You may have experienced a recent financial hardship and are researching whether Chapter 13 bankruptcy in Massachusetts is the best option for you. You are not alone. There are 3,529 bankruptcies filed in Massachusetts in the year ending June 30th, 2021. In addition, Chapter 13 bankruptcy is the second most common consumer bankruptcy file in the United States.
One of the most important things for you is to understand the affordability of your Chapter 13 plan payment. We will cover how you can estimate that in this article.
Many people consider Chapter 13 bankruptcy in the following scenarios,
- They make too much money to qualify for Chapter 7 bankruptcy in Massachusetts.
- They are at risk of losing belongings in Chapter 7 bankruptcy
- The debt settlement plan is too expensive
- There is a high lawsuit likelihood of their creditors in debt settlement
The purpose of this article is to explain Chapter 13 bankruptcy in Massachusetts in understandable terms. The goal is to help you understand your options to make the most informed decision.
We will start by covering the following:
- Chapter 7 vs Chapter 13 bankruptcy in Massachusetts
- Calculating your Massachusetts Chapter 13 bankruptcy plan payment
- Massachusetts Means Testing
- Chapter 13 bankruptcy filing process in Massachusetts
- Massachusetts bankruptcy exemptions
- Bankruptcy courts and trustees in Massachusetts
- Common Questions About Chapter 13 bankruptcy in Massachusetts
Chapter 7 vs Chapter 13 bankruptcy in Massachusetts
There are key differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy that you need to be aware of.
A Chapter 7 bankruptcy case requires that you pass the bankruptcy means test to receive a bankruptcy discharge (forgiveness). If your income exceeds the means test, you may not qualify for a Chapter 7 bankruptcy. That said, you may still qualify if you have certain expenses or primarily have business debts. Chapter 7’s purpose is to provide debt relief to those who don’t have the means to pay back their debts.
A Chapter 13 bankruptcy is designed for those who can repay at least a portion of their debts. That said, they may need help restructuring their debt into a payment plan. In a Chapter 13 bankruptcy, the debtors propose a payment plan to repay some or all of their debts.
That said, your Chapter 13 plan payment is based on numerous factors that we will cover next.
Calculating your Massachusetts Chapter 13 bankruptcy plan payment
Your Chapter 13 plan payment depends specifically on your finances. To estimate your plan payment, you can use Ascend’s free Chapter 13 bankruptcy calculator that mirrors the bankruptcy forms.
Let’s cover the factors that are included in your Chapter 13 plan payment
The amount of your disposable income each month after you subtract your allowable expenses and deductions can have implications on your plan payment. The disposable income is subtracted from your monthly income before taxes.
Your recent financial purchases could have some implications on your Chapter 13 monthly payment.
The value of your assets could increase the amount of your monthly plan payment. For example, this can happen if you have a home that has a large amount of equity above the allowable Massachusetts bankruptcy exemption.
We will cover the Massachusetts bankruptcy exemptions below and how they can affect your Chapter 13 payment plan.
Some debt has to be paid through the Chapter 13 plan. These debts could include taxes, alimony, administrative costs, attorney fees, and child support. Many of these debts are considered priority unsecured debts.
You may also be responsible to pay back part or 100% of your unsecured debts, such as credit card debt, personal loans, and medical bills. For example, this can make your Chapter 13 plan payment very expensive, so you may want to estimate your plan payment with a free Chapter 13 bankruptcy calculator.
Finally, you may be able to catch up on back car payments and mortgage payments as well.
Massachusetts Means Testing
The bankruptcy filing process in Massachusetts requires that you come to a means test. The means test calculates your annual median income, disposable income, and your average monthly income.
These figures are important in your Chapter 13 bankruptcy.
How to Calculate Average Monthly Income
Your average monthly income (also known as AMI) is calculated by taking all the household income 6 months prior to filing your case. The total of your income is divided by 6. The output is considered your AMI.
For example, let’s say your household size is 4 and you made $24,000 in the past 6 months when adding it all together. Your AMI would be $4,000.
Next you multiple your AMI by 12. Using the example, your annual income is $48,000.
The annual median income is often used in a Chapter 13 bankruptcy case to determine if you can do a 36 month or 60-month plan.
If your income exceeds the Massachusetts median income level, you have to submit a 60-month plan instead of a 36-month plan. If your median income is below the median income in Massachusetts, you may qualify for a 36-month plan.
Some may still choose a 60-month plan based on their specific needs.
So, what’s the median income for qualification in Massachusetts?
The median income in Massachusetts for bankruptcy cases is set by the Trustee’s office. The office revises the data, so you can check the means-testing website, and scroll down to the data required fields to select the most current month.
Using the example above, you would compare the $48,000 for a household size of 4 with the table below. If it’s higher, you may have to do a 60-month Chapter 13 bankruptcy plan.
Below are the Massachusetts median income levels for cases filed on or after May 15th, 2021. You would add $9,000 per household member after a household size of 4.
# of People Annual Income
How to Calculate Disposable Income
The next part of the means test is designed for you to calculate your disposable income.
In most cases, 100% of your disposable income has to be put into your Chapter 13 bankruptcy plan payment to repay your unsecured creditors. Unsecured creditors such as credit cards and personal loans typically only receive a small portion of the money owed to them in a Chapter 13 bankruptcy plan.
Consequently, most unsecured debts are forgiven or discharged upon successful completion of your plan.
That said, there are only specific living expenses that may be deducted from your average monthly income. For example, many payroll deductions are allowed expenses. For more information, the US trustee’s office publishes a list of expenses that are allowed by household size. These expenses include household supplies, food, etc.
If your expenses exceed the maximum amount, you may have to get approval and provide proof of the expenses.
Chapter 13 bankruptcy filing process in Massachusetts
You may want to understand the Chapter 13 bankruptcy filing process in Massachusetts. Firstly, you should consider districts in Massachusetts. Where you live determines which district you file your Chapter 13 bankruptcy case. You also will be assigned a Massachusetts Chapter 13 bankruptcy trustee who is the administer of the case.
Bankruptcy Districts in Massachusetts
- 1 Courthouse Way
Boston, Massachusetts 02210
- 595 Main Street
Worcester, Massachusetts 01608
- 300 State Street
Springfield, Massachusetts 01105
The process to file your Chapter 13 bankruptcy in Massachusetts is the same. Firstly, you need to understand whether Chapter 13 bankruptcy is right for you, decide whether to hire a Chapter 13 bankruptcy attorney, fill out the bankruptcy form, and attend the appropriate meetings.
Massachusetts Chapter 13 Bankruptcy Trustees
The Chapter 13 bankruptcy trustees manage the Chapter 13 process. You can find the list of trustees here or you can see the list below. Please note that the Chapter 13 trustee program do not administer bankruptcy in both Alabama and North Carolina.
Let’s go through the steps.
1. Decide whether Chapter 13 bankruptcy is right for you in Massachusetts
A Chapter 13 bankruptcy can be expensive. For example, if your disposable income is high, your Chapter 13 plan payment may be too high.
Ascend’s free Chapter 13 calculator can help you estimate your Chapter 13 plan payment.
You may want to consider the following before making a decision:
- Are you able to qualify for Chapter 7 bankruptcy?
- If you qualify for Chapter 7 bankruptcy, would you lose any belongings?
- What would your debt settlement plan payment be compared to Chapter 13 bankruptcy?
You can also question whether your income would increase or decrease over the next 5 years. Is your income consistent?
2. Locate A Chapter 13 Bankruptcy Attorney in Massachusetts
Many people choose to hire a Chapter 13 bankruptcy lawyer when filing a Chapter 13 bankruptcy in Massachusetts. Chapter 13 bankruptcy are often not simple. The Chapter 13 plan requires extensive experience and knowledge.
Someone who does not understand Chapter 13 bankruptcy law and local rules in Massachusetts could pay much more to get them out of debt.
Here are some benefits of hiring a Chapter 13 bankruptcy attorney in Massachusetts:
- A legal advocate who understands federal and Massachusetts bankruptcy laws
- Helps you determine differences between filing Chapter 7 and Chapter 13 bankruptcy
- Can help calculate the lowest Chapter 13 plan payment
- Completes and files all required bankruptcy documentation
- Reminds you of the hearings and deadlines of the case
- Guides you through the process and supports you at the hearings
- Protects you from aggressive creditors.
- Helps you understand how to keep your property, including your automobile and home.
Finally, a Chapter 13 bankruptcy can help you avoid costly eros that could hurt your chances of the bankruptcy discharge.
3. Complete Your Chapter 13 Bankruptcy Forms
As part of the Chapter 13 bankruptcy case, you are often required to complete two bankruptcy courses. Many of these courses are available online for a small fee. The course may take 1-2 hours to complete.
Here’s the list of approved cases in Massachusetts:
It’s a good idea to check to make sure that you are choosing one from an approved provider. The credit counseling course must be completed before you file Chapter 13 bankruptcy in Massachusetts. You must complete the debtor education course after filing the Chapter 13 bankruptcy petition.
You may consider completing the second course soon after filing the Chapter 13 bankruptcy case to make sure you do not forget to do that.
4. File your Massachusetts Chapter 13 Bankruptcy
Your Chapter 13 bankruptcy case may consist of over 100 pages. You have to complete the bankruptcy approved forms and any local Massachusetts bankruptcy forms required by the course.
Your Chapter 13 bankruptcy attorney often compiles and reviews these forms to ensure the accuracy of the case.
Here’s some example information included in your Massachusetts Chapter 13 bankruptcy case:
- Personal property
- Real estate
- Leases and other contracts
You may also have to complete the statement of financial affairs that has two dozen questions about different financial transactions. Your bankruptcy attorney can assist you to gather the information for the bankruptcy forms.
Massachusetts bankruptcy exemptions
In bankruptcy, there are two types of bankruptcy exemptions: 1) State bankruptcy exemptions 2) Federal bankruptcy exemptions. For your information, Massachusetts is a place that allows you to utilize the federal exemptions.
Below are some of the bankruptcy exemptions in Massachusetts. Please check the full list of exemptions for updates.
In many states, the bankruptcy exemption is based on your age and whether you are married.
- Single and under 65: $500,000
- Married and under 65: $500,000
- Single is 65 or older: $500,000
- Married is 65 or older: $500,000
homestead exemption text Massachusetts: “Mass. Gen. L. Ch. 188 §§ 1, 1A. $500,000 and $500,000 for each age 62+ or disabled person. Record a Declaration of Homestead with the county Registry of Deeds.” (Source)
The Massachusetts automobile exemption is $7,500.
Tools of Trade Exemption
The Massachusetts tools of the trade exemption is $5,000.
The Massachusetts wildcard bankruptcy exemption is $1,000.
The Massachusetts jewelry exemption is $1,225.
Personal Property Exemption
The Massachusetts personal property exemption is $15,000.
Please check the full list of exemptions to understand whether there may be special handling for the exemptions above.
FAQS of filing Chapter 13 bankruptcy in Massachusetts
Let’s cover some of the most common questions of filing a Massachusetts Chapter 13 bankruptcy.
How much does it cost to file a Chapter 13 bankruptcy in Massachusetts?
One of the most common questions is, "What is a cost of filing bankruptcy?".
There are 4 main costs of filing a Chapter 13 bankruptcy in Massachusetts. We will state with the most expensive to least expensive option.
1) Chapter 13 bankruptcy attorney fees in Massachusetts
The Chapter 13 bankruptcy fee is often the same throughout bankruptcy district(s) in Massachusetts. For example, the attorney fee in Boston may be the same as Springfield if they are in the same district.
The attorney fee is often based on the no-look fee, which is defined as the reasonable fee to do the service.
The Chapter 13 bankruptcy attorney cost in Massachusetts estimate between $4,000. This fee can depend on the district.
2) Chapter 13 filing fee
You are required to pay a Chapter 13 bankruptcy filing fee. This fee is $313.00. You may have to pay certain miscellaneous fees.
3) Credit Counseling and Debtor Education Courses
You will be responsible for the credit counseling and debtor education course. These courses may cost between $10 - $50 each.
4) Miscellaneous Costs
You may have to pay miscellaneous costs such as travel to the 341 meeting of creditors. You may have to pay for postage and potentially a credit report if the attorney does not cover that cost for you.
How often can you file Chapter 13 bankruptcy?
There’s no limit to the number of bankruptcy cases a person can file, but there is a waiting time for getting a bankruptcy discharge, a legal order that forgives your debt. For example, a common question is: Filing Chapter 13 after Chapter 7?
Here are the two times you need to know about filing Chapter 13 bankruptcy:
- 4 years - You have to wait 4 years after filing a Chapter 7 bankruptcy to file a Chapter 13 bankruptcy.
- 2 Years - You have to wait 2 years after filing a Chapter 13 bankruptcy to file another Chapter 13 bankruptcy.
You may want to speak with your bankruptcy attorney to ensure that you understand your specific situation.
What are the benefits of filing Chapter 13 bankruptcy in Massachusetts?
Here are some benefits of filing a Chapter 13 bankruptcy in Massachusetts:
- Prevents foreclosure by allowing you to catch up on your mortgage payments in 3 or 5 years.
- Prevents repossession and allows you often to keep your vehicle.
- Stops garnishment, debt collection lawsuits, seizures and levies
- Stops creditor calls
- Allows you to catch up on alimony and child support arrears
- Can help resolve tax debt and IRS issues
- Allows you to sometimes get relief from unsecured debt
- Protects your property
- You may be able to get discharged from a second mortgage
- You may be able to pay less than owed for a secured lien on your automobile.
Lastly, you may also get peace of mind and git rid of stress and anxiety from dealing with the debt challenges by filing Chapter 13 bankruptcy in Massachusetts. That said, before filing Chapter 13 bankruptcy, you may also want to consider your alternatives, which we will cover below.
Finally, you may want to consider the Chapter 13 disadvantages. For example, a common question is about getting a loan in bankruptcy. You may want to consider: Chapter 13 bankruptcy loans. Getting a loan or a mortgage can be difficult in a Chapter 13 bankruptcy, so it's important to measure the pros and cons.
What Are alternatives to filing Chapter 13 bankruptcy?
There are 3 common alternatives to file Chapter 13 bankruptcy in Massachusetts. Let’s cover each one of them.
Debt settlement is one of the most common alternatives to Chapter 13 bankruptcy. This debt relief solution is a restructuring debt in a payment plan, similar to Chapter 13 bankruptcy.
It can last up to 5 years or as little as 1 year or less. The debt settlement company tries to negotiate to lower the total amount of your debt. For example, a debt settlement company may try to negotiate a $10,000 debt to $5,000, then take a $1,500 fee. You may save money in this case.
In debt settlement, you may have more payment flexibility and the plan payment may be cheaper than a Chapter 13 bankruptcy in some conditions. That said, you do not get court protection from creditors, wage garnishment, foreclosure, etc.
Debt management, also known as credit counseling, is another common alternative to Chapter 13 bankruptcy. The purpose of a debt management plan is to reduce your interest rates. For example, you may see your interest rate reduction from 24% to 11%. Debt management is also often a 36 to 60-month plan.
Chapter 7 bankruptcy in Massachusetts
Chapter 7 bankruptcy is often referred to as liquidation bankruptcy. The Chapter 7 bankruptcy is for those who cannot afford to repay their debts. You often have to qualify for a Chapter 7 bankruptcy by being below the means test for Massachusetts. You may not be able to protect belongings above the exemption, but you often are able to get discharged in as little as 120 days. Chapter 7 bankruptcy is often the least expensive debt relief option. For example, the estimated attorney fee in Massachusetts is $1150 - $2500. Finally, a Chapter 7 bankruptcy stays on your credit report for 10 years instead of the 7 years for a Chapter 13 bankruptcy.
Hopefully, this guide can help you understand more about filing Chapter 13 bankruptcy in Massachusetts. Feel free to reach out to us directly or check out our Chapter 13 bankruptcy tips and tricks or any of our other Chapter 13 bankruptcy resources.