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What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy,” as your estate will go through a liquidation process in which a trustee sells your nonexempt property to repay debtors. That might sound scary, but the idea that you will lose most or all of your property is a myth. An experienced attorney can help minimize liquidated assets and strategically manage your estate so you lose as little as possible. In many cases, filers can lose nothing!

Chapter 7 bankruptcy allows you to discharge certain types of debt. They also both grant you an “Automatic Stay” as soon as you file, freezing all collections actions against you. This means creditors will no longer be able to harass you for the duration of your bankruptcy and attempts to foreclose any of your property will be halted. In other words, filing for either type of consumer bankruptcy will end the annoying calls from collections agents and potentially save your home and car.

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.

In order to be eligible for Chapter 7 bankruptcy, your household’s income for the previous 6 months must be lower than the Massachusetts median income level. If your household’s income is higher than the median, you will need to pass the Massachusetts Means Test to qualify.

The Means Test involves calculating all qualifying forms of income over the past 6 months and subtracting regular qualifying expenses. The result will establish your household’s disposable income, which will in turn determine whether you qualify for Chapter 7 bankruptcy.

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.

Other Steps In The Chapter 7 Process

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

You do not have to navigate the often-confusing bankruptcy process on your own. Our Springfield bankruptcy attorneys at Hare, Stamm, Harris & O’Connor, LLC can assist you at each step of the process, including confirming your eligibility, assisting in your preparation of filing documents, representing you in court and in negotiations with creditors, and recommending steps to optimize your estate and finances.

Let Our Team Guide You Through Bankruptcy

We understand how stressful dealing with debt can be, especially amidst the ongoing COVID-19 pandemic, so we strive to make the bankruptcy process as simple as possible for you. Our legal team has over 100 years of collective legal experience and is prepared to help you with your financial situation. Do not wait to consider bankruptcy if you are experiencing mounting debts. Take the first step to taking control of your finances by calling 413-707-2753 or contacting us online.