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Bankruptcy: Massachusetts

Filing bankruptcy in Massachusetts aims to achieve two things.  First, it gives honest debtors an opportunity to recover from debt, and second, it repays creditors to the extent that the debtor’s property value or earnings permit. 23,215 bankruptcies were filed in Massachusetts in 2010, ranking Massachusetts 33rd in the country for the number of bankruptcy filings per capita. 77% of Massachusetts’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Massachusetts

Federal law governs bankruptcy proceedings in Massachusetts, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located in Boston, Springfield and Worcester.  Although federal courts have exclusive jurisdiction over bankruptcy proceedings, Massachusetts law permits petitioners to use the exemptions found in the U.S. bankruptcy code or the exemptions provided under Massachusetts law. The exemption systems are not interchangeable. With the guidance of a bankruptcy attorney Massachusetts petitioners can gain a full understanding of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Massachusetts

Chapter 7 bankruptcies in Massachusetts are the most common bankruptcy filing.  Chapter 7 is most appropriate for petitioners who do not have significant assets such as substantial equity in a home or financial investments, for the reason that a Bankruptcy Trustee may liquidate personal property that isn’t protected by Massachusetts’s bankruptcy exemptions. Liquidation happens when the Trustee converts personal assets to cash for distribution to creditors. Massachusetts’s Chapter 7 bankruptcy law allows petitioners to retain some essential property and these exempt assets are off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Massachusetts Bankruptcy Exemptions

Massachusetts bankruptcy law designates detailed property exemptions permitting debtors to keep certain personal property and assets so bankruptcy proceedings do not leave them high and dry.  In real terms, this means creditors cannot force debtors to sell the shirt off their backs to repay debts owed.  Bankruptcy in Massachusetts permits petitioners to choose exemptions from either the federal or state lists.

Property exemption amounts are subject to change; individuals and couples considering bankruptcy protection should sit down with a Massachusetts bankruptcy attorney to discuss the exemptions applicable to their situation.  Massachusetts bankruptcy exemptions include:

Massachusetts Homestead Exemption

  • $125,000 total: Automatic homestead
  • $500,000 total: “Declared homestead” for property you occupy or intend to occupy, including mobile home (co-owners may not double; special rules: if over 62 or disabled, may double to 1,000,000)
  • Spouse or children of deceased owner may claim homestead exemption
  • Special rules for elderly and disabled

Massachusetts Tenancy by Entirety Exemption

  • Property co-owned by spouses as TBE and used as the principal residence of the non-debtor spouse is exempt unless the claim is based upon necessities provided to either spouse or dependent.
  • Property held as tenancy by the entirety may be exempt against debt for non-necessity owed by only one spouse.

Massachusetts Personal Property Exemption

  • 2 cows, 12 sheep, 2 swine and 4 tons of hay
  • Beds and bedding; heating unit; clothing
  • Burial plots, tombs and church pew
  • $100: Cooperative association shares
  • Moving expenses for eminent domain
  • $2,500: Bank deposits
  • $500 total: Bibles and books
  • $500 per month: Cash for fuel, heat, water or light
  • $2,500 per month: Cash for rent, in lieu of homestead
  • $600 total: Food or cash for food
  • $1,225 total: Jewelry
  • $15,000 total: Household furnishings
  • $7,500 total: motor vehicle; $15,000 if used by elderly or disabled debtor
  • $300 total: Sewing machine, computer or TV
  • $2500 total: Trust company, bank or credit union deposits

Massachusetts Tools of the Trade Exemption

  • $5,000 total: Tools, implements and fixtures
  • $5,000 total: Materials and stock for trade or business
  • $1,500 total Fishing boats, tackle and nets
  • Arms, accoutrements and uniforms required

Massachusetts Wage Garnishment Exemption

  • 85% of gross wages total: Earned but unpaid wages or 50 times minimum wage per week

Massachusetts Public Benefits Exemption

  • Public assistance and aid to families with dependent children
  • Workers’ and Unemployment compensation
  • Veterans’ benefits

Massachusetts Insurance Exemption

  • $400 per week: Disability benefits
  • Fraternal benefit society benefits
  • Group annuity policy or proceeds; Group life insurance policy
  • Life insurance policy if beneficiary is married woman
  • Life or endowment policy, proceeds or cash value
  • Life insurance or annuity contract proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
  • Medical malpractice self-insurance

Massachusetts Pensions and Retirement Savings Exemption

  • Savings bank and Credit union employees
  • Public employee
  • Private retirement benefits
  • ERISA-qualified benefits, including IRAs. Exempt IRA contributions for previous 5 years limited to 7% of income.

Massachusetts Miscellaneous Exemption

  • Property of business partnership

Massachusetts Wild Card Exemption

  • $1,000 total: Any property up to plus up to
  • $5,000 total: Unused exemptions for automobile, household furnishings and tools of trade

Chapter 13 Bankruptcy, Massachusetts

In 2010, 23% of petitioners filed for protection under Chapter 13 bankruptcy in Massachusetts.  Filing Chapter 13 bankruptcy in Massachusetts begins a financial reorganization process in which a court-appointed Trustee negotiates with creditors and implements a 3-5 year repayment plan, using the debtor’s future earnings to pay back creditors.  Chapter 13 petitioners in Massachusetts keep most – or all – of their property.

How to File Bankruptcy in Massachusetts

A key consideration when deciding whether to pursue bankruptcy protection should be one’s eligibility for property exemptions. In order for bankruptcy to solve one’s financial troubles, the end result should protect major assets and discharge debts. Because each bankruptcy case is uniquely complicated, a Massachusetts bankruptcy attorney can advise debtors of their options concerning Chapter 7 and Chapter 13 bankruptcies.

Bankruptcy Attorney: Massachusetts

It is the bankruptcy petitioner’s responsibility to know their rights and duties as debtors.  A Massachusetts bankruptcy attorney can simplify the particulars of federal bankruptcy laws and state exemptions.  Debtors facing the complex and stressful road to personal bankruptcy owe it to their selves to sit down with a Massachusetts bankruptcy attorney for legal counsel and support.