Many people facing financial hardship are unwilling to even consider bankruptcy because they mistakenly believe doing so will also mean the certain loss of their home or car. To accurately determine whether this is true or not, individuals facing hard financial times should consult the advice of a bankruptcy attorney. The reason for this is a bankruptcy attorney can review individual situations and determine which property can be protected from a person's creditors through what are called 'exemptions.'
Massachusetts residents can file bankruptcy using Massachusetts exemptions or the more commonly used Federal exemptions. Most persons filing bankruptcy in Massachusetts at the present time are filing bankruptcy using the Federal exemptions. The reason for this is two-fold. One, there are not many debtors in Massachusetts that have $500,000 of equity in their home who are in financial difficulty and two, Massachusetts exemption statutes provide very few protections for any other property beyond a primary residence at the present time. For example, one currently filing under the Massachusetts bankruptcy exemptions can only protect $700.00 of equity in a car or risk losing it entirely when filing bankruptcy.
Under the Federal bankruptcy exemptions in place as of January 2011, an individual can file bankruptcy and still protect up to $21,625 of equity in their home. They can also exempt up to $3,450.00 of equity in a car, and even up to $11,525.00 in household items so long as no item exceeds $550. Even beyond this, if the equity in one's home is $10,800 or less, an individual can apply what is called a wildcard exemption of as much as $10,825.00 and protect additional personal property along with $11,525.00 of equity in their home. A married couple filing bankruptcy together is entitled to double the exemption amounts listed above, with a few restrictions.
Thus, in contrast to the disbelief of many people, it is possible to file bankruptcy in Massachusetts, protect certain property, absolve oneself from all debts owed to creditors, and still be able to begin with a fresh fiscal start. The challenge, however, is doing it the right way through the advice of counsel so that the debtor is left still owning the possessions that are important to them post-bankruptcy.
The decision of electing bankruptcy per Massachusetts protections versus Federal ones is about to get a bit muddier as well. As of April 7, 2011, Massachusetts Bankruptcy exemptions will change significantly per a bill recently signed into Law by Governor Patrick. For example an individual will be able to protect up to $7,500.00 ($15,000.00 if elderly or disabled) of equity in a car as opposed to $3,450.00 under the Federal system. An individual will also be able to protect up to $15,000.00 of furniture under the Massachusetts system as opposed to $11,525.00 under the Federal one.
So which way should one file bankruptcy, using the Massachusetts exemptions or the Federal ones? This question is best left to your attorney, and it is one we here at P&P Law can help you answer, after examining your particular situation. While bankruptcy can always be accomplished prose, the debtor must know there are benefits, pitfalls, rules, etc. that one must decide if they are better served by having experienced bankruptcy attorneys such as those at P&P.
