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Bankruptcy Wipes Out Credit Card and Other Types of Unsecured Debts

The primary reason people file bankruptcy in Massachusetts is to obtain a court-ordered discharge of debt. However, not all forms of debt are dischargeable in bankruptcy. Before you file bankruptcy in Massachusetts, it is important to understand the nature of your debts, and which debts can and cannot be discharged in bankruptcy.

Esher Rossi is a full service Massachusetts insolvency and financial restructuring firm. Our bankruptcy attorneys represent consumer and business debtors as well as creditors, trustees, creditors’ committees, and investors, in all aspects of distressed economic  and bankruptcy situations including Chapter 7 bankruptcy, Chapter 11 bankruptcy, Chapter 13 bankruptcy, mediation and arbitration services.

The Difference between Secured and Unsecured Debt

Secured debts are debts whose repayment backed by pledged property, such as your home or your car. A creditor has the right to foreclose or repossess secured property if the debt is not repaid. While filing bankruptcy will put a temporary stop to a foreclosure or repossession, you will have to get caught up on your payments to keep the property. Filing Chapter 13 bankruptcy gives you up to five years to get caught up on arrearages.

Unsecured debts are debts whose repayment is not backed by property. Examples of unsecured debts are credit card debts, hospital and medical bills, and payday loans. Some second and third home mortgages may also be deemed unsecured, and, in instances where the balance of the first mortgage is higher than the value of the home, can be discharged in a Chapter 13 or Chapter 11 bankruptcy.

A creditor can file an action to garnish your wages to collect payment of unsecured debts. However, the automatic stay that enters upon filing for bankruptcy protection stops garnishments and all other collection tactics, including those harassing telephone calls. You can obtain a full discharge of dischargeable unsecured debts by filing Chapter 7 bankruptcy. You can also discharge your unsecured debts by paying a percentage of their amount over a period of three to five years by filing Chapter 13 bankruptcy.

Student Loans and Child Support Payments

Some debts cannot be discharged. Generally, child support payments and student loans are non-dischargeable. However, student loans may be dischargeable if the Bankruptcy Court determines that the repayment of such loans creates an undue hardship. Child support arrearages can be paid through a Chapter 13 payment plan.

The Boston bankruptcy discharge lawyers at Esher Rossi will discuss your financial restructuring options. Our personal bankruptcy lawyers serve all of Massachusetts including downtown Boston, the Greater Boston MetroWest region, Cape Cod and the cities of Boston, Cambridge, Cape Cod, Framingham, LowellNewton, and Worcester.

Bostonian Legal Group