Massachusetts Bankruptcy Attorneys
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Top Ten Questions about Filing Bankruptcy in Massachusetts(updated July 2010)
Yes! Yes, there is. All things considered, bankruptcy is pretty generous and helpful for people who are really struggling with debt. It can be a true path to financial freedom. However, bankruptcy is scary (at least it sounds that way) and most people have very little idea about what it’s all about. I will try to explain on this page about the process and the pros and cons, but the bottom line is this: People in debt trouble can get relief by making the debts go away or shrinking them to a level that they can more easily handle. The Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA") went into effect on October 17, 2005. This is the new bankruptcy law you may have heard about (though it's becoming a stretch to call it "new"). The bottom line is this: BAPCPA introduced several changes for people seeking debt relief under the Bankruptcy Code such as:
But the good news is that bankruptcy is still around and here to stay. Honest people who need help can get lasting and sometimes dramatic relief in the bankruptcy system. They can even rebuild credit and obtain a new degree of financial freedom. However, there is a bunch of misinformation out there. More good news: even though the nuts and bolts of bankruptcy are complicated, the basic idea is simple--simple enough for anyone to understand and make up their own mind about. Read #2 directly below for more about this.
Bankruptcy is intended to give people a fresh start free of debt. In bankruptcy a person either gets released from their dischargeable debts (Chapter 7) or is allowed to reduce their debts to a manageable level and maintain a payment plan (Chapter 13). Although bankruptcy certainly helps some people out of bad situations, the bankruptcy laws are not simply charity. They are meant to encourage entrepreneurial risk taking and the freedom that the U.S. economy depends on for growth. Why do people file bankruptcy in Massachusetts? In my experience as a bankruptcy lawyer, these are some common scenarios:
People often feel embarrassed and feel like there is no hope when they find themselves in situations like these. They may know that bankruptcy exists but are scared by it. Bankruptcy is not something to take lightly, but it is not as scary as you might think. You owe it to yourself to at least know your options. Bankruptcy sometimes is the best way out of a bad situation and on to a better future. Qualifying involves analyzing your income and assets. We do this for free (unless you have complex business issues, then we charge a small consultation fee). We can tell you where you stand.
3. What is Chapter 7 Bankruptcy? The goal of a Chapter 7 bankruptcy is to wipe out ("discharge") your debts. In exchange for having your debts erased, you must give up all your property to your creditors. This sounds rather harsh, but the reality is not as bad as it sounds. You need only give up your "non-exempt" property, which for most people, once the proper exemptions are applied, amounts to nothing at all. In many cases, much or all of your property may be exempt. You will have a chance to determine what property is exempt with your bankruptcy lawyer prior to filing your bankruptcy petition. Income also affects your eligibility for Chapter 7. If you make more than the median income based on household size, you will have to contend with something called the "means test." This test helps determine if you can receive a Chapter 7 discharge or would be better suited to be in a Chapter 13 bankruptcy. Even if you fail the means test, special circumstances can still make some people eligibility for a Chapter 7 discharge. The means test only applies to people who have family income greater than the median income. In Massachusetts, the median income by family size (for cases filed after March 15, 2010):
4. What is Chapter 13 Bankruptcy? Bankruptcy under Chapter 13 allows you to create a plan which you will pay into on a regular basis. Initially, a Chapter 13 bankruptcy sounds less attractive than a Chapter 7 filing: Chapter 13 requires you to pay money into a plan whereas a Chapter 7 just wipes out your dischargeable debts. In some cases a Chapter 7 filing will be more advantageous. However, Chapter 13 has many benefits. Some are:
5. What is the "automatic stay"? The automatic stay is one of the most important aspects of the bankruptcy process. Once you file a bankruptcy petition, the automatic stay stops all collection efforts and proceedings against you, all harassment, lawsuits, and any foreclosure proceedings. It gives you breathing room to deal with your financial affairs without interference from your creditors. When clients retain us we work with them to immediately reduce or eliminate debt collection calls by providing them with a special phone number to give out to callers even before their case is filed. Ask us about this important benefit.
6. What are the Massachusetts exemptions? First, it is important to note that as part of a bankruptcy filing you must choose between the federal bankruptcy exemptions and the exemptions arising under Massachusetts and federal non-bankruptcy laws. This is a key decision that you and your bankruptcy attorney will make which depends on the nature and value of your property. If the Massachusetts and federal non-bankruptcy choice is made, the most important exemption for homeowners is the homestead exemption. Filing of a declaration of homestead in the proper manner and at the right registry of deeds will exempt up to $500,000 of your equity in your primary residence, even if the filing occurs just prior to your bankruptcy filing. There are new provisions limiting the state homestead to $136,875 (adjusted April 1, 2007 from $125,000) if the property was bought or otherwise acquired within 1215 days of the petition date. There is an important exception to the 1215 day rule in circumstances in which you buy a home in the same state and roll your equity into your new home. There are various other exemptions under Massachusetts law and federal non-bankruptcy laws. Some examples include: 401(k)s, certain retirement accounts and death benefits, social security benefits, veterans' benefits, unemployment and workers' compensation benefits, and certain personal property and pensions.
7. What are the advantages of Bankruptcy? The advantages to a bankruptcy filing can be significant. Often it is the only thing that can save your home or can forestall the tax authorities from taking action against you. Bankruptcy also helps people who just can't make ends meet because of a lost job, mounting medical expenses, or for other reasons. Erasing or substantially reducing debt such as credit card can dramatically improve your finances and quality of life.
8. What are the disadvantages of Bankruptcy? The fact that you declared bankruptcy will appear on your credit report. Bankruptcy will stay on your credit report for up to 10 years from the date of filing, but given current credit reporting standards, a Chapter 13 will only remain on your credit report for seven years. Keep in mind that many people already have severely damaged credit before they file for bankruptcy. Many people report that they are surprised by the easy availability of credit after bankruptcy. We will work with clients after bankruptcy to ensure that their credit reports are accurate. The result is often an improved credit score which facilitates access to credit on favorable terms after bankruptcy. Read more about this new service here. Note: Filing bankruptcy will not stop you from getting student loans in the future that are guaranteed by the government (such as the Stafford, Perkins, and PLUS loans that most students get).
9. Where is the Bankruptcy Court in Massachusetts and will I have to go? Yes, at least once. After the court receives a Chapter 7 or 13 bankruptcy filing, it schedules a meeting of your creditors. In the vast majority of cases no creditors attend the meeting and it is just you, your bankruptcy attorney, and the bankruptcy trustee for about a ten minute meeting. This is called the section 341 meeting. There are two bankruptcy courts departments in Massachusetts, one in Boston and one in Worcester (although 341 meetings are also held in Brockton, Springfield, and Pittsfield). Note that at this time we only handle cases for people who live in or own property in Suffolk, Middlesex, Norfolk, Essex, Worcester, Plymouth, Bristol, Barnstable, Nantucket, Dukes counties. Where you are assigned is based on your city of town of residence. A complete list (for Eastern Mass.) can be viewed here.
10. How do I find out how much bankruptcy will cost me? We are bankruptcy specialists and can handle cases affordably due to our experience. Contact us and we will discuss your options with you. We will also give you clear and honest information about all of the costs of the process. Our goal is to make bankruptcy affordable for the average person. To that end, we offer payment plans and free consultations. One of the special thing we do is this: if you are on a payment plan with us, we give you a number to give to creditors and debt collectors who call before your case is filed. This allows you to reduce the "heat" and get a little peace while going through the pre-filing bankruptcy process. Payment plans are optional, but some people really benefit from them. There is a little bit more about the cost of bankruptcy here.
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Experienced, Effective, and Affordable Consumer and
Business Bankruptcy Lawyers in Massachusetts
