Chapter 7 Bankruptcy in Montana: Exemptions, Filing, and Discharge

Chapter 7 bankruptcy in Montana lets you wipe out most unsecured debts through a court-supervised liquidation, provided your income passes a federal means test and you’re willing to give up any property that Montana’s exemption laws don’t protect. The U.S. Bankruptcy Court for the District of Montana handles the case, a trustee reviews your finances and sells non-exempt assets to pay creditors, and whatever qualifying debt remains gets discharged permanently.¹ Most cases close within three to four months. The filing stays on your credit report for ten years.

Who Qualifies in Montana

Eligibility turns on the means test.² The first step compares your household’s average monthly income over the prior six months against the median for a Montana household of the same size. Fall below the median and you qualify automatically. For cases filed between November 2025 and March 2026, Montana’s thresholds are:³

One earner: $69,482
Two-person household: $89,107
Three-person household: $100,637
Four-person household: $118,578 (add $11,100 for each additional person)

If your income is above the threshold, a second calculation subtracts allowed expenses to see whether you could fund a meaningful repayment plan. When the math says yes, the court presumes a Chapter 7 filing would be abusive, and you’ll usually need to convert to Chapter 13 or face dismissal.²

You also have to complete a credit counseling course from a U.S. Trustee-approved agency within 180 days before filing, and the certificate goes with your petition.⁴ If a prior bankruptcy of yours was dismissed within the last 180 days for noncompliance or because you withdrew after a creditor challenged the stay, you can’t refile until that window closes.⁵ And if you received a Chapter 7 discharge in an earlier case, you can’t get another one in a Chapter 7 case filed within eight years of that earlier filing date.⁶

What Property You Can Keep

Montana has opted out of the federal exemption scheme, so you use state exemptions to decide what stays with you.⁷ There is no wildcard exemption, so you cannot apply a catch-all dollar amount to protect property that doesn’t fit a named category. That gap matters.

Your Home

Montana’s homestead exemption is unusually generous. The base value set in 2021 was $350,000, and it rises 4% each calendar year, which puts the 2026 limit at roughly $425,827 in equity.⁸ It covers your primary residence and the land it sits on. The trap: you must file a homestead declaration with the clerk and recorder in the county where the home is located before you file for bankruptcy. No recorded declaration, no exemption, and the trustee can sell the house.

Vehicles, Household Goods, and Work Tools

Montana protects personal property with per-category dollar caps:⁹

Up to $4,000 in equity in one motor vehicle
Up to $7,000 total in household furnishings, appliances, clothing, jewelry, books, sporting goods, and musical instruments, with no single item exceeding $1,250
Up to $4,500 in tools, professional books, and equipment used in your trade

Because there’s no wildcard to layer on top, excess equity goes to creditors. A $6,000 paid-off vehicle gets sold, you receive $4,000, and the remaining $2,000 goes into the estate. The same math applies to any single household item worth more than $1,250.

Wages, Benefits, and Retirement

Garnishment of disposable earnings is capped at the lesser of 25% of your weekly pay or the amount by which weekly pay exceeds 30 times the federal minimum wage, which leaves at least 75% of your earned wages protected.¹⁰ Social Security and unemployment are fully exempt. Pensions, 401(k)s, and IRAs are broadly protected, with one caveat: contributions made within the year before filing are exempt only up to 15% of your gross income for that year, and anything above that can be claimed by the trustee.⁷ The rule exists to stop last-minute dumping of cash into a retirement account.

Debts Chapter 7 Will Not Erase

Chapter 7 is powerful for credit card balances, medical bills, personal loans, and similar unsecured debt, but federal law excludes several categories from discharge:¹¹

Child support and alimony survive in full
Recent income taxes, taxes where no return was filed, and taxes connected to fraud or evasion remain owed
Student loans survive unless you win a separate undue hardship proceeding, which is hard to do
Debts incurred through fraud, embezzlement, or willful injury to another person or their property stay in place
Criminal fines, restitution, and most government penalties are not dischargeable
Debts you fail to list may not be discharged if the creditor didn’t receive notice in time

A discharge also wipes out your personal liability but does not strip liens from property. If you stop paying your mortgage after discharge, the lender can still foreclose; the underlying debt is gone, but the lien isn’t.⁵ If most of what you owe falls in the non-dischargeable list, Chapter 7 may not give you the relief you’re hoping for.

What You File and Where

You file your petition and supporting schedules with the U.S. Bankruptcy Court for the District of Montana. The court has divisional offices in Billings, Missoula, Great Falls, and Butte.¹ The filing fee is $338. The court can waive it if your income falls below 150% of the federal poverty guidelines, and you can also apply to pay in installments.

Federal law requires you to produce:¹²

Pay stubs or other payment records from the 60 days before filing
Your most recent federal tax return or transcript, provided to the trustee at least seven days before the creditors’ meeting
A complete list of creditors with mailing addresses
Schedules of assets, liabilities, income, and monthly expenses
Your credit counseling certificate

One warning before you file: don’t transfer, sell cheap, or give away property in the months leading up to filing. The trustee can claw back payments to ordinary creditors made within 90 days before filing, payments to insiders like family members made within one year, and transfers made to hide assets within two years, with Montana law potentially reaching further. Trustees look for these transfers as a matter of routine, and finding one can derail an otherwise clean case.

The instant your petition is filed, the automatic stay takes effect.¹³ Collection calls stop. Lawsuits pause. Wage garnishments halt. Even pending foreclosure sales are frozen. Creditors who violate the stay can be sanctioned. Secured creditors can ask the court to lift the stay in limited situations, such as when you’ve stopped making car payments and the vehicle is losing value.

After You File: Meetings and Discharge

Between 21 and 40 days after filing, you’ll attend the meeting of creditors, usually called the 341 meeting.¹⁴ The trustee runs it and asks you questions under oath about your finances and the accuracy of your petition. Creditors can attend, but in routine consumer cases they rarely do. If your paperwork is in order, the meeting is often over in a few minutes.

After the 341 meeting, creditors and the trustee have 60 days to object to specific debts being discharged or to raise concerns about the case overall.¹⁵ Within roughly the same window, you must complete a debtor education course on personal financial management, which is separate from the pre-filing credit counseling course. Skipping it will block your discharge entirely.⁶ The course is usually available online and runs about two hours. File the completion certificate with the court.

If no objections stick and everything required is on file, the court issues a discharge order ending your personal liability for qualifying debts.¹⁶ Most Montana Chapter 7 cases finish within three to four months of filing.

Keeping a Car or Other Secured Property

If you want to keep collateral like a car, you can sign a reaffirmation agreement committing to continue paying that specific debt after discharge. It’s voluntary. By reaffirming, you keep the property but also keep the full obligation, so the lender can pursue you for any deficiency if you later default or the collateral drops in value.¹⁷

The agreement has to be filed before your discharge is granted. If you have a lawyer, that attorney can certify the agreement doesn’t create undue hardship and that you signed voluntarily; if you don’t, the bankruptcy judge holds a hearing and decides.¹⁷ You have 60 days after the agreement is filed to rescind it. If the car is worth significantly less than what you owe, surrendering it and buying a replacement with exempt funds is often the better move.

Credit Report, Taxes, and the Long View

A Chapter 7 filing stays on your credit report for 10 years from the filing date.¹⁸ The initial hit is steep, but scores often start climbing within one to two years as discharged debts stop generating new negative marks and you add positive payment history. Secured credit cards are usually available within months, conventional auto financing within a couple of years.

Discharged debt is not taxable income. Outside bankruptcy, a creditor’s write-off of $15,000 would normally show up as income on your return, but debt eliminated through a bankruptcy discharge is excluded.¹⁹ If a creditor sends you a 1099-C after discharge, you still report it, but you attach IRS Form 982 to your return for the year of the discharge, which excludes the amount and accounts for any required reduction in tax attributes like net operating loss carryovers.

Because the eight-year wait before another Chapter 7 discharge is firm, the care you take now matters. List every debt. Record the homestead declaration. Mind the per-item caps. A dischargeable debt left off the schedules, or a piece of equity you forfeited for lack of a filing, is a mistake you’ll live with for close to a decade.

1
United States Bankruptcy Court District of Montana. United States Bankruptcy Court for the District of Montana
2
Office of the Law Revision Counsel. 11 US Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
3
United States Department of Justice. Median Income Table – November 1, 2025
4
United States Bankruptcy Court. Credit Counseling Warning
5
United States Courts. Chapter 7 – Bankruptcy Basics
6
Office of the Law Revision Counsel. 11 USC 727 – Discharge
7
Montana Code Annotated. Montana Code 31-2-106 – Exempt Property — Bankruptcy Proceeding
8
Montana Code Annotated. Montana Code 70-32-104 – Limitation on Value
9
Montana State Legislature. Montana Code 25-13-609 – Personal Property Exempt Subject to Value Limitations
10
Montana Code Annotated. Montana Code 25-13-614 – Earnings of Judgment Debtor
11
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
12
Office of the Law Revision Counsel. 11 USC 521 – Debtor Duties
13
Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay
14
Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 2003 – Meeting of Creditors or Equity Security Holders
15
Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 4004 – Granting or Denying a Discharge
16
United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
17
Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
18
Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports?
19
Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments