Experiencing financial hardship is something anyone from any background can experience. If you find yourself struggling to meet your financial obligations, a Chapter 13 bankruptcy can help. Here’s how it works and how to know if it’s right for you.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a structured repayment plan that assesses all of your debts and determines what you can reasonably pay towards them. This means the court take away from the money you need to pay rent or a mortgage, travel to work, and buy groceries or other necessities.
How Chapter 13 Bankruptcy Works in Massachusetts
With this type of bankruptcy, the court determines how much disposable income you have using what is called a “means test.” Then, that disposable income is paid towards the creditors you owe over a period of three to five years depending on your total amount of debt. Once the repayment period is over, any leftover debt is discharged, which means you are no longer responsible for paying it.
Benefits of Filing Chapter 13 vs. Chapter 7 Bankruptcy
With a Chapter 7 bankruptcy, the first step after taking the means test is to determine what kind of property you own that can be liquidated to help satisfy your debts. This doesn’t happen with a Chapter 13 bankruptcy. Even if you own unexempt property like a second vehicle or expensive heirlooms, you get to keep these items without worrying that the court will take and sell them.
Read More: All About Chapter 7 Bankruptcy
Who Qualifies for Chapter 13 Bankruptcy?
Anyone who does not pass the means test and cannot file for Chapter 7 bankruptcy qualifies for a Chapter 13. However, you do not have to file a Chapter 7 even if you do qualify for it. Those who are eligible to file a Chapter 13 include:
● Individuals or married couples
● Those with a consistent source of income
● Those with less than $1,395,875 of secured debt and/or less than $465,275 of unsecured debt
You may not file if:
● You are a business
● You have more debt than the above limits
● You do not have enough disposable income to make the monthly payments
● If you had a bankruptcy dismissed within the last 180 days due to failure to comply with the court
● If you have not filed the last four years of tax returns
How Common Law Associates Can Help You File Chapter 13 Bankruptcy in Massachusetts
At Common Law Associates, LLP, we can help you take the first step toward financial freedom. Contact us today to learn more about filing for a Chapter 13 bankruptcy in Massachusetts or to schedule a free, no-obligation case consultation to discuss your options. Call now at (508) 775-0815 to get started.
Frequently Asked Questions
How are my payments allocated towards my debts?
When you make payments to the court under a Chapter 13 plan, the money is distributed among your creditors in the order of importance. Secured debts that are non-dischargeable, like taxes you owe, are paid first. Then, unsecured debts like credit card bills are paid next, and finally, medical bills are paid last. The bankruptcy trustee assigned to your case determines how your money gets allocated and will make those payments for you.
Is there anything I shouldn’t do during the repayment period?
During your repayment period, it’s advised that you do not take on new debt or transfer property without court approval. Do not take out a new credit card, try to sell your house, or try to buy a vehicle. If in doubt, ask your bankruptcy lawyer.
What happens if I can’t make my payments?
If you experience financial hardship part way through your repayment period, you may be able to convert to a Chapter 7 bankruptcy. However, it’s crucial that you contact a lawyer who can advocate on your behalf. Never stop making your payments or pay less than what you owe without approval since this could risk your case being discharged entirely.