Massachusetts bankruptcy laws: What are the Laws Regarding Bankruptcies in the State of Massachusetts
Bankruptcy is federal law governed process designed to provide financial relief to an individual or a business unable to pay back the debts. In this process, the current assets are liquidated to repay the overwhelming debts experienced by the individual or business. The two main objectives of bankruptcy are,
- Fair settlement of the legal claims of the creditors
- Providing an opportunity for a fresh start to the debtor
Bankruptcy is the last resort that aids the financial instability of the debtor. The laws governing bankruptcy change from one state to another.
How to file for bankruptcy in Massachusetts
Massachusetts follows the federal bankruptcy laws. When an individual or a business is unable to pay the debts, bankruptcy is a powerful option to consider. Bankruptcy can be the only path to financial freedom and starting fresh. According to the Bankruptcy Act of 2005, the debtor has to undergo credit counseling within six months before filing for bankruptcy. The debtor is also required to complete a financial management instructional course, post-filing for bankruptcy.
Bankruptcy act means test: The debtor’s income and expenses are analyzed and compared to the Massachusetts state median income. This analysis is to determine whether the debtor falls under Chapter 7 or Chapter 13 and is called the means test. If the income is below the median, the debtor falls under Chapter 7 bankruptcy. If the income is above the state median and the debtor has filed under Chapter 7, the petition will not be passed, and the debtor will be asked to file again, under Chapter 13 bankruptcy.
Gathering the necessary document: The debtor is required to gather the documents required to file for bankruptcy. The debtor can do it by self or take the help of an attorney. The documents required are,
- Proof of current income source
- Major financial transactions of the last two years
- Tax returns of the last two years
- Monthly living expenses
- Debt-secured and unsecured
- Property-LL assets and possessions
- Deeds of real estate owned by the debtor
- Car or any vehicle owned
- Documents of loan taken by the debtor
Filing for bankruptcy: Once the paperwork is gathered, the debtor has to determine which property is exempt from seizure under the Massachusetts exemptions. Most of the time, exemptions are filed by debtors filing under Chapter 13. The debtor or the attorney has to file a two-page petition and several other forms describing the current financial status and recent financial transactions. The filing has to be done at the Massachusetts district bankruptcy court.
Chapter 13 bankruptcy in Massachusetts
To file for bankruptcy under chapter 13, the debtor must have a regular source of income. The debtor proposes a plan for repayment to the creditor offering to pay off all or part of the debt with future income. If the debtor follows the terms of the repayment agreement, the remaining dischargeable debt is released at the end of the plan. If the debtor has a valuable asset and wants to keep it, filing for bankruptcy under chapter 13 is the best option.
Chapter 7 bankruptcy in Massachusetts
Chapter 7 bankruptcy is best suited for those who would want to start fresh. A trustee is appointed who liquidates all assets of the debtor which are not exempt. The liquidation proceeds are distributed among the creditor, debtor, and a part is taken by the trustee as commission. Certain debts such as alimony, child support, fraudulent debts, certain taxes, student loans, credit card debt, unsecured bills and certain items charged are not discharged by chapter 7. Secured debts such as car loan can be kept by signing a voluntary “Reaffirmation Agreement.” These debts cannot be bankrupted for the next eight years. The debtor has to pay back the payments due to reaffirm the secured debts.
When one door closes, another opens. Bankruptcy is an opportunity to restart life.