The 2021 Montana Legislative Session updated consumer laws related to exempt property and Justice Court jurisdiction. Senate Bill 114 and House Bill 555 raised the value for exempt property and Senate Bill 261 raised the dollar limit on cases that can be heard in Justice Court.
What does exempt mean?
Exempt means that it’s protected by law from collection to pay off an unsecured debt. Unsecured debts are things that aren’t attached to collateral, like medical and credit card bills. The past legislative session increased the value that is exempt from debt collection in your home, car, personal property, and work equipment. These items are now protected up to higher values, making it less likely debt collectors or creditors can take them from you to pay back your debts.
It’s helpful to know that a creditor or debt collector can’t just take your property to pay off an unsecured debt. They must first file a lawsuit against you, give you an opportunity to file an Answer with the court, and then prove that you legally owe the debt. A debt collector must have a court-ordered judgment against you to take your unsecured debt. It is very common for people to not file an Answer to debt collection lawsuit and lose their case by default. You can avoid this by checking out our Step-by-step Guide on How to Answer When You Get Sued.
Is my personal property exempt?
Personal property is exempt up to $7,000 in total value, with no one item exceeding $1,250 in value. For example, if your personal property is worth $6,500 altogether but you have a piece of jewelry worth $1,500, everything but that piece of jewelry is exempt from debt collection.
The previous amount was $4,500, with no one item exceeding $600 in value. Personal property are things like furniture, appliances, jewelry, clothing, books, firearms, animals, and musical instruments.
Is my car exempt?
The interest you have in one motor vehicle is exempt up to $4,000, up from $2,500 before. Your interest is the current sale value of the vehicle minus any loans you owe on it. If your car is worth over $4,000, a debt collector or creditor could take your car and sell it. If they do sell your car, they have to give you $4,000 since that is your exempt interest in the car.
This exemption only applies to unsecured debt unrelated to your car, like credit cards or medical bills. Your car can still be repossessed for late payments or from a loan where you used your car as collateral. If you’re struggling with car payments, you might want to check out our article on repossession. It’s also a good idea to talk to a lawyer. You might also want to look into financial counseling from a HUD-certified counselor.
Is my home exempt?
The equity in your home is exempt for up to $350,000, increased from the previous value of $250,000. By law, this amount will automatically increase from $350,000 by 4% every calendar year after 2021. So in 2022, your home’s value will be exempt up to $364,000. In 2023 it will be $378,560.
A house or mobile home that you live in and own along with the land qualifies as a homestead. A mobile home that you own but rent the lot underneath doesn’t qualify. Mobile homes by themselves are personal property.
This home exemption isn’t automatic. You must file a Homestead Declaration form with the Clerk and Recorders Office in the county where your home is located. Many Clerk and Recorders offices have this form available. You can also find it on the Montana Judicial Branch website. If you already filed a Homestead Declaration, you do don’t need to file a new one to be protected up to the new value. You also won’t need to file a new Declaration each year as the exemption amount increases.
A Homestead Declaration only protects your home from collection on unsecured debts. The exemption won’t prevent foreclosure if you are behind on mortgage payments. If your equity in the house is more than $350,000 a creditor or debt collector may force the sale of your home and take anything above that amount. We have more information on the foreclosure process in Montana. If you’re at risk of losing your home due to a foreclosure or a creditor forcing a sale, talk to a lawyer right away.
Is anything else exempt?
Objects needed for work are exempt up to $4,500 in total value, increased from $3,000. This includes things like: tools, equipment, trade books, and uniforms. This law also protects items used for work that belong to a dependent.
Collectors took my exempt property, what should I do?
If someone took your exempt property, you only have 10 business days after you find out to file paperwork with the court to ask for it back. You need to file a Notice of Claimed Exemption that lists your property and why it is exempt. You must file the Notice of Claimed Exemption in the same court that issued the judgment saying that you owe the debt collector or creditor money.