Federal Bankruptcy Laws in Massachusetts

In 2005 Congress updated the federal bankruptcy laws with what is referred to as The Bankruptcy Reform Act. The updated laws were put into place to protect both parties from potential fraud and to help educate those who struggle with financial issues to prevent future filings for personal debt relief.

Some of the Federal and Massachusetts laws include:

Financial Credit Counseling Course – Two debtor education courses are required for each individual filing for bankruptcy. One is taken before the petition is filed and one is taken after the creditor hearing. These courses are mandatory and will result in a dismissed case if not taken and submitted with the bankruptcy court.

Involuntary Chapter Change – You may be counseled to file for a Chapter 7 bankruptcy. However, once the court examines your petition, they may find that you would be better suited to a Chapter 13 (debt reorganization) and change the Chapter accordingly. Your attorney will discuss your options if this occurs.

Massachusetts median Income Requirement – All debtors must fall at or below the average income for their family size in Massachusetts. If you exceed the median income a mathematical process, called the means test, will be applied using your financial information to determine if you still qualify for a bankruptcy.

Passing the means test – If you pass the means test, but exceed the average state level of income you will qualify for a Chapter 13. The law requires you to pay back a portion of your debts in either a three or five year bankruptcy plan.

Homestead exemption – Currently the home exemption law is capped at $136,875. You must have acquired your home four or more years prior to filing for bankruptcy to qualify for this exemption. Due to the economy, many homes have dropped 25% or more in equity value causing many to qualify for this exemption.

Massachusetts Homestead Exemption – In Massachusetts, residents have an option to use a homestead exemption. If you have up to $500,000 of equity in your home, this exemption may help you in a different way than filing for bankruptcy.  Please contact us for questions regarding this exemption.

Always Consult an Attorney, Bankruptcy Laws Can Be Confusing

Bankruptcy laws can be confusing and it is very important that you understand both the federal and Massachusetts laws in order to obtain the best results. With years of success assisting clients with personal bankruptcy, our office can make sure you get the attention you deserve. When you schedule a free consultation we will review your financial status and offer you the best options for your situation.