- 1). Seek credit counseling from a government-approved credit counseling agency. The credit counseling must be done within the 180 days prior to filing the bankruptcy petition. After counseling, the debtor will receive a certificate of credit counseling. The debtor must file this certificate with the bankruptcy court to prove she has met the credit counseling requirement.
- 2). Take the means test. The debtor compares his family income with the median family income for a family of the same size in Massachusetts. If the debtor's family income falls below the state median, he can file for Chapter 7 and skip to step 4. If the debtor's family income hovers above the state median, he must calculate his monthly disposable income.
As of 2010, the Census Bureau listed Massachusetts median incomes as: $53,315 for a single earner; $69,204 for a family of two; $82,297 for a family of three; and $99,293 for a family of four. Add $7,500 for each family member in excess of four. - 3). Calculate monthly disposable income by deducting allowed monthly expenses from monthly income. If the debtor's monthly disposable income is less than $100, the debtor passes the means test. If the debtor's monthly disposable income is more than $100, but that amount would not be enough to pay at least 25 percent of the debts over the next five years, the debtor also passes the means test and can file for Chapter 7. Any other outcome means the debtor fails the means test. When a debtor fails the means test, she may need to file for Chapter 13 bankruptcy. In a Chapter 13 case, the debtor repays her debt in a three-to-five-year repayment plan.
- 4). File bankruptcy petition, bankruptcy forms and pay $299 filing fee (as of August, 2010). The filing fee must be paid at the time the petition is filed. The debtor can file the bankruptcy forms and certificate of credit counseling with the bankruptcy petition or within 15 days of filing the bankruptcy petition. Among the bankruptcy forms filed will be a schedule of exempt assets.
- 5). Claim exemptions. Massachusetts lists the following property as being exempt from being sold to pay creditors: $500,000 of property the debtor occupies or plans to occupy; motor vehicle up to $700; furniture up to $3,000; clothing; beds and bedding; heating unit; wages; pensions; public benefits; tools of the trade, boats, nets and fishing tackle of fisherman up to $500; and insurance. Consult Massachusetts law for a complete list.
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