAs are capped at a large inflation-adjusted federal ceiling). Public benefits such as Social Security, unemployment compensation, workers' compensation, veterans' benefits, and public assistance are generally exempt. Support obligations like alimony and child support reasonably necessary for your family, the proceeds of certain insurance policies, and personal-injury recoveries also receive protection, sometimes with caps.
Vermont Exemptions vs. the Federal Set
Because Vermont permits the federal exemptions, you should compare the two carefully. The federal homestead figure (11 U.S.C. § 522(d)(1)) is far smaller than Vermont's $125,000, and it is adjusted for inflation every three years, so a filer with significant home equity almost always does better with the Vermont homestead. On the other hand, the federal scheme includes a large standalone wildcard, which can be more useful for renters or filers with little home equity but other assets to protect. The current federal dollar amounts are revised periodically, so check the latest § 522(d) figures rather than assuming an old number. The choice is all-or-nothing: you cannot take Vermont's homestead and the federal wildcard together.