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Last updated Nov. 7, 2017.
Home of the American industrial revolution, the first Thanksgiving Day, and the first U.S. Postal zip code, Massachusetts is steeped with tradition. Residents of the Bay State enjoy historic sites and beautiful art and culture, from living history museums to film festivals.
The economy in Massachusetts also is recovering nicely. Wage and salary gains statewide resulted in a 4% growth in the economy in the second quarter of 2017, compared to a U.S. growth in real gross domestic product of 2.6% during the same time period. For the remainder of 2017, Massachusetts’ economy is expected to grow at a strong 2.7% annual rate.
To go along with that growth, bankruptcy filings in Massachusetts have decreased 4.7% from the 12-month period ending Sept. 30, 2017 — mirroring national trends. However, more than 8,000 bankruptcy cases are filed per year in the Commonwealth. That’s a lot of people who are looking for financial relief, either with debt piling up due to medical bills, credit cards, or student loans.
- Understanding Chapter 7 Bankruptcy in Massachusetts
- How to Keep Your Property and File for Bankruptcy in MA
- Massachusetts Bankruptcy Exemptions
- Massachusetts vs. Federal Exemptions
- Preparing to File Chapter 7 Bankruptcy
- Massachusetts Bankruptcy Court Locations
Understanding Chapter 7 Bankruptcy in Massachusetts
You’re in debt and are doing research online, so you’ve probably already encountered some general information about bankruptcy. But what do you need to know about bankruptcy if you’re filing in Massachusetts?
Before you dive into your Massachusetts research, make sure that MA law applies to your case. If you just moved to MA, your previous home’s law’s might apply to your Chapter 7 case. Check out this post for more information.
OK, back to Chapter 7.
Chapter 7 bankruptcy is legal action that can be taken by individuals to wipe out their debts and get a new financial start. Chapter 7 is called “clean slate” bankruptcy because it is an effective tool for wiping out debt, but the rules vary by state as to what property you’re allowed to keep through the process.
For example, Tom Brady couldn’t file bankruptcy in Massachusetts and keep those lovely Super Bowl rings because they wouldn’t be deemed “exempt” under MA law. Those who qualify for Chapter 7 bankruptcy may be able to keep many of their assets as exempt, and in MA you may file Chapter 7 under either the federal exemptions or Massachusetts bankruptcy exemption laws.
How to Keep Your Property and File for Bankruptcy in MA
Chapter 7 bankruptcy bankruptcy puts all of your property into a bankruptcy estate. Any items in the estate that aren’t exempt are liquidated to make repayment to creditors; however, most people who file keep all their property. It is important to keep in mind that, even in the unlikely event you have an item of property sold by the trustee, you are still entitled to the amount of the exemption in that item. For example, MA law allows a $7,500 exemption for a vehicle used for personal transportation. Let’s say you own a car worth $10,000. Even if the trustee were to sell the car, you would get a check for the $7,500. The sale does not defeat the exemption.
Once the process is complete and the trustee has looked over all your assets, you are discharged of any remaining debts. This means you owe nothing, and you have no corresponding tax liability. In the interim, creditors are no longer allowed to call thanks to the protections of the automatic stay, a federal court order that penalizes creditors who don’t respect the bankruptcy process.
There are some debts that are not included in a Chapter 7 bankruptcy. These types of debts cannot be discharged. This means that you will remain responsible for them, even after filing for bankruptcy.
Some debts that may not be dischargeable include taxes, student loans, child or spousal support, and court fines and restitution. It is essential that you provide accurate information. If you falsify documents or attempt to conceal assets, your entire case may be denied.
Massachusetts Bankruptcy Exemptions
Like every other state in the Union, Massachusetts offers exemptions to those filing bankruptcy.
As we’ve mentioned above, exemptions allow you to shield assets through the bankruptcy process. Massachusetts is one of those states that allows debtors to choose either the federal exemptions or the home state exemptions, but you must choose one or the other.
As our chart demonstrates, MA law is much more generous than is federal.
Here are some common exemptions available under Massachusetts law.
Massachusetts vs. Federal ExemptionsThe top 5 exemptions under Massachusetts law compared to federal law.
|Type of exemption||Massachusetts law||Federal law|
|Homestead||Up to $500,000, with $1 million for elderly/disabled exemption for two individuals||$23,675 of equity in principal place of residence|
|Personal property||Necessary clothing and bedding, $15,000 in additional household furniture, $500 per month for utilities, and more||$12,625 aggregate value on household goods, plus federal wildcard exemption applicable ($1,250 plus $11,850 of any unused portion of your homestead exemption)|
|Vehicle||$7,500, or up to $15,000 for elderly/disabled||$3,775|
|Wages||85% of gross earnings or 50 times the Massachusetts minimum hourly wage per week, whichever is greater||Income you've earned but not yet received becomes part of your bankruptcy estate|
|Pension/retirement||Exempt, except those that remain subject to claims under support orders||Exempt, with a cap of about $1.28 million on IRAs and Roth IRAs|
Massachusetts Homestead Exemption
You may exempt up to $500,000 of the value of your principal residence if you file a Declaration of Homestead or up to $125,000 even if you don’t declare. It is important to note that in Massachusetts, married couples filing a joint bankruptcy are not allowed to double the exemption, regardless of whether they are living apart. (See Massachusetts General Laws Ch 188 § 1-14.)
Disabled or elderly homeowners may be eligible for a $500,000 exemption whether or not they file a Declaration of Homestead. Those who have a physical or mental impairment or are at least 62 years of age are eligible for this exemption. If two spouses who own the property are over age 62, they qualify for a $1 million exemption.
Massachusetts Vehicle Exemption
You are allowed an exemption of up to $7,500 for one vehicle that is used for your personal transportation. If the vehicle is owned or used by a handicapped person or someone over age 60, an exemption of up to $15,000 is allowed.
Personal Property Exemptions in Massachusetts
When declaring bankruptcy, you may exempt a portion of your personal property other than your motor vehicle. (Mass. Ann Laws Ch 235 § 34.) This includes:
- Clothing and beds
- Up to $15,000 in furniture
- $1,225 in jewelry
- $600 in provisions
- $500 per month for utilities
- $500 of books
- 100 shares in a cooperative
- Livestock including 2 cows, 12 sheep, 2 swine, and 4 tons of hay
- One heating unit
- One sewing machine
- One pew in a house of worship
- Military uniforms
- All rights to cemeteries including burial tombs and plots
Pension or Retirement Exemption in Massachusetts
Those who receive a pension or retirement benefits may be exempt from bankruptcy per Mass. Ann. Laws Ch 32 § 19, Ch 171 § 84, and Ch 246 § 28. Note that the exemption does not apply to benefits subject to support orders.
Massachusetts Wages Exemption
In Massachusetts, you may protect up to 85% of your gross earnings or 50 times the minimum Massachusetts hourly wage per week, whichever is greater. Mass. Ann. Laws ch. 115, § 5
Massachusetts Wildcard Exemption
In addition to the above, Massachusetts is one of a few states to offer a wildcard exemption. Filers can exempt $1,000 plus $5,000 in any unused motor vehicle, household furniture, or tools of the trade exemptions. Mass. Ann. Laws. ch. 235, § 34(17)
Preparing to File Chapter 7 Bankruptcy
Before you can file for bankruptcy you will need to gather the necessary documentation. This includes copies of your income statements from the last 6 months, current bills and statements from all creditors, income tax documents, mortgage information, details of any other income, retirement account information, rental leases, and other documents.
You must include all sources of income such as from investments, rental property, businesses, child support, alimony, pensions, and food stamps, among others. All information must be current. Additionally, you must provide details of any previous bankruptcy that you filed. Keep in mind that it may take some time and effort to gather these documents in preparation for filing bankruptcy.
Immediately upon filing a petition for bankruptcy, your creditors are no longer able to contact you for payment. Your case will be assigned to a trustee who will take charge of the liquidation of your assets. Any assets that are exempt cannot be included in this action.
Many people are happy to learn that a large portion of their remaining assets are exempt, and a large portion of cases are concluded with no assets.
Massachusetts Bankruptcy Court Locations
Not sure where to file for bankruptcy in Massachusetts? The United States Bankruptcy Court District of Massachusetts has locations in Boston, Springfield, and Worcester. There’s also a Barnstable courthouse, but they do not accept pleadings for filing (those should be filed in Boston).
Here are the main bankruptcy court locations in Massachusetts.
Boston: United States Bankruptcy Court, John W. McCormack Post Office and Court House, 5 Post Office Square, Suite 1150, Boston, MA 02109, (617) 748-5300
Worcester: United States Bankruptcy Court, Donohue Federal Building, 595 Main St., Room 211, Worcester, MA 01608, (508) 770-8900
Springfield: United States Bankruptcy Court, United States Courthouse, 300 State St., Springfield, MA 01105, (413) 785-6900
Filing for bankruptcy can be complex, so it is essential to seek help from a qualified professional. The process is simplified significantly with assistance from an attorney who specializes in bankruptcy in Massachusetts. Your attorney will evaluate your information to determine whether you qualify for bankruptcy. If so, your lawyer will guide you through the process to ensure a favorable result.