Bankruptcy is a legal proceeding in which an individual who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law. For more information check out Massachusetts Bankruptcy Center

There are four types of bankruptcy cases provided under the law:

Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property which exceeds certain limits called “exemptions”, so the property can be sold to pay creditors. In most cases, our clients are able to exempt all of their assets and keep all of their property and get rid off all of their debt.

Chapter 11 known as “reorganization”, is used by businesses and a few individual debtors whose debts are very large.

Chapter 12 is reserved for family farmers.

Chapter 13 is called “debt adjustment”. It requires a debtor to file a plan to pay debts (or parts of debts) from current income. Exemptions also apply in Chapter 13.

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. However, some of your creditors may have a “security interest” in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case. There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full, or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.

Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

Bankruptcy may make it possible for you to:

Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.

End constant and annoying phone calls by creditors and collection agencies.

Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)

Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.

Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

Restore or prevent termination of utility service.

Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

Yes. Bankruptcy laws change from time to time and in order to effectively handle your case, our attorneys keep current on the changes in bankruptcy laws by reading legal journals and attending bankruptcy seminars taught by bankruptcy trustees, judges and other leading authorities in the field.

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” a.k.a. “ 341 meeting” to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

Timeline

Most people and small business file either a Chapter 7 or Chapter 13 Bankruptcy. From beginning to end, most Chapter 7 cases take between 90 to 120 days to complete. Chapter 13 cases, however take longer because there is either a 3 year or 5 year repayment plan which has to be completed. Most of your involvement as a client will be at the beginning of the case and going to typically one meeting of creditors, which is explained in the next paragraph.

Process

You and your attorney will fill out an “intake” which is how we get information from you to include in your bankruptcy petition. A bankruptcy petition is the document that is filed with the court that has all of your financial information, including a list of all of your debts and all of your assets and other property, as well as a list of all your income and expenses.

Means Test

There is a legally required “means test” that every person filing bankruptcy must go through, which our office handles. The means test determines if someone can file a Chapter 7 or Chapter 13 bankruptcy. To complete the means test, in most cases, we need the client’s last 2 years of federal tax returns and last 2 pay-stubs.

Financial Counseling

Before the bankruptcy can be filed, the client has to take a “credit counseling” course and obtain the “certificate of credit counseling”. This takes about an hour and can be done over the telephone or over the internet. Our office can provide a list of credit counseling agencies.

Before the bankruptcy is concluded, each person must take a “financial management” course that will assist the client in future financial planning and money management. Our office can provide a list of the agencies that provide this service.