Filing Personal Bankruptcy in Massachusetts Overview

Massachusetts, like most states, has its own rules for residents who want to declare bankruptcy. These rules supplement the laws set in place by the Federal Bankruptcy code, which applies to residents in all 50 states. Those who meet the residency requirements of having lived in Massachusetts for two years prior to declaring bankruptcy should familiarize themselves with the Massachusetts laws so they understand what their options are.

In Massachusetts, as an individual, you have two major options for filing. These options include Chapter 7 and Chapter 13 bankruptcy. There are income requirements you must meet to qualify for Chapter 7, and if you do not meet those requirements, Chapter 13 will be the primary option for most consumers.

If you are able to file for Chapter 7, your non-exempt assets will be taken and sold. The proceeds will be used to pay off your creditors according to a formula set by the court. Any unpaid balance of your eligible debts will then be discharged. This includes most debt, other than student loan debt, tax debt and debt for unpaid child support. The loss of assets can be unpleasant for some individuals, but fortunately certain exempt assets cannot seized for a bankruptcy sale. Before you declare Chapter 7, you must understand how these exemptions work.

The rules for Massachusetts exemptions are some of the best in the state for filers, allowing you to protect up to $500,000 in equity in your home from seizure or sale under the homestead exemption. While you are also allowed to use the federal exemptions if you file a Massachusetts bankruptcy, many elect to use the state exemption rules because this generous homestead exemption allows them to protect their homes.

If you are not eligible for Chapter 7 bankruptcy or if you have a significant amount of non-exempt assets, then Chapter 13 may be a better option. With this option, you are not subject to seizure of assets. Instead, you must create a repayment plan to pay back some of your creditors over a three to five year period.

When deciding which bankruptcy is right for you, you should consult with all available bankruptcy resources at your disposal. One of your most important resources is the assistance of a qualified and experienced bankruptcy attorney. While it is legal to file bankruptcy without an attorney, it is rarely advisable to do so because of the complexity of the bankruptcy code and the requirement that court procedures be followed exactly for a successful bankruptcy.