Massachusetts Bankruptcy: Consider The Alternative

As of 2021, Massachusetts’ outstanding debt was approximately $82.5 billion. This includes general obligation bonds, revenue bonds, notes, and other types of debt issued by the state government. In terms of per capita debt, Massachusetts has one of the highest levels in the country, with each resident owing about $12,000. However, the state also has a relatively high median household income and a strong economy, which help to offset the debt burden. The state’s debt is primarily used to fund infrastructure projects, such as transportation and education, as well as to pay for pension and healthcare benefits for state employees. As of 2021, the bankruptcy rate in Massachusetts was 2.6 per 1,000 residents, which is lower than the national average of 2.9 per 1,000 residents. In terms of actual numbers, there were 9,231 bankruptcy filings in Massachusetts in 2020, a decrease from the 11,307 filings in 2019. The majority of these filings were Chapter 7 bankruptcies, which are often used by individuals to discharge unsecured debts such as credit card debt and medical bills.

Bankruptcy Laws in Massachusetts

Bankruptcy laws in Massachusetts are governed by federal law, specifically the U.S. Bankruptcy Code. However, Massachusetts has its own specific exemptions that determine what property individuals can keep when filing for bankruptcy. Chapter 7 and Chapter 13 bankruptcy are the most common types of bankruptcy filed in Massachusetts. Chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy, as it involves the sale of non-exempt assets to pay off creditors. Chapter 13 bankruptcy, on the other hand, involves a repayment plan over three to five years that allows the debtor to keep their assets. In Massachusetts, the following property is exempt from seizure in a bankruptcy proceeding:

• Homestead exemption: up to $500,000 in equity in a primary residence
• Personal property exemption: up to $15,000 in personal property, including furniture, clothing, and household goods
• Motor vehicle exemption: up to $7,500 in equity in a motor vehicle
• Tools of the trade exemption: up to $5,000 in tools of the trade, including books, instruments, and equipment used for a person’s profession or trade
• Retirement account exemption: various types of retirement accounts are exempt, including 401(k) plans, IRAs, and pension plans.

It’s important to note that these exemptions are subject to certain limitations and qualifications, and that bankruptcy law can be complex.

What Types of Bankruptcy Are There For You Personally And For Your Business?

There are several types of bankruptcy available for individuals and businesses under the U.S. Bankruptcy Code:

For individuals:

• Chapter 7 bankruptcy: This is the most common form of bankruptcy for individuals. It involves liquidating non-exempt assets to pay off creditors and discharging most unsecured debts.
• Chapter 13 bankruptcy: This allows individuals with regular income to reorganize their debts and create a repayment plan over three to five years. Debtors can keep their assets, but must use their income to pay off creditors.
• Chapter 11 bankruptcy: This is typically used by individuals with significant debts, and allows for the reorganization of debts and assets to create a more manageable financial situation.

For businesses:

• Chapter 7 bankruptcy: This involves liquidating the assets of the business to pay off creditors and shutting down the business.
• Chapter 11 bankruptcy: This allows businesses to reorganize their debts and assets to create a more sustainable financial situation.
• Chapter 13 bankruptcy: This is not available for businesses, as it is only for individuals with regular income.

Learn More about the 3 main types of bankruptcy

Things To Keep in Mind When Considering Business Bankruptcy in Massachusetts

If you’re considering filing for business bankruptcy in Massachusetts, there are several things to keep in mind:

• Understand the types of bankruptcy available: As mentioned earlier, Chapter 7 bankruptcy involves liquidating assets to pay off creditors, while Chapter 11 bankruptcy allows for reorganization of assets and debts. It’s important to understand the implications of each type of bankruptcy and which may be more appropriate for your business.
• Consult with a bankruptcy attorney: Bankruptcy law can be complex, and an experienced bankruptcy attorney can help guide you through the process, including assessing your options and potential risks and benefits.
• Review your business finances: Before filing for bankruptcy, it’s important to review your business finances to ensure that bankruptcy is the best course of action. You may want to consider other options, such as negotiating with creditors or restructuring your business.
• Consider the impact on your employees: Bankruptcy can have significant impacts on your employees, including potential job losses. It’s important to consider these impacts and explore options to minimize them.
• Understand the consequences of bankruptcy: Bankruptcy can have significant consequences, including damage to your credit score, potential loss of assets, and limitations on future borrowing. It’s important to understand these consequences and make an informed decision about whether bankruptcy is the best option for your business.

What Debts Are Not Discharged in Bankruptcy?

While filing for bankruptcy can help discharge many types of debts, there are some debts that are not dischargeable under the U.S. Bankruptcy Code. These include:

• Certain taxes: Some taxes, such as recent income taxes and payroll taxes, cannot be discharged in bankruptcy.
• Debts incurred through fraud or intentional wrongdoing: Debts incurred through fraud, embezzlement, or other intentional wrongdoing cannot be discharged in bankruptcy.
• Student loans: In most cases, student loans cannot be discharged in bankruptcy, although there are some exceptions for borrowers who can demonstrate undue hardship.
• Child support and alimony: These debts cannot be discharged in bankruptcy.
• Fines and penalties: Debts owed for fines or penalties imposed by government agencies or courts cannot be discharged in bankruptcy.
• Debts not listed on the bankruptcy petition: Debts that were not properly disclosed on the bankruptcy petition may not be discharged.

How Bankruptcy in Massachusetts Affects Your Credit Score and Ability to Get a Loan in The Future

Filing for bankruptcy in Massachusetts can have a significant impact on your credit score and ability to get a loan in the future. Bankruptcy is a major negative event on a credit report and can stay on your credit report for up to ten years, depending on the type of bankruptcy filed. After bankruptcy, it may be more difficult to get approved for loans, credit cards, or other forms of credit. If you are approved, you may face higher interest rates and less favorable terms due to your bankruptcy history. Lenders may view you as a higher risk borrower, and some lenders may even deny your application outright.

How Does Bankruptcy in Massachusetts Affect Tax Debt?

In general, taxes owed to the IRS or Massachusetts Department of Revenue can be included in a bankruptcy filing, but the rules for discharging tax debts are complex and depend on several factors, including:

• The age of the tax debt: To discharge tax debt in bankruptcy, the debt must generally be at least three years old at the time of filing.
• The type of tax debt: Income tax debts are generally dischargeable in bankruptcy, but certain types of taxes, such as payroll taxes or fraud penalties, may not be dischargeable.
• The timing of the tax returns: To discharge tax debt in bankruptcy, the debtor must have filed a tax return for the debt at least two years prior to filing for bankruptcy.
• The nature of the bankruptcy: The rules for discharging tax debts can vary depending on the type of bankruptcy filed. For example, Chapter 7 bankruptcy may be more effective in discharging tax debts than Chapter 13 bankruptcy.

Will You Lose Your Home or Car in Bankruptcy in Massachusetts?

Whether you will lose your home or car in bankruptcy in Massachusetts depends on several factors, including the type of bankruptcy filed, the value of your property, and the amount of equity you have in the property. In a Chapter 7 bankruptcy, the bankruptcy trustee may sell certain assets, such as a home or car, to pay off your debts. However, Massachusetts law allows debtors to exempt certain assets, such as a primary residence or vehicle, up to certain dollar amounts. If the equity in your home or car is within the exemption limits, you may be able to keep it in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you may be able to keep your home or car even if you have significant equity in the property, as long as you are able to make payments through a repayment plan.

Statute of Limitations for Collections in Massachusetts

In Massachusetts, the statute of limitations for collections on most types of debt is six years. This means that a creditor or debt collector has up to six years from the date of the last payment or charge on the account to file a lawsuit against the debtor for the unpaid debt. After the statute of limitations has expired, the creditor or debt collector cannot legally sue the debtor for the debt. It’s important to note that making any payment on a debt can reset the clock on the statute of limitations. So, if you are being contacted by a debt collector regarding an old debt, it’s important to verify when the last payment was made before making any payments or agreeing to a payment plan. Additionally, the statute of limitations does not apply to certain types of debt, such as government-backed student loans and tax debts, which have their own specific rules and limitations.

Cons of Bankruptcy in Massachusetts

Filing for bankruptcy in Massachusetts, or anywhere else, is a serious decision that should be carefully considered. While bankruptcy can provide relief from overwhelming debt and help individuals and businesses get a fresh start financially, there are also some cons to be aware of. Here are some of the main cons of filing for bankruptcy in Massachusetts:

• Negative impact on credit: Filing for bankruptcy can have a significant negative impact on your credit score and can remain on your credit report for up to 10 years. This can make it more difficult to obtain credit, get approved for loans, rent an apartment, or even get a job.
• Loss of assets: Depending on the type of bankruptcy you file for, you may be required to sell or liquidate some of your assets in order to pay off your debts. This can include your home, car, and other personal property.
• Public record: Bankruptcy filings are public record, which means that anyone can access them. This can be embarrassing and may cause feelings of shame or stigma.
• Potential to affect others: If you have a co-signer on a loan or credit card, filing for bankruptcy may affect their credit as well.
• Emotional toll: Filing for bankruptcy can be emotionally draining and stressful, especially if you feel ashamed or guilty about your financial situation.

Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy

Why People Regret Filing Bankruptcy

People may regret filing for bankruptcy for a variety of reasons, including:

• Negative impact on credit: As mentioned earlier, filing for bankruptcy can have a significant negative impact on your credit score and remain on your credit report for up to 10 years. This can make it more difficult to obtain credit, get approved for loans, rent an apartment, or even get a job. Some people may regret filing for bankruptcy because they didn’t fully understand the long-term consequences it would have on their credit.
• Loss of assets: Depending on the type of bankruptcy you file for, you may be required to sell or liquidate some of your assets in order to pay off your debts. This can include your home, car, and other personal property. Some people may regret filing for bankruptcy because they lost assets that were important to them.
• Emotional toll: Filing for bankruptcy can be emotionally draining and stressful, especially if you feel ashamed or guilty about your financial situation. Some people may regret filing for bankruptcy because they didn’t fully anticipate the emotional toll it would take on them.
• Stigma: Despite the fact that bankruptcy is a legal process, there can be a stigma associated with it. Some people may regret filing for bankruptcy because they feel embarrassed or ashamed about it.
• Unforeseen consequences: Finally, some people may regret filing for bankruptcy because they didn’t fully anticipate all of the consequences it would have on their lives. For example, they may have difficulty renting an apartment or getting a job, or they may be surprised by how long the bankruptcy remains on their credit report.

What Happens If You Do Not Qualify For Bankruptcy In Massachusetts?

If you do not qualify for bankruptcy in Massachusetts, it means that you are unable to file for bankruptcy under the specific chapter that you are seeking. For example, if you do not pass the means test for Chapter 7 bankruptcy, you may not be eligible to file for Chapter 7 bankruptcy. However, you may still be eligible to file for Chapter 13 bankruptcy. If you are not eligible for bankruptcy, you may need to consider an alternative option for dealing with your debts, such as debt settlement.

Learn more: What Are Your Options When You Don’t Qualify for Bankruptcy

Why Debt Settlement In Massachusetts Is A Better Option Than Bankruptcy:

Here are some reasons why debt settlement may be a better option than bankruptcy for some people:

• Avoiding the stigma of bankruptcy: Bankruptcy can carry a social stigma, and some people may feel ashamed or embarrassed about having to file for bankruptcy. Debt settlement can provide debt relief without the public record and social stigma associated with bankruptcy.
• Potential for less damage to credit: Debt settlement may not have as long-lasting of an impact as bankruptcy. With debt settlement, a debt settlement firm will negotiate with your creditors to pay off a portion of your debt, which can result in a less negative impact on your credit score.
• Keeping assets: In a Chapter 7 bankruptcy, you may be required to liquidate assets to pay off creditors. Debt settlement can provide debt relief without the loss of assets.
• Lower cost: While both debt settlement and bankruptcy involve costs, debt settlement may be less expensive than bankruptcy, as there are no court fees or attorney fees associated with debt settlement.

Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help

CuraDebt – The Alternative You Are Looking For

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