When filing for Chapter 7 bankruptcy in Massachusetts, the court will explore all possible avenues to repay your creditors before discharging the remaining debt. This will include ordering the bankruptcy trustee to sell any non-exempt assets you own.
Understanding non-exempt assets
Non-exempt assets are any possessions or property that the appointed bankruptcy trustee can use to pay back creditors. Generally, the court considers an asset non-exempt if they have a high financial value or could yield a significant profit when sold. Examples of such properties in consumer bankruptcy filings typically include cars, boats, jewelry and second homes.
The bankruptcy code also allows individuals to keep certain types of assets exempt from the court. These exemptions vary among states. In Massachusetts, they include clothing, $600 of food, $15,000 of furniture, $1,125 of jewelry, $5,000 of tools of the trade (like professional instruments or equipment), social security payments, pensions and retirement accounts, disability income benefits and public assistance benefits (such as welfare).
Alternatives to Chapter 7 bankruptcy
If you have an asset that you fear you might lose when you file for Chapter 7 bankruptcy in Massachusetts, you may seek alternative debt solutions such as Chapter 13 bankruptcy. In this arrangement, instead of disposing of your non-exempt assets, you and the court agree to a three-to-five-year partial repayment plan where you make fixed monthly payments to your creditors in exchange for keeping said assets.
In addition, you can also consolidate your debt with a loan or credit counseling. Credit counselors can negotiate with creditors on your behalf to lower interest rates and combine payments into one manageable monthly bill. This will allow you more breathing room when managing your finances as you repay what you owe.
It is important to note that regardless of which option you choose, you should understand the laws and processes involved to make an informed decision. Regardless, being honest and straightforward with the court and creditors is the best way to ensure that everything goes smoothly.