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Massachusetts Chapter 7 Bankruptcy |
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INTRODUCTION TO BANKRUPTCY |
There are generally four types of bankruptcy,
chapters 7, 11, 12 and 13 of 
the Bankruptcy code.
Chapter 12 involves issues with farmers. Chapter
11 deals with large corporations or individuals
with large sums of money. Chapters 7 and 13 deal
with individuals and small business which will be
the topic of this discussion.
MASSACHUSETTS CHAPTER 7 BANKRUPTCY
First, chapter 7 is essentially a proceeding where
your property (that is non exempt by law) is
liquidated or sold for distribution to your
creditors. Regardless of the amount that your
creditors receive, you are discharged or freed
from the obligations of your debts through this
proceeding. Furthermore, when you file chapter 7,
it automatically stops lawsuits, foreclosures, and
any other collection actions against you. This is
referred to as an "automatic stay". However, in
specific instances, a creditor may seek permission
from the bankruptcy court for relief from the
automatic stay so they can begin or continue such
collection or foreclosure actions against you.
WHAT IS A CHAPTER 7 BANKRUPTCY DISCHARGE?
The filing of a chapter 7 petition
is designed to result in a discharge of most of
the debts you listed on your bankruptcy schedules.
A discharge is a court order that says you do not
have to repay your debts, but there are a number
of exceptions. Debts which may not be discharged
in your chapter 7 case include, for example, most
taxes, child support, alimony, and student loans;
court ordered fines and restitution; debts
obtained through fraud or deception; and personal
injury debts caused by driving while intoxicated
or taking drugs. Your discharge may be denied
entirely if you, for example, destroy or conceal
property; destroy, conceal or falsify records; or
make a false oath. Creditors cannot ask you to pay
any debts which have been discharged. Once you
receive a chapter 7 discharge, you may not file
another chapter 7 case for a period of six (6)
years.
WHAT ARE THE POTENTIAL EFFECTS OF A DISCHARGE?
The fact that you filed bankruptcy may appear on
your credit report for up to 10 years. Thus,
filing a bankruptcy petition may affect your
ability to obtain credit in the future. However,
if you follow our credit restoration program, you
will quickly begin receiving offers of credit and
even a mortgage! It is not uncommon for our
clients to obtain a mortgage within two years of
receiving a discharge.
WHAT IS A CHAPTER 7 BANKRUPTCY EXEMPTION
With respect to exempt property, the bankruptcy
code allows you to "exempt" (or keep) from your
creditors a large amount of value in your personal
and real property. For example, a debtor is
allowed to keep his or her car if the equity in
the car does not exceed $3,225.00. Assuming for a
moment that the car does exceed $3,225.00 in
value, there are other portions of the code that,
when applied properly, will allow you to keep the
car when the equity is over $3,225.00.
Before you decide to file chapter 7, you must
fully analyze your financial situation to
determine whether a chapter 13 filing would be
beneficial. Chapter 13 is for an individual debtor
with stable income, who can file a Plan of
Arrangement to pay a percentage of their general
unsecured debts over the course of the Plan term,
usually 36 or 60 months. An additional benefit could
be retention of all assets and the opportunity to
cure arrears due secured parties, such as home mortgage(s), car loans, etc.
HOW MASSACHUSETTS CHAPTER 7 BANKRUPTCY WORKS
A chapter 7 case begins with the filing OF a
petition with the bankruptcy court. In addition to
the petition, you are also required to file
with the court several schedules of assets and
liabilities, a schedule of current income and
expenditures, a statement of financial affairs,
and a schedule of executory contracts and
co-debtors. A husband and wife may file a joint
petition or individual petitions.
In order to complete the official bankruptcy forms,
which make up the petition and schedules, (you) will need to compile the following
information:
- Most recent bills/statements from ALL
creditors including student loans, unpaid
medical bills, unpaid utility bills, etc.
(including name, address, zip code and account
number).
- Prior Bankruptcy documents, if any.
- Income tax, excise tax, real estate tax or
other tax bills for taxes you owe.
- Documents on alimony or child support owed
to a former spouse.
- Documents for any and all real estate you
own, including the deed, homestead, HUD
Statement and a statement from the mortgage
company showing the balance due on the mortgage.
Also, an appraisal of the real estate or a
written real estate broker’s opinion of value.
- Documents regarding the rental of your
apartment.
- For each secured debt, such as a car loan or
home mortgage, a copy of the latest statement
showing the name and address of the creditor,
the balance due on the debt and the balance of
monthly payments left.
- 6 months of your (and if married and living
together, your spouse’s) most recent pay stubs.
- If self-employed, copies of monthly profit
and loss statements for the past six months;
- 6 months of documentation relating to other
sources of income you may have from rental
property, businesses, interest and dividends,
alimony, child support, pensions, SSI, SSDI, or
food stamps.
- Documents relating to any retirement
accounts you have including IRA’s, 401(k)’s, etc
showing the name and address of the
administrator of the plan and the value of the
account.
- Monthly statements for each and every bank
account you have (whether or not there is a
$0.00 balance) for the last 3 months.
- The estimated replacement value of your home
furnishings, including televisions, stereos,
kitchen ware, tables, chairs, beds, sofas, etc,
Replacement value means the price a retail
merchant would charge for property of that kind
considering the age and condition of the
property at the time the value is determined.
- The estimated replacement value of your
clothing, again, keeping in mind that
replacement value means the price a retail
merchant would charge for property of that kind
considering the age and condition of the
property at the time the value is determined.
- An estimated value of your jewelry, again,
keeping in mind that replacement value means the
price a retail merchant would charge for
property of that kind considering the age and
condition of the property at the time the value
is determined.
- A copy of your federal and state tax returns
for the last four years.
- Documents relating to any consumer credit
counseling or credit management services.
- Documents regarding any lawsuits you are
involved in, wage garnishments, and seizure or
foreclosure of property.
When a husband and wife file a joint petition,
they should be sure to gather the above detailed
data for both spouses.
The filing of a petition under chapter 7
“automatically stays" most actions against the
debtor or the debtor's property. This stay arises
by operation of law and requires no judicial
action. As long as the stay is in effect,
creditors generally cannot initiate or continue
any lawsuits, wage garnishments, or even telephone
calls demanding payments. Creditors normally
receive notice of the filing of the petition from
the court clerk.
One of the schedules of assets and liabilities
which will be filed by the individual debtor is a
schedule of "exempt" property. Federal bankruptcy
law provides that an individual debtor can protect
some property from the claims of creditors either
because it is exempt under federal bankruptcy law
or because it is exempt under the laws of the
debtor's home state. In Massachusetts, the debtor
has the option of choosing between a federal
package of exemptions or exemptions available
under state law. Thus, whether certain property is
exempt and may be kept by the debtor is often a
question of state law.
A "meeting of creditors" or a "341
meeting" is
usually held 20 to 40 days after the petition is
filed. The debtor must attend this meeting, at
which creditors may appear and ask questions
regarding the debtor’s financial affairs and
property. If a husband and wife have filed a joint
petition, they both must attend the creditors'
meeting. The trustee also will attend this meeting
and question the debtor on the same matters. In
order to preserve their independent judgment,
bankruptcy judges are prohibited from attending.
ROLE OF THE CASE TRUSTEE
Upon filing of the chapter 7 petition, an
impartial case trustee is appointed by the United
States trustee to administer the case and
liquidate the debtor's nonexempt assets. If, as is
often the case, all of the debtor’s assets are
exempt or subject to valid liens, there will be no
distribution to creditors. Typically, most chapter
7 cases involving individual debtors are "no
asset" cases.
MASSACHUSETTS CHAPTER 7 BANKRUPTCY DISCHARGE
The bankruptcy law regarding the scope of a
chapter 7 discharge is complex, and debtors should
consult competent legal counsel in this regard
prior to filing. As a general rule, however,
excluding cases which are dismissed or converted,
individual debtors are discharged in more than 99
percent of chapter 7 cases. In most cases, the
discharge will be granted to a chapter 7 debtor
relatively early in the case, that is, 60 to 90
days after the date first set for the meeting of
creditors.
The grounds for denying an individual debtor a
discharge in a chapter 7 case are very narrow and
are construed against a creditor or trustee
seeking to deny the debtor a chapter 7 discharge.
Among the grounds for denying a discharge to a
chapter 7 debtor are that the debtor failed to
explain satisfactorily any loss of assets; the
debtor committed a bankruptcy crime such as
perjury; the debtor failed to obey a lawful order
of the bankruptcy court; or the debtor
fraudulently transferred, concealed, or destroyed
property that would have become property of the
estate.
While the information presented in this fact sheet
is accurate as of the date of publication, it
should not be cited or relied upon as legal
authority. It should not be used as a substitute
for reference to the United States Bankruptcy Code
and the Federal Rules of Bankruptcy Procedure,
both of which may be reviewed at local law
libraries, and any local rules or practices
adopted and disseminated by each bankruptcy court.
Finally, this fact sheet should supplement, not be
a substitute for, advice of competent legal
counsel.
If you have any questions about Massachusetts Chapter 7 Bankruptcy, contact us today.
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Portions reprinted from the office of the US
Department of Justice. |
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*Federal law has defined us as a debt relief
agency. We help people file for bankruptcy relief
under Title 11 of the Bankruptcy Code. |
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