Massachusetts Bankruptcy Law: How to Protect Your Car

Bankruptcy can be a daunting process, particularly when it comes to protecting your assets, such as your vehicle. In Massachusetts, understanding the nuances of bankruptcy law is crucial for safeguarding your car during financial difficulties. This article will guide you through the key aspects of Massachusetts bankruptcy law and offer tips on how to protect your vehicle.

When you file for bankruptcy in Massachusetts, you generally have two primary options: Chapter 7 and Chapter 13. Each type of bankruptcy operates differently and affects your assets in unique ways.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as "liquidation" bankruptcy. It involves the sale of non-exempt assets to pay off creditors. However, Massachusetts offers a range of exemptions that can help you keep your vehicle. Under Massachusetts law, you can exempt up to $15,000 in equity in your car. For couples filing jointly, this amount doubles to $30,000.

To qualify for Chapter 7, you must pass the means test, which determines whether your income is low enough to file under this chapter. If successful, you can discharge most of your unsecured debts while retaining your exempt assets, including your vehicle.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also known as a "reorganization" bankruptcy, allows individuals with a regular income to create a plan to repay all or part of their debts over a three to five-year period. This type of bankruptcy is particularly beneficial for those who want to keep their car and avoid repossession. Under Chapter 13, you can keep your car while making manageable monthly payments through the bankruptcy plan.

One of the main advantages of Chapter 13 is that it can help you catch up on missed payments and prevent repossession. If you've fallen behind on your car loan, this option allows you to include the arrears in your repayment plan, giving you the chance to retain your vehicle.

Additional Considerations

In both Chapter 7 and Chapter 13, it’s essential to remain current on your car loan payments if you intend to keep your vehicle. Failing to make payments after filing can lead to repossession regardless of your bankruptcy status.

Another important aspect to consider is the type of lender you are dealing with. Certain lenders may have policies in place that affect how they handle bankruptcy. It is advisable to communicate with your lender and understand their position to avoid surprises.

Conclusion

Protecting your car during bankruptcy in Massachusetts requires a thorough understanding of state laws and careful planning. Whether you choose Chapter 7 or Chapter 13, being informed about your options will help you navigate the process more effectively. Remember to consider your financial situation, the value of your vehicle, and your ability to meet any repayment obligations. By doing so, you can work towards securing your vehicle while finding a path to financial recovery.