Montana Bankruptcy Guide — Chapter 7 & 13
Chapter 7 and Chapter 13 bankruptcy in Montana — exemptions, the automatic stay, means test eligibility, and what property you can protect
Bankruptcy is a federal court process that can stop collection actions, discharge qualifying debts, and provide a structured path to financial stability. The two most common consumer chapters — Chapter 7 (liquidation) and Chapter 13 (repayment plan) — follow different paths but both begin with the automatic stay that halts garnishment, foreclosure, and other collection activity the moment you file.
Montana requires debtors to use state exemptions — federal bankruptcy exemptions under §11 U.S.C. § 522(d) are not available.
The two most common consumer chapters
Chapter 7: Liquidation discharge
Chapter 7 eliminates most unsecured debts (credit cards, medical bills, personal loans) in approximately 3-4 months §11 U.S.C. § 727. A Trustee reviews your assets, but many Chapter 7 cases are "no-asset" — meaning exemptions protect everything the debtor owns. Eligibility requires passing the Means test §11 U.S.C. § 707(b), which compares your household income to Montana's median.
Chapter 13: Repayment plan
Chapter 13 reorganizes debt into a 3-to-5-year repayment plan §11 U.S.C. § 1322. It is designed for people with regular income who need to catch up on secured debts (mortgage arrears, car loans) or who earn too much to qualify for Chapter 7. At the end of the plan, remaining qualifying unsecured debts are discharged.
Chapter 7 vs. Chapter 13 at a glance
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Purpose | Eliminate unsecured debt (fresh start) §11 U.S.C. § 727 | Reorganize debt into a repayment plan §11 U.S.C. § 1322 |
| Timeline | 3–4 months §11 U.S.C. § 727 | 3–5 years §11 U.S.C. § 1322 |
| Who qualifies | Must pass the Means test §11 U.S.C. § 707 | Regular income required §11 U.S.C. § 109 |
| Property at risk | Non-exempt assets may be liquidated §11 U.S.C. § 704 | You keep all property §11 U.S.C. § 1306 |
| Mortgage arrears | Cannot cure — may lose home §11 U.S.C. § 362 | Can cure arrears over plan period §11 U.S.C. § 1322 |
| Car loans | Must be current or surrender §11 U.S.C. § 521 | Can restructure payments §11 U.S.C. § 1325 |
| Tax debt | Limited (must meet 3-year/2-year/240-day rules) §11 U.S.C. § 523 | Can pay over plan period §11 U.S.C. § 1322 |
| Credit impact | Stays on report 10 years §15 U.S.C. § 1681c | Stays on report 7 years §15 U.S.C. § 1681c |
| Repeat filing | 8-year wait after prior Ch. 7 discharge §11 U.S.C. § 727 | 2-year wait after prior Ch. 13 discharge §11 U.S.C. § 1328 |
Montana exemptions at a glance
- Homestead: Currently $425,828 in equity for 2026 (set at $350,000 in 2021 and indexed up 4% each calendar year, per Department of Revenue) §70-32-104
- Personal property: $7,000 aggregate in household furnishings and goods, appliances, jewelry, wearing apparel, books, firearms and other sporting goods, animals, feed, crops, and musical instruments, with a $1,250 limit per item §25-13-609(1)
- Wages: 75% of disposable earnings (or amount exceeding 30× federal minimum wage) §25-13-614
- Retirement: Traditional IRAs are exempt to the extent of deductible contributions made before the suit resulting in judgment was filed, plus earnings on those contributions. Roth IRAs are exempt to the extent of qualified contributions made before that suit was filed, plus earnings, and rollover contributions are also exempt. IRA assets are not exempt when the debt is for child support or for maintenance owed to a spouse or former spouse. Benefits from Montana public retirement systems under Title 19, chapters 3, 5 through 9, and 13 are exempt separately under 25-13-608(1)(i), as provided by 19-2-1004 §25-13-608(1)(e)
What the Automatic stay does immediately §11 U.S.C. § 362
The moment a bankruptcy petition is filed, the Automatic stay takes effect. This federal court order immediately halts:
- Wage Garnishment
- Foreclosure proceedings
- Repossession attempts
- Collection calls and letters
- Utility shutoffs (for 20 days)
- Most pending lawsuits against the debtor
Debts that survive bankruptcy §11 U.S.C. § 523
- Most tax debts less than 3 years old
- Domestic support obligations (child support, Alimony)
- Student loans (absent a showing of undue hardship)
- Debts arising from fraud, embezzlement, or willful injury
- Court-ordered Restitution and certain fines
When timing matters most
Filing too early can waste an exemption opportunity or miss a critical deadline. Filing too late can mean lost property, completed garnishment, or foreclosure sale. The decision about when to file is often as important as the decision about whether to file.
Ready to Talk to a Lawyer?
Submit a short intake form and a participating Montana attorney who handles this type of matter may reach out to you. No commitment required.
Frequently Asked Questions
General answers to common questions. Specific outcomes depend on your facts and timing.
If you have a deadline, court notice, or upcoming hearing, mention it when requesting assistance so timing can be evaluated promptly.
- Takes effect immediately upon filing
- Prior dismissed cases within 1 year may limit stay to 30 days or eliminate it entirely
- Below-median income generally passes; above-median triggers detailed expense analysis
- Uses 6-month lookback of current monthly income
- Homestead: Currently $425,828 in equity for 2026 (set at $350,000 in 2021 and indexed up 4% each calendar year, per Department of Revenue)
- Montana requires use of state exemptions — federal exemptions under [§ 11 U.S.C. § 522(d)] are not available