If you’re drowning in debt, you’re not alone. The vast majority of Americans have at least one form of debt, and many of them struggle to meet their financial obligations. Chapter 7 bankruptcy in Massachusetts provides an avenue for relief for low-income individuals and married couples who need help paving the way to a better future with a fresh financial start.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a type of bankruptcy that allows you to be legally released from what you owe upon meeting certain conditions. This means that once your bankruptcy is complete, you will no longer have to pay some or all of your debts.
How Chapter 7 Bankruptcy Works in Massachusetts
Step 1: Take the Means Test
This is a calculation of your income to determine what kind of disposable income you have to work with.
Step 2: Attend Credit Counseling
Filing a Chapter 7 bankruptcy requires you to complete a credit counseling course before you file.
Step 3: List Exempt and Non-Exempt Assets
After reviewing the requirements for exempt and non-exempt assets, you will categorize everything you own under one or the other. Your bankruptcy lawyer can help you do this.
Step 4: Submit Your Filing
Once you’ve filled out all the necessary paperwork that discloses your assets, debt obligations, income, and recent financial transactions. You will submit it to the court, or your attorney will do so on your behalf.
Step 5: The Automatic Stay
Once your paperwork is received by the court, an automatic stay goes into effect. This essentially stops all collection activity against you, meaning you will no longer receive calls or letters trying to get you to pay.
Step 6: A Trustee Is Appointed
The court will appoint a trustee to your case who may decide to liquidate some of your non-exempt assets to go towards your debts.
Step 7: The Meeting of Creditors
You will need to attend a meeting with your creditors where they will be able to ask questions about your finances and why you cannot pay.
Step 8: A Debtor Education Course
Before your bankruptcy is formally approved, you must attend an education course that covers healthy financial management before any of your debts are discharged.
Step 9: Finalization
Upon completion of the second education course, your bankruptcy is approved and unsecured debts are discharged. You will need to contact creditors to whom you still owe secured debts in order to arrange a new payment plan.
Benefits of Filing Chapter 7 vs. Chapter 13 Bankruptcy
With a Chapter 7 bankruptcy, you can get out from under most of the debt you owe without having to pay it back. With a Chapter 13 bankruptcy, you are put on a repayment plan for a period of three to five years when you are required to make monthly payments that go towards your debts.
If you have little to no disposable income, a Chapter 7 is usually the better option, especially if you don’t have many assets that would qualify as non-exempt and could be liquidated. That means you get to keep your daily-use assets and get rid of your debt in one fell swoop. For many individuals and married couples, this is a win-win.
Read More: All About Chapter 13 Bankruptcy
Who Qualifies for Chapter 7 Bankruptcy?
To qualify for a Massachusetts Chapter 7 bankruptcy, you must pass the means test. If your income is below the median income for families of a similar household size in your state, you automatically pass and don't need to do anything else. If your income falls above the median, you can still pass if you show that you have little to no disposable income after deducting allowable living expenses.
If you do not pass the means test, you will need to file a Chapter 13 bankruptcy.
How Common Law Associates Can Help You File Chapter 7 Bankruptcy in Massachusetts
If you need a fresh financial start, Common Law Associates, LLP can help. Contact us today to get started by making an appointment for your no-cost, no-obligation consultation to discuss your case. Call now at (508) 775-0815.
Frequently Asked Questions
Do I have to sell all my property?
Some of your property may be liquidated to get the money to pay for your debts before the remainder is discharged. However, the court will not force the liquidation of exempt property and many items fall under this exempt status. These are things you need for daily living, like:
● Your primary vehicle
● Your home
● Household appliances
● Furniture
● Clothing
Things that may be considered non-exempt include:
● Heirlooms like fine china
● Luxury jewelry
● A second vehicle
● Boats, ATVs, and golf carts
Since most people who qualify for a Chapter 7 don’t own luxury goods, most assets can be kept.
What kind of debts are not discharged in a Chapter 7 bankruptcy?
Not all debts can be discharged in a Chapter 7. You will still be responsible for some debts, including:
● Certain student loans
● Alimony or child support
● Federal or state taxes you owe
● Anything purchased on a credit card right before you filed
How long will a Chapter 7 bankruptcy stay on my credit?
A chapter 7 bankruptcy will be visible on your credit report for about 10 years after your filing is completed. However, many people who have been struggling to meet their debt obligations notice an improvement in their credit score once those debts are eliminated, even with the bankruptcy filing on record.