Federal law governs bankruptcy in every state, so much of the process is the same. The main bankruptcy codes for individuals are Chapter 7, also known as straight bankruptcy or liquidation, and Chapter 13. Chapter 7 allows you to discharge your debts after the trustee liquidates your assets to pay your creditors at least a portion of what you owe them. Chapter 13 requires that you file a repayment plan with the bankruptcy court. You may repay all or a portion of our debts, depending on variables such as earnings, the type of your debts, and the amount of property you own. No property is lost, and repayment is funded through your disposable income.
Where Do You File for Bankruptcy?
Massachusetts has one bankruptcy district and three divisions. The Eastern Division in Boston is the main office. The Hyannis court is for hearings only. It does not accept filings or pleadings. You can locate the appropriate court for your area by visiting the U.S. Trustee’s website. The addresses are:
- Eastern Division: John W. McCormack Post Office and Court Houseâ€¨, 5 Post Office Square, Suite 1150, â€¨Boston
- Central Division: Donohue Federal Buildingâ€¨, 595 Main Street, Room 211, Worcester
- Western Division: United States Courthouse,â€¨ 300 State Street, Springfield
Eligibility for Chapter 7 Bankruptcy
If your average monthly income is below Massachusetts’ median income for a household of your size, you're eligible to file Chapter 7. If your average monthly income is more than Massachusetts’s median income, you're not eligible unless you pass a stringent means test.
Length of a Massachusetts Chapter 13 Plan
If your average monthly income is less than Massachusetts’ median income, your Chapter 13 plan can't exceed 36 months unless the bankruptcy court finds that good cause exists to extend it. If so, you may have up to a maximum of 60 months. Massachusetts’ current median income for a one-person household is $53,496. This increases to $64,174 for a family of two. For more Information regarding Massachusetts' median incomes for various family sizes, visit the U.S. Department of Justice's website.
Exemptions are property that may be excluded from liquidation. In Massachusetts, you can use the state's set of exemptions or federal exemptions, but not parts of both. A married couple must both use one or the other as well. State exemptions for Massachusetts are frequently updated and changed, but they include the following:
- Homestead Exemption: The homestead exemption in Massachusetts can be either declared or automatic. The automatic exemption is $125,000. If you want to take the declared exemption instead, you must sign a declaration. A declaration can increase your homestead exemption up to $500,000. The federal homestead exemption is only $21,625, but you can double this if you're married and both you and your spouse are filing.
- Wages: 85% of your gross wages, or 50 times the minimum wage per week
- Other Property: A motor vehicle up to $7,500, beds, bedding, heating units, clothing, burial plots, tombs and church pews, bibles and books up to $500, a sewing machine up to $300, cash for fuel, heat, water and light up to $600 a month, rent of up to $2,500 a month, two cows, 12 sheep, two swine, four tons of hay, groceries up to $300 a month, furniture up to $15,000, bank deposits up to $2,500, and jewelry to $1,225
- Tools of the Trade: Anything you use in your work, including arms, uniforms, boats, fishing tackle and nets to $1,000, business materials and stock up to $5,000, tools, implements and fixtures to $5,000
- Wild Card Exemption: $1,000 plus up to $5,000 of any unused exemptions for your vehicle, furnishings and tools of the trade.
- Pensions: IRAs, nontaxable retirement accounts, pensions for police, teachers, state workers and judges
- Compensations and Public Benefits: Unemployment compensation, victim’s compensation, veterans’ benefits, public assistance and disability benefits up to $400 a week, as well as workers' compensation
- Insurance: Life insurance proceeds, disability up to $400 a week, fraternal society benefits and mutual aid association benefits
If you've lived in Massachusetts for at least 91 of the last 180 days, you can file for bankruptcy in Massachusetts and use these exemptions.
There are limits to the homestead exemptions if your home was purchased less than four years before you filed for bankruptcy. You must have lived in the state for at least 40 months before you can claim any homestead protection greater than $146,450.
This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a Massachusetts bankruptcy lawyer.