If you are filing for Chapter 7 for the first time, you may have some questions about the process. Particularly, you might be wondering which debts can be discharged. This post covers your concerns and the additional protections Massachusetts can provide.
Which unsecured debts can you eliminate?
Chapter 7 allows you to erase the following debts:
- Most credit card bills and store charge accounts, excluding recent luxury purchases or cash advances
- Medical bills and hospital costs
- Personal loans from banks or private lenders
- Past-due utility bills, whether in collections or not
- Money still owed after a car repossess or home foreclosure
After discharging these debts, you are no longer legally required to pay them. This means that creditors cannot take legal action against you, nor attempt to contact you to demand repayment. Knowing which debts qualify can help you decide if Chapter 7 fits your needs or if another bankruptcy type is better.
What debts do you still owe?
While Chapter 7 offers relief, it does not wipe out every type of financial obligation. You will generally remain responsible for the following debts after your bankruptcy concludes:
- Child support and alimony payments
- Most student loans
- Recent income tax debts, typically less than 3 years old and valid tax liens on your property
- Court fines and criminal penalties
- Debts from fraud or lying on a loan application (only if the creditor successfully proves the fraud in court)
These rules exist for public policy reasons. For example, you cannot simply file for bankruptcy in order to avoid paying child support, leaving your family without financial support.
Understanding these limitations allows you to plan your post-bankruptcy budget accurately. A careful review of your finances can help identify which debt you should prioritize paying.
Does Massachusetts have specific considerations?
Massachusetts offers a unique advantage for Chapter 7 filers: the ability to choose. Unlike many states that force you to use local laws, Massachusetts allows you to select either federal or local rules.
The Massachusetts homestead law is a big plus for many people.Filing a Declaration of Homestead can help you shield up to $1,000,000 of your home equity from creditors. If you have not filed one, your primary residence still receives $125,000 in automatic protection.
Beyond your home, the Massachusetts option provides specific safeguards for your daily life. State laws include allowances to keep your vehicle, necessary household goods and qualifying retirement savings.