Boston Bankruptcy Lawyers
306 Dartmouth Street
Boston, MA 02116
~and~
270 Broadway
Revere, MA 02151
~and~
1 Adams Place
Quincy, MA 02169
Phone: (617) 716-0282
Email:
attorney@bkmass.com
 Experienced, Effective, and Affordable Consumer and
Business Bankruptcy Lawyers in Massachusetts
Main Office two blocks from MBTA Copley Stop in
Boston's Back Bay.
|
|
Chapter 13 Bankruptcy in Massachusetts
Last Edited: 1/15/2012
There are two types of bankruptcy that individuals tend to file. One is Chapter 13
and the other is Chapter 7.
What is Chapter 13?
Chapter 13 is a court-approved partial
repayment plan of debts. The partial repayment happens through a plan which lasts between three to five years.
At the end of the plan payments, the remaining balances
on most debts are discharged (credit cards, medical bills,
unsecured personal loans, unsecured junior mortgages, etc.) Importantly, student loans are not forgiven at the end
of a Chapter 13 plan.
The Chapter 13 Plan
In Chapter 13, your lawyer proposes a plan for the Court to approve.
The plan is a written document, usually of about five pages. If the plan complies with the
bankruptcy laws, your creditors cannot refuse to accept it. This is the
chief power of Chapter 13 bankruptcy.
If you file Chapter 13, you make monthly payments as set forth in the plan.
This money is sent to the Chapter 13
trustee, a quasi-governmental official, who holds the money pending court
approval of your plan. Once your plan is confirmed by the court, the
trustee distributes the money to your creditors in
the manner provided in your plan.
The Applicable Commitment Period
How long does a plan last? This is determined by your income and household
size. If you are above-median income based on household size, your plan is
five years (60 monthly payments). If you are below median income, your
plan is three years (36 monthly payments).
Why do People File Chapter 13? The most common reason
people file Chapter 13 is that they need
debt relief and Chapter 13 is the only type of bankruptcy they qualify for based
on their income. The bankruptcy laws require that most people who can
afford to pay some of their debts back do so in Chapter 13.
That's what the bankruptcy means test is all about. Most, but not all, people
who are above-median income only qualify for Chapter 13 because of the means
test.
In Massachusetts, here's the median income by family size (for cases filed after November 1, 2011):
- Family of one: $53,496
- Family of two: $64,174
- Family of three: $80,337
- Family of four: $99,067
- Add $7,500 for each additional family member.
Another
common reason why some people file Chapter 13 instead of Chapter 7 is to keep property they would otherwise lose
in a Chapter 7. No one ever loses property in a Chapter 13. It is not a liquidation
chapter. It is a reorganization chapter. Sometimes this is very important
to people. Many people have very limited property and would
lose nothing in a Chapter 7, but some people have non-exempt
property--like excess equity in houses or cars--that they would not want to lose in a Chapter 7. If these people still
want debt relief, often the best way is through Chapter 13. Since 2011 and
the
modernization of Massachusetts exemption laws, fewer people need Chapter 13
for this reason.
What are some Advantages of Chapter 13?First of all, it gives
you the ability to make a single debt payment that is affordable based on your
income. You will still have to make most mortgage and car payment, but
your unsecured debts are consolidated into the Chapter 13 plan. Secondly,
a plan gives you the ability to do other things that are relevant for people in
some situations. For example, in Chapter 13 you can stop foreclosures
by curing mortgage arrears, cram down car loans,
strip off wholly unsecured second and third mortgages, and pay off nondischargeable tax debts.
Ultimately, your plan is based on what you want to accomplish and also on your
income, expenses, assets and debts.
Chapter 13 bankruptcy will stay on your credit report for seven years. (Chapter 7 remains on your report for 10 years).
What Will My Chapter 13 Payment Be?It depends on your
income, assets, expenses and debts. What you will pay is based on a means
test and budgetary test that incorporates your income, expenses, secured debt
payments and other factors. We will do our best to tell you approximately
what your payment will be if you opt for a
free consultation. Determining a
Chapter 13 payment amount is one of the specialized parts of the Chapter 13
process, and it is one of the reason you need an honest lawyer who really knows
Chapter 13 bankruptcy and all the permissible means test deductions. Many
of these deductions are not common knowledge, even among lawyers.
Do You Qualify for Chapter 13?
The debt limits for Chapter 13 are $360,475 for unsecured debt and $1,081,400 for secured debt. If you
have more in either category of debt, you do not qualify for Chapter 13 and must
file Chapter 11 if you want to reorganize.Otherwise, as long as you are an
individual with regular income who can afford to pay your living expenses,
secured debt payments for property you want to keep, and an extra amount as a
Chapter 13 plan payment, you qualify for Chapter 13 bankruptcy.
What's the Big Picture? The bottom line about Chapter 13 is this: You pay what you can afford after your reasonable expenses
for a set period of time, then you emerge from bankruptcy with a clean slate.
Here is some information on choosing between
Chapter 7 and Chapter 13 bankruptcy.
Read the Top 10 Questions about Bankruptcy in Massachusetts.
Bankruptcy Client Testimonials.
About Ortiz & O'Donnell.
Request Free Phone Consultation or call (617) 716-0282.
|
