Massachusetts Bankruptcy Law: How to File for Chapter 7 or 13
Filing for bankruptcy in Massachusetts can be a complex process, but understanding the ins and outs of Chapter 7 and Chapter 13 can help you make informed decisions. Both forms of bankruptcy provide relief, but they cater to different financial situations. This article will outline the steps required to file for each chapter and highlight essential considerations you should keep in mind.
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," is designed for individuals with limited income who are unable to pay their debts. Under this process, most of your unsecured debts can be discharged, allowing for a fresh financial start. However, certain assets may be sold to repay creditors.
Eligibility for Chapter 7
To qualify for Chapter 7 in Massachusetts, you must pass the Means Test, which evaluates your income against the median income for your household size in the state. If your income is below the median, you are likely eligible. If it's above, you may still qualify depending on your disposable income and expenses.
Steps to File for Chapter 7
Gather Financial Documents: Collect your financial records, including income statements, tax returns, and a list of debts and assets.
Complete the Bankruptcy Forms: Fill out the required bankruptcy petition and schedules, detailing your financial situation.
File the Petition: Submit your completed forms to the U.S. Bankruptcy Court in Massachusetts. There is a filing fee, although you may qualify for a fee waiver based on your income.
Attend the Creditor's Meeting: After filing, you will attend a meeting of creditors where you will answer questions about your financial situation.
Receive Your Discharge: If there are no objections, the court will grant your discharge within a few months, eliminating most of your debts.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often referred to as "reorganization bankruptcy." It is suitable for individuals who have a regular income and want to keep their assets while repaying debts over a period of three to five years.
Eligibility for Chapter 13
To be eligible for Chapter 13 in Massachusetts, you must have a stable income and your unsecured debts must be below $463,275, while secured debts must be below $1,395,875 (as of 2023). You must also file certain forms and pay a filing fee.
Steps to File for Chapter 13
Create a Repayment Plan: Design a plan that details how you will repay your debts over the specified period.
Gather Required Documents: Similar to Chapter 7, compile your financial documents, including income, expenses, and a list of creditors.
File the Petition: Submit the Chapter 13 bankruptcy petition along with your repayment plan and necessary documents to the Bankruptcy Court.
Attend the Confirmation Hearing: You will attend a court hearing where the bankruptcy judge will review and confirm your repayment plan.
Begin Making Payments: Once approved, you will start making regular payments to the bankruptcy trustee who will distribute the funds to your creditors.
Important Considerations
1. Consultation with a Bankruptcy Attorney: Navigating bankruptcy laws can be daunting. It's advisable to consult with an experienced bankruptcy attorney who can guide you through the process and help you choose the right chapter.
2. Impact on Credit: Both Chapter 7 and Chapter 13 will have a significant impact on your credit score, and can remain on your credit report for up to 10 years (Chapter 7) or 7 years (Chapter 13).
3. Exemptions: Understanding Massachusetts bankruptcy exemptions is crucial. Certain assets, such as your primary residence, vehicle, or retirement accounts, may be protected from liquidation in Chapter 7.
4. Financial Counseling: Before filing, both chapters require credit counseling from an approved agency to explore alternatives to bankruptcy.
Conclusion
Filing for bankruptcy can be a path to financial relief, but it's important to fully understand the process and implications. Whether you choose Chapter 7 or Chapter 13, taking informed steps can help pave the way for a more secure financial future in Massachusetts.