Massachusetts Bankruptcy Law: How to Handle Credit Card Debt
Massachusetts Bankruptcy Law offers individuals a path to manage overwhelming credit card debt, providing options to alleviate financial stress and regain control of their finances. Understanding the nuances of the law is essential for anyone considering bankruptcy as a means to handle their credit card obligations.
In Massachusetts, two primary types of bankruptcy under federal law are available to individuals: Chapter 7 and Chapter 13 bankruptcy. Each option has distinct eligibility requirements, processes, and implications for debt relief.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, commonly referred to as "liquidation bankruptcy," allows individuals to discharge most unsecured debts, including credit card debt. This means that you could potentially eliminate your credit card obligations entirely. However, it's important to note that not everyone qualifies for Chapter 7.
To be eligible, applicants must pass a means test, which evaluates their income level against the state's median income. If your income exceeds this threshold, you may need to consider Chapter 13 instead.
During the Chapter 7 process, a bankruptcy trustee may sell non-exempt assets to pay creditors. Fortunately, many personal belongings and essential assets are considered exempt under Massachusetts law, allowing individuals to retain necessary possessions while discharging debt.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, often referred to as a "wage earner's plan," is designed for individuals with regular income who can pay back a portion of their debts over a 3 to 5-year repayment period. This option may be suitable if you don’t qualify for Chapter 7 or wish to keep your assets intact.
In a Chapter 13 case, individuals propose a repayment plan to their creditors, detailing how they intend to repay their debt over the set period. This plan must be approved by the bankruptcy court. While credit card debts can be included in this repayment plan, individuals may end up paying only a portion of what they owe, depending on their financial situation.
The Process of Filing for Bankruptcy
Filing for bankruptcy in Massachusetts involves several critical steps:
Consult a Bankruptcy Attorney: It is highly recommended to seek legal counsel to guide you through the process, ensure all documentation is correct, and maximize the benefits of your filing.
Credit Counseling: Before filing, you must undergo credit counseling from an approved agency to explore alternatives to bankruptcy.
Prepare and File Bankruptcy Petition: Your attorney will help you gather the required information and file a petition with the bankruptcy court.
Automatic Stay: Upon filing, an automatic stay goes into effect, halting most collection actions against you, including calls and lawsuits from creditors.
Attend the Meeting of Creditors: You will meet with the trustee and creditors to discuss your case and plans for debt repayment or discharge.
Complete Financial Management Course: Before obtaining your discharge or completing your repayment plan, you must complete a financial management course.
Impact on Credit Score
Filing for bankruptcy will have a negative impact on your credit score. Chapter 7 bankruptcy remains on your credit report for ten years, while Chapter 13 stays for seven years. However, many individuals find that filing for bankruptcy and eliminating significant debt ultimately helps improve their credit situation over time as they can begin rebuilding their financial health.
Conclusion
Massachusetts Bankruptcy Law provides valuable avenues for individuals struggling with credit card debt. Whether you choose Chapter 7 to discharge debts or Chapter 13 to create a manageable repayment plan, understanding your options and working with a qualified attorney can help you navigate this challenging journey. Taking proactive steps toward financial stability can lead to a brighter financial future.