Explanations of Bankruptcy
Chapter 7 Bankruptcy
Filing a Chapter 7 bankruptcy petition allows the debtor to use non-exempt property to pay debtors. Filing under Chapter 7 bankruptcy is ideal for individuals who desire to have allowable debts discharged; after discharge you will no longer owe on these dischargeable debts.
It is important to understand that not all debts are dischargeable under Chapter 7. After a thorough review of your financial circumstances our firm will inform you as to which debts are dischargeable in Chapter 7 bankruptcy. For example, it is possible that a bank may be able to foreclose on your home mortgage or repossess an automobile. Additionally, you will not receive a discharge for debts owed related to most taxes, student loans, domestic support obligations, and fines and penalties from government agencies. We will discuss your options after a thorough review of your circumstances.
As with all forms of bankruptcy filing, information provided to the court must be correct and filed in good faith. There are severe penalties, including criminal penalties, for knowingly providing disinformation to the bankruptcy court. The best way to avoid potential difficulties with the court is to provide truthful, accurate information to our law firm.
In order to qualify for Chapter 7 bankruptcy, you must pass the means test. To pass the means test your income minus certain expenses must be below the median income level in Massachusetts. However, if your income is above the median income level in Massachusetts you may have to file under Chapter 13. Our firm will discuss these options with you after a thorough review of your financial and personal circumstances.
Some property may be exempt from liquidation. For example, you may be able to keep your car, your home, clothing, and other household items when filing for bankruptcy under Chapter 7. Our firm will conduct a thorough review of your circumstances and inform you of exemptions available to you.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is used to reorganize your debt. While this bankruptcy chapter is most often utilized by businesses, there are times when filing Chapter 11 may be appropriate for the consumer. Our firm will inform you of the appropriateness of choosing Chapter 11 after a thorough review of your circumstances.
Chapter 12 Bankruptcy
Chapter 12 bankruptcy is a repayment plan, similar to that of Chapter 13, which allows fishermen and family farmers to set up a repayment plan based on the future earnings of the individual. Chapter 12 allows for the discharge of some debts if allowed by the court.
Chapter 13 Bankruptcy
Filing a petition for bankruptcy under Chapter 13 allows a consumer who has regular income to establish a repayment plan over a three-to-five-year period. Additionally, some debts may be discharged under a Chapter 13 plan. The total debt of the consumer must be below a specific dollar amount to be eligible to file Chapter 13 bankruptcy.
Upon completion of the Chapter 13 repayment plan, most of your debts will be discharged. Debts which are commonly not discharged include: domestic support obligations, certain taxes owed to government agencies, most student loans, debts for fraud or theft, criminal fines, debts omitted in the bankruptcy petition, debts caused by death or personal injury related to driving while intoxicated, and others.
General Bankruptcy Issues
Serious penalties, including criminal prosecution, can occur when a debtor knowingly supplies false information, or conceals information from the bankruptcy court. For this reason, it is imperative that all information provided to our firm accurately and truthfully represents your financial and other circumstances.
Frequently Asked Questions
1. What happens to my credit if I file for bankruptcy in Massachusetts?
Your credit report will show that you filed for bankruptcy. Bankruptcy will remain on your credit report for a total of 7 years for Chapter 13 bankruptcy and 10 years for Chapter 7 bankruptcy. Creditors may view a bankruptcy on your credit report as a possible reason to deny the extension of credit, or to offer higher, less favorable interest rates.
2. Can my credit be repaired during the 7 or 10 year period in which bankruptcy remains on my credit report?
While a bankruptcy filing will remain on your credit report for a 7 or 10 year period, it may be possible to slowly rebuild credit during this time period. One method which may be helpful in rebuilding credit is to begin with a secured credit card, then after successfully managing payments on that card for a period of time, requesting an unsecured card from the card provider. Once the unsecured credit card has been issued, it may be possible to request increases in the overall credit limit on the card over time, as you demonstrate your ability to make timely payments on the card. While the bankruptcy remains on your credit report for the applicable time period, if you follow this method, you may have established credit which you can use to improve your credit score.
3. What property is excluded from the bankruptcy estate?
There is a wide variety of property that is excluded from the bankruptcy estate. While not an exhaustive list, these are some basic assets that will not be taken into consideration by the bankruptcy court or trustee when filing for bankruptcy: money in certain education accounts, funds in many individual retirement accounts or retirement accounts which fall under ERISA, certain state tuition programs for educational institutions, most employer retirement plans, and several other types of property.
4. Will my creditors be able to collect from me after I file for bankruptcy?
While there are some exceptions, for the most part once you file for bankruptcy, all collection activity, letters and phone calls from collection agencies, lawsuits, foreclosures, and even lien related activity must cease. Filing for bankruptcy forces creditors to stop pursuing repayment and other remedies under what is known as the automatic stay. If a creditor fails to stop pursuing you for money owed them once the automatic stay has been imposed by the bankruptcy court, you may have a claim against that creditor which may result in an award of damages by a court. Damages for violation of the automatic stay can be substantial, and may include punitive and other money damages, attorney’s fees and costs.
5. What does the automatic stay not protect me from?
There are some matters which will not be affected by filing for bankruptcy. For example, if you own property that is not part of the bankruptcy estate and an award has been given to another party giving that party the ability to collect domestic support obligations from that property, filing for bankruptcy will not stop collection in this instance.
6. How long does the automatic stay protect me from creditors seeking to obtain payment or judgements against me?
Property which is part of the bankruptcy estate will remain protected against actions taken by creditors for as long as that property remains part of the bankruptcy estate and either the case is closed, dismissed, or a discharge is granted or denied or relief from the automatic stay is granted to a creditor(s) by the court.
7. How will my debt be discharged?
In a chapter 7 case, for example, the court may decide that certain debts are no longer owed by the debtor. While you may decide you wish to pay a discharged debt, or to reaffirm a discharged debt, you will not be required to do so if the debt has been fully discharged by a bankruptcy court. Our firm will review your debts to determine the potential dischargeability of those debts.
8. Can the bankruptcy court deny the discharge of a debt?
Yes. In a chapter 7 bankruptcy case, for example, if the bankruptcy court finds that the debtor transferred, mutilated, concealed or destroyed any property within one year of filing for bankruptcy or anytime following filing for bankruptcy to hinder, delay, or defraud, the entire case could be discharged by the court. In addition, failing to keep records of financial condition, or knowingly making a false statement could also result in the bankruptcy court discharging your case.
NOTE: Criminal penalties have been imposed on bankruptcy petition filers for fraudulent reporting in a bankruptcy petition. For this reason, it is essential that you be as accurate and truthful as possible with any information filed with the bankruptcy court and discussed with your attorney.
9. What if I have had a bankruptcy filing discharged in the past, can I refile for bankruptcy?
If you had previously filed a bankruptcy petition under Chapter 7 or Chapter 11 within the past eight years which was discharged, you will not be allowed to refile until that eight year period has passed. Similarly, if you had previously filed a bankruptcy petition under Chapter 13, or Chapter 12 within the past six years which was discharged (with some exceptions) you will not be able to file until the six year period has passed.
10. What debts are not dischargeable in bankruptcy?
Under Chapter 7 bankruptcy there are a number of debts which cannot be discharged, here is a limited list: most taxes owed by the debtor, a debt incurred by the debtor for money, property, or services under false pretenses, certain luxury goods over a specific dollar amount purchased within 90 days of filing a bankruptcy petition, cash advances over a certain dollar amount taken within 70 days of filing a bankruptcy petition, debts incurred from willful or malicious injury to another party or to the property of another party, domestic support obligations, most penalties or fines owed to a government agency, most student loans, and debts owed for death or a personal injury caused while intoxicated driving, certain debts owed in connection with a divorce.
Under Chapter 13 bankruptcy there are also a number of debts which cannot be discharged in bankruptcy, here is a limited list: certain creditor claims where payment on the property is due after the date of the final Chapter 13 plan payment, student loans, debts owed for death or a personal injury caused while intoxicated driving, restitution or a fine resulting from a criminal sentence, a debt incurred by the debtor for money, and property, or services under false pretenses.
11. Can a creditor object to the discharge of a debt in bankruptcy?
Yes. A creditor or trustee may file a complaint for the purpose of determining the dischargeability of a debt if the creditor or the trustee believes that the debt should not be discharged. There are a number of specific requirements that a creditor must meet in order to property object to the discharge of a debt in bankruptcy, including filing the objection timely. Our firm will assess the complaint filed by a creditor to determine any defenses to the claim.
12. If I file for Chapter 13 bankruptcy, how long must I make payments under the Chapter 13 plan?
Generally, a Chapter 13 plan requires repayments to be made to the bankruptcy trustee for a period of 3-5 years. Over the repayment term, you will pay the full amount of any arrearage, amounts due on priority claims, amounts owed if required by the court for unsecured claims, and the bankruptcy trustee’s commission.
13. What are my obligations under a repayment plan when filing Chapter 13 bankruptcy?
Once you file a petition in Chapter 13 bankruptcy, you must make all payments are required under the Chapter 13 plan within the time frame required (usually monthly payments). Our firm will assess your financial circumstances to determine the best possible plan under Chapter 13 while taking into consideration you income and expenses to determine your ability to make successful payments under the Chapter 13 plan.
14. What happens if I don’t make a payment, miss a payment, or pay late under a Chapter 13 plan?
The Chapter 13 repayment plan must be followed to the letter, meaning you must make every effort to make all payments in a timely manner and in the amount required under the Chapter 13 plan. However, there are times where due to a change in your financial or personal circumstances, following the Chapter 13 repayment plan may not be possible. If you are unable to follow the time or amount requirements of the Chapter 13 repayment plan, you must contact our firm immediately so that we can evaluate your circumstances to intervene on your behalf with the bankruptcy court. Failure to make a payment timely or in the full amount, particularly without informing the court and explaining your circumstances to the court, may result in the conversion of your case to a Chapter 7 bankruptcy which may result in undesirable consequences.
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The information provided in the pages and posts of this website are for general informational purposes only. The information presented on this site is not legal advice, and no attorney-client relationship is formed by the use of this site.