How to Handle Credit Card Debt through Bankruptcy in Massachusetts

Dealing with credit card debt can be overwhelming, especially when it feels like the amounts just keep piling up. If you're a Massachusetts resident facing this issue, you might be considering bankruptcy as a solution. Understanding how to handle credit card debt through bankruptcy in Massachusetts can provide you with a clear pathway towards financial recovery.

In Massachusetts, two types of personal bankruptcy are commonly filed: Chapter 7 and Chapter 13. Each has distinct rules and benefits that cater to different financial situations.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy." In this process, most of your unsecured debts, including credit card debt, can be discharged, meaning you’ll no longer be legally required to pay them. To qualify for Chapter 7 bankruptcy in Massachusetts, you must pass a means test that compares your income to the state’s median income.

One of the significant advantages of Chapter 7 is the speed of the process; it usually takes around three to six months from the filing date to obtain a discharge. However, it’s crucial to be aware that while your credit card debts can be wiped out, some assets may be at risk of liquidation unless they fall within exempt categories.

Exploring Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also known as "reorganization bankruptcy," is an option for individuals who earn a regular income but still struggle with debt. This type allows you to keep your property while you create a repayment plan to pay back your debts over three to five years.

Unlike Chapter 7, where debts are discharged quickly, Chapter 13 allows you to manage your debt while making manageable monthly payments based on your income. This plan can halt foreclosure processes and may enable you to keep your home and other valuable assets.

Steps to File for Bankruptcy in Massachusetts

If you've decided to pursue bankruptcy to handle your credit card debt, follow these essential steps:

Consult with a Bankruptcy Attorney: Finding an experienced bankruptcy attorney in Massachusetts is crucial. They can guide you through the process, help you understand your options, and ensure all paperwork is filed correctly.
Complete Credit Counseling: Before filing for bankruptcy, you are required to complete a credit counseling course. This course helps you understand your financial situation better and explores alternatives to bankruptcy.
Gather Necessary Documentation: Collect all financial documents, including income statements, tax returns, bank statements, and a list of all creditors and debts. This information will be essential for your bankruptcy filing.
File the Bankruptcy Petition: With your attorney, prepare and submit your bankruptcy petition in the federal court. This includes all necessary forms and payments.
Attend the 341 Meeting: After filing, you will be required to attend a meeting of creditors, known as the 341 meeting. This is where creditors can question you about your financial situation and debts.
Complete Financial Management Course: After your bankruptcy petition is submitted, you must complete a debtor education course before your debts can be discharged.

Impact on Credit Score

Filing for bankruptcy will significantly impact your credit score. A Chapter 7 bankruptcy will stay on your credit report for 10 years, while a Chapter 13 will remain for 7 years. However, many people find that after the initial shock, they can begin to rebuild their credit by making consistent payments on remaining debts and demonstrating responsible financial behavior.

Conclusion

Handling credit card debt through bankruptcy in Massachusetts can be a significant step towards regaining financial stability. It's essential to fully understand your options, and working with a legal professional can offer the support needed to navigate this challenging process. By taking informed steps, you can start on the road to a healthier financial future.