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Massachusetts Chapter 7 Bankruptcy

INTRODUCTION TO BANKRUPTCY
There are generally four types of bankruptcy, chapters 7, 11, 12 and 13 of Massachusetts Chapter 7 Bankruptcy issues

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.

Portions reprinted from the office of the US Department of Justice.
*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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