Do I Qualify for Bankruptcy in Massachusetts?
Qualifying for bankruptcy in Massachusetts depends on your financial situation, the type of debt you carry, and your ability to repay what you owe. Many people assume they won’t qualify or that bankruptcy is only for extreme situations, but most people are actually eligible. Here’s what to know.
Signs You Might Need to File Bankruptcy
It could make sense to file for a bankruptcy case in Massachusetts if any of the below applies to you:
It is difficult for you to pay your bills each month.
You are using credit cards for basic expenses such as groceries, utility bills, or mortgage payment.
There is fear of wage garnishment in the near future.
Your home could be repossessed, or there are threats of foreclosure on your property.
Your debt continues to increase despite monthly payments.
Learn more about the benefits of bankruptcy.
Differentiating Between the Two Main Forms of Bankruptcy
A majority of people are eligible for either a Chapter 7 or a Chapter 13 bankruptcy. Here are the key differences between them:
Chapter 7 Bankruptcy
Sells off non-exempt property
Discharges several types of unsecured debt
Typically for lower-income individuals
Learn more about Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Lets you keep your assets
Requires structured payments towards your debt
Based on income and ability to pay
Learn more about Chapter 13 bankruptcy.
Factors That Determine Your Eligibility
Your Income
Your income plays a major role in determining whether you qualify for Chapter 7 or Chapter 13 bankruptcy. For Chapter 7, you must pass the “means test,” where your income is compared against the median income of a household of your size in Massachusetts.
If your income is less than the median income, then you can apply for Chapter 7. However, if your income is higher, you can still apply after taking into account some necessary expenses. In other cases, Chapter 13 is the way to go.
The Kinds of Debt You Have
Not all debts are treated the same in bankruptcy. Unsecured debts like credit cards, medical bills, and personal loans are typically dischargeable. In other words, these debts can be cleared off without having to repay them. Other types of debts, such as student loans, cannot be discharged.
Other types of debts such as student loans cannot be discharged. Knowing what kinds of debt you have can help you decide which form of bankruptcy is your best bet.
Whether You Have Assets
Assets can influence whether you file for bankruptcy and the kind of bankruptcy filing you choose. In Chapter 7, non-exempt assets may be sold to repay creditors, but many people are able to protect essential property through exemptions under Massachusetts or federal law.
In Chapter 13, you retain your assets and pay off your debts via an arrangement.
How to Find Out For Sure
While general guidelines can give you a sense of whether you qualify, each financial scenario is unique. The most reliable way to find out is to speak with a Massachusetts bankruptcy lawyer who can review your income, debts, and assets in detail.
Common Law Associates will carefully consider your individual financial picture and provide you with clear advice about the next steps and the type of filing that will suit you best.
Contact us today to learn more or to book your free, no-obligation consultation to discuss your options. Call our office now at (508) 775-0815 or use the contact form on our website to reach out.
Frequently Asked Questions
What happens when I declare bankruptcy in Massachusetts?
When you declare bankruptcy in Massachusetts or any other state, an automatic stay goes into effect right away. This stops collection actions against you, including creditor calls, wage garnishments, and foreclosure proceedings. If you've been stressed out with phone calls and letters, the automatic stay gives you relief right away while your case is reviewed by the bankruptcy trustee.
Will I lose my property if I declare bankruptcy?
Not necessarily. Many people who file for bankruptcy are able to keep their home, car, and other essential assets since these are exempt in most cases. In Chapter 13, however, you typically keep all your property whether exempt or not and make payments on your debt over time.
How long will bankruptcy stay on my credit?
A Chapter 7 bankruptcy filing can take anywhere between 10 years to come off of a credit report. This is opposed to Chapter 13 bankruptcy, which may take 7 years to clear the credit report.That said, many people begin rebuilding their credit much sooner. Eliminating debt can even put you in a stronger financial position and make it easier to improve your credit over time.