Massachusetts Bankruptcy Protection

Bankruptcy Protection law

Imagine Yourself Debt-Free, With a Fresh Start

While it may not be easy to decide whether or not to file for bankruptcy, it can offer you a way to eliminate your debt burden when it has become too great to handle on your own. Under the current economic conditions, bankruptcy no longer has the negative “stigma” associated with it many years ago. The rich and famous as well as the poor and unknown have filed for bankrupcy protection in the federal courts and as foreclosures and unemployment continue to degrade the economy, individuals and businesses alike will continue to seek a “fresh start” through bankruptcy.

There are two main types of bankruptcy cases individuals use, Chapter 7 and Chapter 13. While both provide relief from debt and a fresh financial start, there are distinct differences and at Wright & Associates, we are committed to making sure you understand what they are and what options are available to you.

Chapter 7

Chapter 7 is commonly referred to as “straight bankruptcy,” and is the most common type of bankruptcy filing. Petitioners who invoke Chapter 7 have few or no assets available to pay creditors, and the discharge applies to most debts.

Important things to know about Chapter 7 are:

You must qualify to file Chapter 7 based on your income and a means test set out in bankruptcy law. If you can afford to repay a portion of your debts, you may have to use Chapter 13

Your available assets, called nonexempt property, may be sold by the bankruptcy trustee to pay your creditors

You are permitted to keep exempt property, which is protected from the reach of your creditors

The Chapter 7 discharge applies to most common unsecured debt types, including medical bills and credit cards

Most Chapter 7 cases are “no-asset,” meaning there’s nothing left to pay creditors after accounting for your property exemptions. State or federal law control property exemptions, and this is why bankruptcy cases can be different from state to state.

Bankruptcy Protection law

Chapter 13

Chapter 13 is commonly referred to as a “re-organization” because it essentially re-organizes and prioritizes your debts. That is, you make partial or full payments according to a court-approved repayment plan, and remaining debts are discharged once you complete the repayment plan. If you have a set amount of stable disposable income after paying for life essentials, Chapter 13 may be your only bankruptcy option.

The repayment plan is the main part of a Chapter 13 case and property exemption laws factor into figuring out repayment plan details.

Key features of Chapter 13 cases:

  • You have mortgages or loans you want to bring current through the repayment plan, allowing you to keep the property
  • Your debts are ineligible for a Chapter 7 discharge, such as taxes, child support or student loans
  • You’re driven to pay off debts by personal values or morals
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Common Bankruptcy Myths…Debunked

Common Bankruptcy law

Myth: Bankruptcy relief is no longer available under the new law

This is just silly. The law wouldn’t be there if it didn’t serve a purpose. Almost all of the relief formerly available through bankruptcy survives in today’s bankruptcy code. It is a little more involved and may be more expensive, but it is still the quickest and single most effective way to make a fresh financial start.

Myth: You can’t file bankruptcy if you have a job

The new “means test” is supposed to divert some filers who make more than the median income for households of their size in their state of residence to Chapter 13. The only way to fund a Chapter 13 plan is to HAVE a job so this is just ridiculous.

Myth: Medical bills and credit cards can’t be discharged in bankruptcy

Rubbish. Debt collectors are known to push this mis-information on the unsuspecting consumer. The truth is that almost all unsecured contract debt, like credit cards, personal loans, and medical bills, remain dischargeable in bankruptcy.

Common Bankruptcy law

Myth: Chapter 13 plans require repayment in full of debt

Chapter 13 plans range from plans that pay general unsecured creditors nothing to plans that pay 100%, with every variation calculable in between. How much you must pay in 13 is driven by the ratio between your disposable income, the value of your non-exempt assets, and the total of priority debts you have.

Myth: People who file bankruptcy can’t get credit for 10 years

This is nonsense. People in a Chapter 13 bankruptcy can borrow money during the case and people who’ve filed Chapter 7 get inundated with credit card offers after they get their discharge. While this is not credit at the best rates, it is available nonetheless. This myth probably got its start in the fact that the Fair Credit Reporting Act allows the reporting of a bankruptcy filing for 10 years.

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