What is the Median Income for Chapter 7 in Massachusetts?
A debtor who receives a discharge under Chapter 7 no longer has the obligation to pay his creditors. Understandably, creditors who were not being paid as a result of debtors filing for bankruptcy appealed to Congress until Congress finally decided to make the biggest change to bankruptcy law in decades. That change requires that Massachusetts median incomes be used in determining whether Massachusetts debtors can file for Chapter 7 bankruptcy.
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Attempt at Reform
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In the 1990s it became increasingly evident to the members of Congress that Chapter 7 bankruptcy was being used as a first stop to getting rid of debt rather than a last resort. In 2000, President Bill Clinton rejected an attempt at bankruptcy reform by pocket-vetoing a bill sent to him by Congress. While the president agreed that bankruptcy reform was in order, he disapproved of this particular bill.
BAPCPA
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In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Congress aimed to hold more debtors responsible for the debts they incur and made it more difficult for debtors to cheat their way out of debt. President George W. Bush signed BAPCPA into law on April 20, 2005. The most controversial part of the Act is the means test, which is the deciding factor on the question of whether a debtor can or cannot file for Chapter 7 bankruptcy and have his debts discharged.
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Median Incomes
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A debtor takes the means test by comparing his family income to the median family income for a family of the same size in Massachusetts. The Census Bureau listed Massachusetts' median family incomes as of 2010 as $54,161 for a single earner; $67,142 for a family of two; $82,385 for a family of three; and $100,462 for a family of four. Add $7,500 for each family member in excess of four. If the debtor's family income is less than Massachusetts' median family income, he can file for Chapter 7 bankruptcy. If the debtor's family income is more than Massachusetts' median family income, then the debtor must calculate his monthly disposable income to determine if he can file for Chapter 7.
Accomplished Reform
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If the debtor's family income is less than the Massachusetts median family income, there is no presumption of abuse. If the debtor's family income is more than the Massachusetts median family income, there may be a presumption of abuse depending on the amount of monthly disposable income the debtor has. With the enactment of BAPCPA, Congress accomplished its goal by preventing debtors from filing for Chapter 7 bankruptcy when a presumption of abuse is present.
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