What Are the Different Types of Bankruptcy in Massachusetts?
Bankruptcy is a legal process that allows individuals and businesses to seek relief from their debts. In Massachusetts, there are several types of bankruptcy options available to debtors, each suited to different financial situations. Understanding these types can help you determine the best course of action for your financial circumstances.
1. Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is designed for individuals and businesses with limited income. This type of bankruptcy allows debtors to eliminate most of their unsecured debts, such as credit card balances and medical bills, without the obligation to pay them back. In Massachusetts, debtors may be able to keep certain exempt assets while liquidating non-exempt assets to pay creditors.
2. Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often referred to as reorganization bankruptcy. It is ideal for individuals who have a regular income and want to keep their assets while repaying debts over a three to five-year period. In this type of bankruptcy, the debtor proposes a repayment plan to make installments to creditors. It allows individuals to catch up on overdue payments, such as mortgage arrears, and avoid foreclosure.
3. Chapter 12 Bankruptcy
Chapter 12 bankruptcy is specifically designed for family farmers and fishermen who have regular annual income. This type allows them to propose a repayment plan to pay off debts while continuing their operations. Chapter 12 offers more flexible repayment options compared to Chapter 13, making it a suitable choice for those in the agricultural and fisheries sectors.
4. Chapter 11 Bankruptcy
Chapter 11 bankruptcy is primarily aimed at businesses, allowing them to restructure their debts while continuing to operate. Although it is more commonly associated with corporations, individuals with substantial debt can also file for Chapter 11. This type of bankruptcy allows the debtor to develop a plan for reorganization and repayment, and it offers comprehensive options for renegotiating terms with creditors.
5. Chapter 9 Bankruptcy
Chapter 9 bankruptcy is unique, as it pertains to municipalities, such as cities or towns, seeking relief from debts. This type allows municipalities to reorganize and work out a plan with creditors while providing essential services to residents. While rarely used, it is an option available in Massachusetts for local government entities facing financial distress.
6. Chapter 15 Bankruptcy
Chapter 15 bankruptcy is a relatively new addition to the bankruptcy code, designed to provide relief for cross-border insolvency cases. This type of bankruptcy is relevant for debtors who have assets and debts in more than one country. It allows for the recognition of foreign bankruptcy proceedings in the U.S. courts, facilitating cooperation between U.S. and foreign courts.
In summary, Massachusetts offers several bankruptcy types to cater to various financial predicaments. Chapter 7 and Chapter 13 bankruptcy are the most common for individuals, while Chapter 11 serves businesses. On the other hand, Chapters 9 and 15 address very specific scenarios. Consulting with a qualified bankruptcy attorney can provide guidance tailored to your unique situation and help you choose the best bankruptcy option available to you.