Springfield Chapter 7 Bankruptcy Attorneys
Helping Our Massachusetts Clients Navigate Liquidation Bankruptcy
Bills do not stop if you experience a devastating personal injury or abruptly lose your job. Both these and other depressingly plausible incidents can radically transform your previously healthy financial situation. Things can get even worse if, for example, you are hit with expensive medical bills, but your inciting injury has also kept you from working. This can mean your household may be faced with significantly higher bills but drastically lower income, quickly leading to a seemingly inescapable cycle of debt.
Scenarios of this sort, where a household has little to no disposable income and is consequently accumulating debt, can be potentially helped through Chapter 7 bankruptcy, also known as liquidation bankruptcy. The term “liquidation bankruptcy” might sound intimidating, but Chapter 7 can help you escape crushing debt and even save your home from foreclosure or your vehicle from repossession.
Our Springfield Chapter 7 bankruptcy lawyers at Hare, Stamm, Harris & O’Connor, LLC can help determine if you qualify and prepare the necessary financial documents. We can help you formally file and give you legal guidance through each phase of the process.
The Chapter 7 Bankruptcy Process
If a bankruptcy court approves your formal filing, they will promptly issue an “automatic stay,” an order that freezes all collections actions against you. If you have been experiencing creditor harassment, for example, that will stop: The automatic stay prohibits collection agents from contacting you. Any efforts to foreclose your property or repossess your vehicle must also immediately cease, potentially saving your car and home.
Next, your bankruptcy court will appoint a trustee to oversee your liquidation process. All of your property will enter what is called a “bankruptcy estate,” but where nonexempt assets will be liquidated to repay your creditors. In exchange, you will be permitted to discharge unsecured debts at the end of the process.
However, with the help of an experienced Springfield Chapter 7 bankruptcy attorney, you can minimize the impact of liquidation on your assets. “Exempt” property is shielded from the liquidation process, and we can help optimize your estate to best leverage exemption protections to safeguard as much of your assets as possible. In layman’s terms, this means you will not have to give your house, your car, or other things you need to live your life. In many scenarios, with the right planning, little to nothing gets liquidated.
Options When Filing Your Exempt Property
When filing your exempt property, you have the option of choosing between federal exemptions and the state of Massachusetts’s exemptions. Massachusetts has especially generous exemption thresholds, so you will generally want to operate under the state’s rules.
To give you an idea of how much of your exempt property is protected from Chapter 7 liquidation, the state of Massachusetts offers some of the following exemptions:
- Up to $500,000 in homestead (your primary residence and home)
- Up to $15,000 in household furniture
- All necessary clothing and bed furnishings (sheets, pillows)
- Up to $500 a month in utilities
- Up to $7,500 for your vehicle
- 85% of your gross earnings or your weekly income on Massachusetts minimum wage income multiplied by 50, whichever is greater
As you can see, a great deal, if if not the entirety, of your estate may qualify as exempt, making the impact of liquidation negligible. Items that do tend to be considered “nonexempt,” and thus subject to liquidation, are often also considered items of luxury. This can include a second home or property, an additional vehicle, a collection of valuable items, or certain types of investments or bank accounts. While these can be liquidated during the Chapter 7 process, remember that your unsecured debts will be discharged at the end of the process, giving you a fresh financial slate.
Once the liquidation process has been completed and verified by the bankruptcy court, you will be permitted to discharge all unsecured debts. This means you will not owe any additional payments to the discharged debts, and creditors will no longer be allowed to pester you about repaying them.
Types of unsecured debts you can typically discharge include:
- Credit card debt
- Medical debt
- Utility bill debt
- Student loan debt (under certain circumstances)
- Income taxes (if not already subject to a government lien)
- Personal loans without a security agreement or mortgage attached
- Court judgments that have not yet been enforced
These categories of debt can represent the majority, if not the entirety, of the overwhelming debt that can quickly take over lives. You should also be aware that certain types of debt, called secured debt, cannot be discharged through Chapter 7 bankruptcy. Exceptions and special circumstances do exist across many debt categories, so it is best to review the details of what types of debt you can and cannot discharge with a qualified lawyer.
Do I Qualify for Chapter 7 Bankruptcy?
In the state of Massachusetts, debtors must pass a Means Test to qualify for Chapter 7 bankruptcy. This is primarily determined by your household’s level of income. If your income for the last six months is lower than the state’s current median income level for your household size, you will qualify to file for Chapter 7 in most scenarios.
As of May 1, 2020, the Massachusetts median income thresholds are as follows:
- 1 Person – $5,593.25 (Monthly) | $67,119.00 (Annually)
- 2 People – $7,010.42 (Monthly) | $84,125.00 (Annually)
- 3 People – $9,010.83 (Monthly) | $108,130.00 (Annually)
- 4 People – $11,201.50 (Monthly) | $134,418.00 (Annually)
- 5 People – $11,951.50 (Monthly) | $143,418.00 (Annually)
- 6 People – $12,701.50 (Monthly) | $152,418.00 (Annually)
- 7 People – $13,451.50 (Monthly) | $161,480.00 (Annually)
- 8 People – $14,201.50 (Monthly) | $170,418.00 (Annually)
- 9 People – $14,951.50 (Monthly) | $179,418.00 (Annually)
- 10 People – $15,701.50 (Monthly) | $188,418.00 (Annually)
If your monthly or annual income exceeds the above threshold for your household size, you will likely not qualify for Chapter 7 but instead be eligible for Chapter 13 bankruptcy. However, if you recently lost a job or another source of income, waiting for your 6-month running income to drop may put you under the qualifying threshold. There are also other exceptions that our qualified bankruptcy lawyers can help you explore.
In addition to passing the Means Test, all debtors filing for consumer bankruptcy must take a credit counseling session up to 6 months before filing. You will also need to complete a financial management course once your bankruptcy process has concluded.
Finally, a bankruptcy court will need to verify the following when considering your filing:
- You are an individual, not an institution (such as a business)
- You are not attempting to abuse bankruptcy or defraud creditors
- You have not filed for Chapter 7 or another type of bankruptcy within a certain period of time
Our partner attorneys at Hare, Stamm, Harris & O’Connor, LLC have over 100 years of collective legal experience, much of which has been devoted to assisting our Springfield clients relieve their debts through Chapter 7 bankruptcy. We have a complete understanding of the state’s bankruptcy systems and can help you avoid common errors while maximizing the benefits Chapter 7 can confer to your financial situation.