Massachusetts Bankruptcy Lawyer

A bankruptcy debtor is required to produce to the trustee in his case seven days before the date of his creditors’ meeting pay stubs for sixty days prior to the date of filing and his last year’s tax return. The return required to be produced is the federal return, usually two pages. None of the other annual return paperwork is required, including federal schedules and deduction sheets and the state return. Information about tax refund monies still in the possession of the debtor would be reported as personal property on Schedule B and no additional paperwork is required as regards the refund.

Although a bankruptcy filing can affect an application for naturalization, there is no immigration status required to file bankruptcy. A debtor is not required to be a citizen or even permanent resident in order to file. Anyone lawfully in the U.S. and having a Social Security number can file for bankruptcy using their home address as their legal residence

As of December 1, 2010, bankruptcy debtors are given more time to complete the second required class, the financial management course. The time has increased from forty-five days after the creditors’ meeting to sixty (60) days after the creditors’ meeting. The notice of this requirement from the court is still sent two weeks before the deadline. Completion of the course should be the last step in a successful Chapter 7 case, as the debtor would then after the two-month post-creditors’ meeting deadline for objections receive their order of discharge.

Even though a Chapter 7 bankruptcy is a “no-asset” case, debtors are still allowed to keep limited “exempt” personal property. A major concern of debtors is that they would lose their car if they filed for Chapter 7 bankruptcy. This should not be the case for most debtors unless they are defaulting on their car loan and listing the account as an unsecured debt on their bankruptcy petition. Debtors who own their home and are using the Massachusetts homestead exemption qualify to have a $700 car, but even if a debtor owns several thousand dollars worth in a motor vehicle, it is unlikely to be seized as used cars would likely not fetch enough for it to be worth the trustee’s while. Federal law for non-homeowners allows a $3,450 car, with additional amounts also available using the wildcard exemption.

Life insurance policies are considered exempt if they are term policies, usually the type offered by employers, with only a death benefit available to beneficiaries and no cash-out value during the debtor’s lifetime. Whole policies are not exempt, but policies worth relatively small amounts may be covered by the wildcard exemption. Most retirement savings accounts would qualify for an unlimited amount of exemption under both state and federal law and the monies from these accounts would likely only be seized as preferential transfers if the debtor had taken large distributions out before filing bankruptcy while avoiding paying creditors.

A bankruptcy case would be filed in the appropriate District where debtor has their “domicile” or “residence” for 180 days before filing or for a longer part of this 180 day period than another District. “Domicile” or “residence” would be where the debtor lives for most of the time – so a debtor whose family has relocated elsewhere or whose work requires frequent travel out of state would still file in the District of their legal residence. If a person contemplating bankruptcy is moving, they would be well-advised to file their case while they are still in their former address before relocating.

There are several types of exemptions in bankruptcy. This means that bankruptcy offers certain protections to avoid your personal property from being seized or attached in a lien. One such exemption is the wildcard exemption.

The wildcard exemption can be used against any nonexempt personal property, especially money in the bank, additional amounts for household goods and furnishings and a motor vehicle. This exemption allows even “no-asset” Chapter 7 filers to retain their savings without the fear of liquidation.The current federal wildcard exemption is $11,975.00. This means that property valued up to this amount can be protected. This amount is for a single person and a couple filing a petition would receive twice this amount as each of them qualifies for the wildcard exemption.

This past October has seen a temporary halt in foreclosures. Bank of America stopped nationwide foreclosures and the sales of foreclosed homes on October 8, but resumed foreclosures in 23 states on October 25. Inspired by the Maine case Federal National Mortgage Association v. Bradbury, JP Morgan Chase and Ally Financial, previously known as GMAC Mortgage, joined Bank of America. However, during this time, banks have not offered more loan modifications to homeowners who have experienced hardship.

Many homeowners considering bankruptcy for unsecured debts have questions about concurrently modifying their home mortgages using federal relief available through the Home Affordable Modification Program (HAMP). This relief is available for homeowners whose monthly mortgage payment exceeds 31 percent of their verified gross (pre-tax) income. These homeowners must own a one- to four-unit home that is their principal residence; have received their mortgage on or before January 1, 2009; have a mortgage payment (including taxes, insurance, and homeowners’ association dues) that is more than 31 percent of their gross (pre-tax) monthly income; owe an amount that is less than or equal to $729,750 on their first mortgage for a one-unit property (with higher limits for two- to four-unit properties); and have a documented financial hardship. The Making Home Affordable Program which administers this relief uses applicants’ financial information to determine whether the applicants suffer hardship.

If you are in an active (open) Chapter 7 or Chapter 13 bankruptcy case, you must be considered for a HAMP modification if you, your attorney, or the bankruptcy trustee submits a request to the loan servicer. If you are in a HAMP trial period plan and subsequently file bankruptcy, you may not be denied a HAMP modification on the basis of the bankruptcy filing. Loan servicers can extend the trial period, but only for an additional two months, resulting in a maximum five-month trial period. Even if you have received a Chapter 7 bankruptcy discharge, you are eligible for HAMP. If you did not reaffirm your mortgage debt, the following language must be inserted in the Home Affordable Modification Agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”

New median household income figures based on U.S. Census information will take effect and apply to cases filed after November 1, 2010. Depending on household size, this could make qualifying for Chapter 7 relief easier for some while forcing certain households into means testing. A single-person household in Massachusetts will see their income limit increase slightly, potentially allowing more people in this situation to qualify for bankruptcy. However, two-person households will see their income limit drop, meaning certain households, especially with two working adults, may be forced into means testing. Household income levels have increased slightly for households of more than two people.

A recent court decision emphasizes the need for consistent reporting of financial information on bankruptcy schedules. The case, In Re: Riley, Christina C. (Lawyers Weekly No. 04-083-10) (15 pages) (Feeney, J.) (USBC) (Chapter 7 case No. 09-10096-JNF) (Sept. 14, 2010), was a Chapter 7 bankruptcy in which a creditor had filed a motion to dismiss for abuse. The creditor claimed that debtor’s salary on the Burlington Public Schools’ schedule gave debtor $4,133 more income for the year 2010-2011 than she had reported. However, debtor’s actual income appeared to be less than this potential amount, and was in fact inconsistent and reduced by absences from work. The court did question debtor’s expenses as listed on Schedule J. A $1,700 monthly amount for child care expenses could not be documented by canceled checks. However, debtor had completed a family court financial statement reporting child care expenses of $466 per week or $1,864 per month. The court found that “although her income is stable and she is eligible to be a debtor in a Chapter 13 case, this Court cannot find that she has the ability to repay creditors out of future earnings, unless her expenses on Schedule J are overstated or are likely to be reduced, particularly due to the pre-school ages of her children.” Although bankruptcy debtors are not required to file supporting documentation for the expenses they report, they should take care to ensure that the amounts listed are as accurate as possible in order to avoid complaints for abuse.