Consumer Bankruptcy Law and Practice: MASSACHUSETTS
Has state opted out of federal bankruptcy exemptions? No.
Is opt out limited to residents or domiciliaries of the state? Not applicable.
Do state’s exemptions have extraterritorial application?
Has state opted out of federal bankruptcy exemptions? No.
Is opt out limited to residents or domiciliaries of the state? Not applicable.
Do state’s exemptions have extraterritorial application?
Has state opted out of federal bankruptcy exemptions? No.
Is opt out limited to residents or domiciliaries of the state? Not applicable.
Do state’s exemptions have extraterritorial application?
Homestead: Uncertain.
Personal property: Uncertain.
Wages: V.I. Code Ann. tit. 5, §§ 521, 522.
Has state opted out of federal bankruptcy exemptions? No.
Is opt out limited to residents or domiciliaries of the state? Not applicable.
Do state’s exemptions have extraterritorial application?
Homestead: Uncertain.
Personal property: Uncertain.
Wages: Mich. Comp. Laws § 600.5311.
Scope: Wages.
Has state opted out of federal bankruptcy exemptions? No.
Is opt out limited to residents or domiciliaries of the state? Not applicable.
Do state’s exemptions have extraterritorial application?
Homestead: No. Haw. Rev. Stat. § 651-92(a)(1) applies to one parcel of real property “in the state of Hawaii.”
Personal property: Uncertain.
Wages: Haw. Rev. Stat. §§ 652-1(a), (b), 651-121, 653-3.
Has state opted out of federal bankruptcy exemptions? No.
Is opt out limited to residents or domiciliaries of the state? Not applicable.
Do state’s exemptions have extraterritorial application?
Homestead: No exemption.
Personal property: Uncertain.
Wages: 23 Pa. Cons. Stat. § 3703; 42 Pa. Cons. Stat. § 8127.
Scope: Wages, salaries and commissions of individuals. 42 Pa. Cons. Stat. § 8127.
Has state opted out of federal bankruptcy exemptions? Yes. 735 Ill. Comp. Stat. § 5/12-1201.
The last two parts of Official Form 106 are schedules I and J, which require a complete disclosure of the debtor’s income and expenses. In chapter 7 cases, these schedules are intended to provide information that could help a bankruptcy court to determine whether a chapter 7 case might be an “abuse” and therefore subject to dismissal under 11 U.S.C.
The statement of financial affairs (Official Form 107) is also required in both chapter 7 and chapter 13 cases.180 Every question must be answered, but the form is simple to fill out. Most questions have a box labeled “No” that should be checked if that is the appropriate response to a given question.
Spouses filing a joint petition may file a single statement. Debtors engaged in business must provide the requested information for all unincorporated businesses, as well as for their personal affairs.
Another required document in chapter 7 cases is the statement of intention regarding debts secured by property of the estate and leased personal property.220 This document must state certain intentions of the debtor, as of the date of its filing, with regard to any property, real or personal, that serves as collateral for a debt. In addition, Official Form 108 requires the debtor to state the debtor’s intentions with respect to leases of personal property.
Section 521 was amended in various respects by the 2005 amendments, and a number of related provisions were also enacted. The changes in statutory language arguably did nothing to change the result of earlier cases that held that a debtor could retain property subject to a security interest if the debtor remained current on payments and other contract obligations. Those cases were based on the plain language of the Code, which in all material respects is unchanged.
Getting Started
Creditors are notified officially of the automatic stay in the notice of the meeting of creditors.300 Unfortunately, from the debtor’s perspective, this notice is not always adequate for several reasons. First, the notice may not be mailed until weeks after the petition is filed. Second, when it is mailed, it goes only to creditors listed in the schedules or statement.
Most of the forms filed at the outset of the case are Official Forms promulgated by the Judicial Conference of the United States and are reproduced in Appendix D, infra.
Any individual residing, domiciled, or having property or a place of business in the United States may file a petition to commence a chapter 7 bankruptcy case.3 To be eligible, the individual must, with certain limited exceptions, have received a credit counseling briefing from an approved nonprofit budget and counseling agency within the 180 days before filing the bankruptcy petition.4 The individual need not be insolvent.
If the filing fee is not paid in full at filing or has not been waived in a chapter 7 case, the debtor must file an application to pay it in installments. The form for this application is provided in Official Form 103A.303 A petition must be accepted if accompanied by this form even if an installment is not paid at the time the petition is filed.304
A chapter 7 debtor whose income is below 150% of the poverty level based upon family size may apply for a waiver of all filing fees.307 The form for the application is Official Form 103B, which also contains a proposed order. The form requests information about the debtor’s income, expenses, major assets, and payments for bankruptcy services. Parts of the form need not be completed if the debtor’s schedules are filed with the petition and copies of the requested completed schedules are attached to the form.
One problem that has received substantial judicial attention is the repetitious filing in bad faith of new bankruptcy petitions by debtors seeking to reinvoke the automatic stay after it has been lifted in their earlier cases.
One important distinction between chapter 13 and chapter 7 is the debtor’s right to file a chapter 13 case that will result in a discharge within eight years of a prior chapter 7 case that resulted in a discharge. This right exists because sections 727(a)(8) and (9), barring a chapter 7 discharge within eight years after any chapter 7 case resulting in a discharge and six years after many chapter 13 cases in which a discharge was granted, are clearly inapplicable to chapter 13.
Another important feature of chapter 13 is found in section 1322(b)(7). This section provides that the debtor has the power to assume or reject any executory contract or unexpired lease. Prior to 2005 this power could be exercised in a chapter 7 case only by the trustee.479 Indeed, a default or anticipated difficulties with respect to an executory contract or lease may be a prime reason for choosing to file under chapter 13.480
Necessarily, the tactics to be followed in litigating to preserve the automatic stay vary from case to case. Certain issues, however, are likely to recur frequently, and certain strategies are likely to be repeatedly useful.
One problem that will very often arise is that of proving the value of property.524 Although the party seeking to lift the stay has the initial burden on the question of equity, it will normally be necessary to have evidence ready to rebut that party’s proof. Obtaining such evidence is not always easy.
One of the principal advantages of chapter 13 is that the debtor has the right to possession of all property of the estate, whether exempt441 or nonexempt.
Schedule C is the debtor’s list of property claimed as exempt. Normally, it is permissible to incorporate by reference much of the listing in Schedules A/B, by referring to the applicable line on Schedule A/B, in order to avoid repetition, and most bankruptcy software programs are designed to avoid the need to re-enter the debtor’s assets.109 As always, though, local practice should be checked.
In many states, a debtor may choose from two sets of exemptions. As under the prior law, a debtor in any state may choose to utilize the exemptions provided by state law, as enhanced by section 522(b)(3)(C), and the exemptions provided by federal nonbankruptcy law (for example, laws protecting Social Security benefits and veterans benefits, and so forth). If the debtor chooses the state exemptions, then certain other property of the estate not normally subject to process under state law may also be claimed as exempt.21
The 2005 Act added three new subsections to section 522 that prevent the debtor from taking full advantage of state homestead exemptions under certain circumstances. These provisions deal with the prepetition conversion of nonexempt property with fraudulent intent (section 522(o)), the acquisition of homestead property within 1215 days before the bankruptcy filing (section 522(p)), and the commission of certain bad acts by the debtor (section 522(q)).
Schedule D lists all secured creditors. This schedule should include all creditors that hold liens, even if they are undersecured or have a completely unsecured lien, and even if their liens can later be avoided by the debtor or trustee.140 Creditors holding security deposits also should be listed here, as well as creditors holding less noticeable types of security interests, such as those in the refunds of credit insurance.