*PERSONAL FINANCE INFORMATION

Personal & Business Bankruptcy

• Can I file for bankruptcy for free?
• Who should consider filing for bankruptcy?
• How does filing bankruptcy affect my credit?
• Are student loans discharged in bankruptcy?
• Will filing bankruptcy affect the value of any life insurance policies I hold?

Collections

• Will checking my credit report hurt my credit score?
• Is there anything I can do to stop collection agencies from calling me?
• Can I stop creditors from coming after me if my ex-spouse has failed to pay credit cards?
• Do I have to pay taxes on money I have inherited?

Personal & Business Bankruptcy

Can I file for bankruptcy for free?
Yes, but only if you qualify.  Massachusetts Local Bankruptcy Rule 1006-2(b) states that a debtor may file an application for waiver of the filing fee.  MLBR 1006-2(a) provides for the payment of the filing fee in installments.  Absent the waiver, the fee charged for filing a Chapter 7 bankruptcy is $306 and for filing a Chapter 13 bankruptcy is $281. Free legal services of are available to individuals with low-income who qualify. Click here for more information on these free, called "pro bono" services.

Who should consider filing for bankruptcy?
Bankruptcy can help individuals who can no longer pay their creditors by helping them start new in one of two ways: by liquidating their assets to pay their debts or by creating a repayment plan to pay their debts. Depending upon eligibility requirements, an individual may choose to file for either Chapter 7 or Chapter 13 bankruptcy. The best way to determine whether bankruptcy is the right choice is to consult with either a bankruptcy attorney or groups that offer free legal services. Every individual's situation is unique, and bankruptcy may be right for one individual, but not for another. 

How does filing bankruptcy affect my credit?
Filing for bankruptcy will show up on a debtor's credit report for several years, and will likely make obtaining credit more difficult and/or expensive. Bankruptcy can remain on a debtor's credit report for 10 years under provisions of the Fair Credit Reporting Act. If the debtor successfully completes a Chapter 13 repayment plan, many credit agencies will reduce the bankruptcy reporting to seven years. Creditors will decide whether to grant or deny credit to an individual after he/she has filed bankruptcy based upon the type and amount of credit requested.

Are student loans discharged in bankruptcy?
Student loans are typically not discharged in bankruptcy. However, if you file for bankruptcy and can successfully prove that repayment of debt would cause "undue hardship," the bankruptcy court will discharge your student loans. Proving "undue hardship" usually requires demonstrating that you cannot provide a minimum standard of living for yourself and your dependents if you have to repay the loan. 

Will filing bankruptcy affect the value of any life insurance policies I hold?
Under Massachusetts law, filing bankruptcy will not affect the value of any life insurance policies held by an individual. A term life insurance policy, which provides insurance for a specified number of years does not accumulate a cash value over time. This type of life insurance policy is exempt from assets during bankruptcy proceedings and will not be affected. A universal life insurance policy, however, accumulates a cash value over time. A portion of the premiums paid by the individual who holds the policy are invested by the insurance company. In Massachusetts, the cash-value of an individual's universal life insurance policy is exempt from bankruptcy.

Collections

Will checking my credit report hurt my credit score?
Checking your credit report will not hurt your credit score. Checking your own credit report is different from a bank or car dealership checking your credit report after you apply for credit. An inquiry by one of the previous mentioned creditors after an individual applies for credit is called a "hard inquiry," and is reflected on the individual's credit report. Individuals can -- without hurting his/her credit score -- visit AnnualCreditReport.com to view free copies of all three credit bureau credit reports, which should be reviewed for errors. 

Is there anything I can do to stop collection agencies from calling me?
The Massachusetts Fair Debt Collection Practice Act protects individuals against harassment by debt collectors and collection agencies; however, it does not apply to an actual creditor to whom the individual owes money. The most effective way to stop collection agencies from calling is to pay your debt, or negotiate a reduction or payment plan. Individuals can write a letter to a collection agency telling the agency to stop calling, or to state that the individual is refusing to pay their debt. According to the law, letters must be sent via Certified Mail. Communications via fax, telephone or e-mail are not effective. Upon receipt, the collector may only call the individual to acknowledge receipt of the letter or to advise the individual of specific legal action the collector intends to take against the individual. If an individual continues to receive calls from the collection agency even after sending a letter, the individual may file a complaint with the Massachusetts Attorney General's Office or use the Federal Fair Debt Collection Practices Act to take action against the collection agency. 

Can I stop creditors from coming after me if my ex-spouse has failed to pay credit cards?
If you have not changed your credit account from a joint account to an individual account or closed all joint accounts held with your spouse during marriage, a creditor can require you to pay for the joint account. Even if a divorce decree assigns separate debt obligations to each spouse, if a joint account is still maintained, the creditor may require payment from both individuals. If you maintain a joint credit account after divorce, an ex-spouse can negatively affect your credit history and leave you responsible for paying creditors. 

Do I have to pay taxes on money I have inherited?
No, Massachusetts does not tax beneficiaries on the money or property that they inherit from an estate.

*These answers do not constitute legal advice and are written for general information purposes only. Individuals should consult with a lawyer for specific legal advice.