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Chapter 7 Bankruptcy

Chapter 13 Bankruptcy

Debt Settlement

FAQ

Answers to common bankruptcy questions

Chapter 13 is a powerful mechanism for the reorganization of debts to help property owners keep their cars, homes, and other valuable assets while getting a handle on debts. Among other important benefits, by filing for Chapter 13 bankruptcy, you may be able to stop wage garnishment, foreclosures, repossession, and reduce or eliminate credit card debt, all under the protection of the bankruptcy court.

Chapter 7 bankruptcy is a special type of bankruptcy available. It recognizes that someone with limited financial resources has found themselves in a situation they are unlikely to get themselves out of through traditional means, such as extra work or savings. Chapter 7 aims to pay off as many debts as possible while also permitting the debtor to start fresh.

There are several practical strategies you can employ to reduce your debt effectively, often allowing you to manage your financial obligations without having to resort to bankruptcy. These approaches require careful planning and direct action on your part. Exploring these options can provide much-needed relief and a path toward financial stability. Debt settlement involves negotiating with creditors to pay a lump sum that is less than the total amount originally owed. This can be a viable option if you have access to a significant amount of money, perhaps from a bonus, inheritance, or by liquidating an asset. However, it is essential to understand that debt settlement can have a negative impact on your credit score and may carry tax implications, as the forgiven portion of the debt could be considered taxable income by the IRS. 

Chapter 7 Bankruptcy FAQ

There are two main distinctions between a Chapter 7 bankruptcy filing and a Chapter 13 bankruptcy filing. A Chapter 7 filing remains on an individuals credit report for ten years, while a Chapter 13 filing is usually extinguished after seven years. The other main difference lies in the debt elimination process. Chapter 7 wipes out debt. In contrast, Chapter 13 involves a reorganization of debts, while the debtor remains in possession of all of his or her assets.

Chapter 7 bankruptcy is a special type of bankruptcy available. It recognizes that someone with limited financial resources has found themselves in a situation they are unlikely to get themselves out of through traditional means, such as extra work or savings. Chapter 7 aims to pay off as many debts as possible while also permitting the debtor to start fresh.

Federal bankruptcy laws are intended to help people facing serious economic challenges. Many hard-working people end in disastrous financial situations through no fault of their own. The government recognizes that you need certain personal assets, so no matter how large your debt, some properties are exempt from liquidation by bankruptcy courts and creditors. Non-exempt property can be sold to satisfy debts. Property that is usually exempt includes:

  • Motor vehicles
  • Necessary clothing, household goods and furnishings
  • Household appliances
  • Jewelry
  • Pension payments and retirement accounts
  • Equity in your home
  • Tools of the trade
  • A portion of unpaid but earned wages
  • Public benefits such as welfare, Social Security and unemployment
  • Damages awarded for personal injuries

Chapter 7 Bankruptcy

Chapter 7 is a powerful tool for eliminating debt and getting a fresh start financially. It can stop the debt collectors’ letters and calls and improve the short-term quality of your life. As much as it is a complicated process, it can help you get your financial house back in order However, it was designed to cater to the specific needs of a particular group of people. This means that it might not solve everyone’s financial problems in Massachusetts.

Main Features

Chapter 7 can erase most of your debts. Applicants should expect to be freed from common obligations such as:

  • Credit Card Debt
  • Medical Bills
  • Personal Loans
  • Utility Bills
  • Car Loan Deficiencies
  • Judgments from Debt Collection

Chapter 13 Bankruptcy FAQ

Chapter 13 is not a viable option for everyone. Depending on your financial and employment circumstances, Chapter 7 may be a better option. Chapter 13 is for individuals with a certain level of debt and the means to repay it, given the assistance and opportunity. There are certain requirements that you must meet in order to qualify for Chapter 13 bankruptcy.

 

Some of these eligibility requirements include:

  • Your debt cannot exceed a certain limit.
  • You have a steady source of income.
  • You have enough disposable income to make payments on a plan
  • You are a private individual and not a business.
 
What level of debt qualifies for Chapter 13, as well as what level of income is considered sufficient for a payment plan, can fluctuate depending on various circumstances. This is why it’s best to consult with an experienced bankruptcy attorney prior to making any final decisions or attempting to file bankruptcy yourself. Failure to adhere to strict guidelines or attempting to file for the “wrong” kind of bankruptcy can result in serious challenges to your financial future and happiness.

A repayment plan is an agreed-upon plan for paying down or paying off your debt and settling your finances in a way that’s suitable to both the government and your creditors. A plan must be approved by both your creditors and the court before it can or will go into effect. Once it is approved, you will be required to comply with its terms until its completion. Failure to comply with the terms of a court-approved repayment plan can result in further financial and legal difficulties.

On average, a payment plan lasts between three and five years. During this period, you will make agreed-upon regular payments to a court-appointed trustee. A trustee is an individual with the legal designation to manage and distribute another person or company’s money and assets. In the case of a creditor repayment plan, the court-appointed trustee will collect your “lump sum payment” and then distribute the money to your various creditors per the terms of the repayment plan. Which creditors are paid first, and who receives what amount of money, will be determined as part of the bankruptcy process in court.

Filing for Chapter 13 bankruptcy will also trigger the automatic stay, so foreclosure proceedings will temporarily stop.

During Chapter 13 bankruptcy, the court will require you to create a repayment plan that outlines how you will make monthly payments to your creditors over the course of three to five years. If you have already missed mortgage payments, you will need to incorporate these missed payments into your proposed repayment plan. However, you won’t need to pay them all at once. Instead, you will need to make small payments on this debt over the course of your three-to-five-year repayment plan. This makes catching up on missed payments far more manageable.

But it’s also worth noting that you will need to make your regular monthly mortgage payments in addition to making these small monthly payments. If you still cannot afford to make regular monthly mortgage payments, you are still at risk of losing your home.

If you have more than one mortgage on your home, filing for Chapter 13 bankruptcy can also help you get rid of the smaller second mortgage. This is known as “lien stripping.” You may qualify for this if the current market value of your home is less than the value of your first mortgage. In this case, the second mortgage can be converted into an unsecured debt. This means it will be treated the same way that other unsecured debts, such as medical debt and credit card debt, are treated in Chapter 13 bankruptcy proceedings. If you qualify for lien stripping, eliminating this second mortgage may make it possible for you to catch up on your other mortgage payments and save your home.

Chapter 13 Bankruptcy

If you file for Chapter 13 bankruptcy, you are required to create a repayment plan that outlines how you will make monthly payments to your creditors. Chapter 13 was designed for Americans who have jobs and a steady income, but who are struggling to “make a dent” in their debts, or who have run up against challenging circumstances. Because of this, Chapter 13 is not a good option for people who do not have a steady source of income.

Main Features

Instead of liquidating assets, Chapter 13 lets you restructure your debt into one affordable monthly payment spread over 3 to 5 years.


  • Stops Foreclosure
  • Stops Repossession
  • Reduce or discharge unsecured debts
  • Stops wage garnishment
  • Catch up on payments
  • Pay down back taces

Debt Settlement FAQ

We will negotiate with your creditors in an effort to reach a favorable settlement on your behalf. We are aggressive negotiators who have helped countless clients settle their debts for less than what was owed. If we are able to reach this type of settlement with your creditors, you will still have to pay your debts, but you won’t have to pay the full amount that you owe.

A creditor will typically not be willing to negotiate unless it is clear that the debtor is unable to make payments due to financial hardship. If the creditor believes the debtor is capable of making consistent payments, there’s no reason for them to settle the debt for less than what the debtor actually owes. We can help you build a strong case supported by financial documents and other evidence that clearly shows why you are unable to pay your debts in full.

Lowering your debt makes monthly payments more manageable, so even if you’re going through a financial hardship, you should still be able to afford these payments. With more manageable payments, you will eventually be able to get rid of these debts for good. This means you will get the fresh financial start that you need to move forward in your life.

Reaching a settlement with your creditors can also put an end to debt collector harassment. The countless phone calls, emails, and letters from creditors will stop once you have agreed to a settlement, as long as you comply with the terms of the agreement.

In Massachusetts, if you’re facing a credit card lawsuit, it’s crucial to understand your rights and the legal processes involved. Credit card companies or debt collectors may sue for the outstanding balance, but they must follow specific procedures. Knowing the statute of limitations, your rights to dispute the debt, and the court procedures can significantly impact the outcome of your case.

Once served with a lawsuit:

  • Don’t Ignore the Summons: Responding within the given timeframe is crucial to avoid a default judgment.
  • Understand the Complaint: Identify what the creditor is claiming and any potential inaccuracies in the amount or nature of the debt.
  • Gather Your Documents: Compile all relevant documentation, including credit agreements, statements, and any correspondence related to the debt.
  • Consider Settlement Options: Before the court date, there might be opportunities to settle the debt for a lesser amount or negotiate a payment plan.
  • Seek Legal Counsel: An attorney can help you understand the complexities of your case, represent you in court, and negotiate on your behalf.

In Massachusetts, different rules stipulate the limits on wage garnishment. For example:

  • Judgment creditors can only garnish up to 25 percent of your disposable weekly earnings (your take-home wage after the mandatory deductions) or
  • The total by which your income is 30 times more than the national minimum wage, whichever is lower, according to 15 U.S.C. § 1673.

 

Mandatory deductions from your paycheck include state unemployment insurance, federal and state taxes, the required retirement deductions, and Social Security. The deductions exclude voluntary deductions like life and health insurance, saving plans, and charitable donations.

Debt Settlement

Bankruptcy is not for everyone. But if you are unable to make payments, it’s in your best interest to work with an attorney to negotiate with your creditors. Why? Debt negotiation can help you reach a favorable settlement so you won’t have to pay your creditors the full amount that you owe. Lowering your debt makes monthly payments more manageable, so even if you’re going through a financial hardship, you should still be able to afford these payments. With more manageable payments, you will eventually be able to get rid of these debts for good. This means you will get the fresh financial start that you need to move forward in your life.

What Are Other Massachusetts Debt Relief Options?

Chapter 7 can erase most of your debts. Applicants should expect to be freed from common obligations such as:

  • Chapter 7 Bankruptcy
  • Chapter 13 Bankruptcy
  • Loan Modification
  • Debt Negotiation