FAQs

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

As far as what type of bankruptcy is appropriate for you, that is a decision that requires a careful analysis of the facts of your particular situation by you and your attorney. 

Your decision whether to file bankruptcy and under which chapter to file depends on your particular circumstances. In general, Chapter 7 is appropriate when the Debtor has insufficient income to pay a portion of his/her debts, and the Debtor is not seeking to keep non-exempt property. Otherwise, if the Debtor has an income or property and can afford to repay at least some of his/her debts, Chapter 11, 12 or 13 may be appropriate, depending on whether the Debtor is an individual, partnership, corporation, or a family farmer. The decision whether to file a bankruptcy case and under which chapter is an extremely important decision and has tremendous financial impact. This decision should be made after obtaining expert advice from a bankruptcy attorney.

Yes. A debtor, or any other party in interest, may file a motion to convert the case to any other chapter under which the debtor is eligible to be a debtor under that chapter. While conversion from one chapter to another is usually automatic, the Bankruptcy Court may deny conversion depending on the circumstances of the case.

All individual bankruptcy filers are required to complete pre-bankruptcy credit counseling and pre-discharge debtor education. These may not be provided at the same time. Credit counseling must take place before you file for bankruptcy; debtor education must take place after you file. You MUST take a credit counseling class prior to filing any type of bankruptcy, except if you are disabled or in certain emergency situations. You can take the class or online or on the phone. It generally takes about a half an hour. Please note, a bankruptcy case may be subject to dismissal if the debtor has not obtained the credit counseling briefing before the filing of the case. After filing and prior to discharge, you MUST also complete a similar financial management class. You cannot take both classes at the same time.

Please see the Helpful Articles section of this website for several organizations that provide this counseling (they also provide the second “financial management” class you are required to complete after filing.

A dismissal order ends the bankruptcy case before a discharge order enters. When the Court dismisses the case, the automatic stay ends and creditors may start to collect debts again. An order of dismissal does not free the debtor from any debt. Unless the debtor appeals the order or seeks reconsideration of the order of dismissal within 14 days, the Clerk will automatically close the case.

Perhaps. However, sometimes a case will be dismissed under Section 109(g) and the debtor will be barred from filing another case for a period of time. The Automatic Stay may also be limited or never come into being in your subsequent case.

Perhaps. Upon the filing of the new case, the automatic stay will be limited to 30 days if a chapter 7, 11, or 13 debtor has had 1 other bankruptcy case pending within one year of the filing of the later bankruptcy petition and that first case was dismissed. The automatic stay shall not go into effect in a bankruptcy case filed by an individual debtor who has had 2 or more bankruptcy cases pending within one year of the filing of a later bankruptcy petition and those prior cases were dismissed. In order to obtain the full protection of the automatic stay in each of the foregoing instances, the debtor must file a motion with the Bankruptcy Court detailing the reasons for the previous case dismissal(s) and any changes of circumstances since that time which would justify the extension or imposition of the automatic stay.

The automatic stay protects the debtor from their creditors. It requires all collection efforts, any harassment, and all foreclosure actions be immediately stopped by creditors when the case is filed. It permits the debtor to attempt a repayment plan or simply to be relieved of the financial pressures that drove them into bankruptcy. The automatic stay also protects creditors. Without it, certain creditors would be able to pursue their own remedies against the debtor’s property. Those who acted first would obtain payment of the claims and that would make it impossible for other creditors to collect anything. Bankruptcy is designed to provide an orderly liquidation procedure under which all creditors with equal rights are treated equally.

The  “means test” is required to determine whether or not a debtor is entitled to a Chapter 7 Discharge, or whether such debtor must convert the case to one under another chapter of the Bankruptcy Code. The basic purpose of the means test is to compare monthly income and expenses to determine whether or not a Chapter 7 discharge would constitute an “abuse” of the provisions related to Chapter 7 in the Bankruptcy Code.

Under Chapter 7, an impartial trustee is appointed to administer the case by collecting and liquidating the Debtor’s non-exempt assets in a manner that maximizes the return to the Debtor’s unsecured creditors.

Under Chapter 13, an impartial trustee is also appointed to administer the case. The primary roles of the chapter 13 trustee are to determine the feasibility of a Debtor’s repayment plan for the court and to serve as a disbursing agent, collecting payments from Debtors and making distributions to creditors. For more information about trustees, visit the U.S. Trustee web site.

Every bankruptcy case is different, and every bankruptcy case has its own unique issues. Some debtors go through the bankruptcy process without ever seeing the Courtroom or the judge. Whether you can expect the same will depend on your case and the issues it presents.

This meeting is referred to as the “meeting of creditors.” It is commonly referred to as a “341 meeting” because the authority to conduct the meeting is found in Section 341 of the Bankruptcy Code. All creditors are notified of the meeting so that they may attend, but their attendance is not required. Debtors must appear, testify under oath and answer questions by creditors and the trustee. This meeting is presided over by the trustee assigned to the case and is held approximately 40 days after the petition is filed. Debtors are required to provide photo identification and proof of social security number to the assigned trustee. A Debtor’s failure to appear may result in dismissal of the case.

No. Please pay close attention to the address of the location of the Meeting of Creditors. In Boston, the meetings are held in the same building as the Court but on a different floor. In Worcester and Springfield, the meetings are held in a separate building. Also, the Meeting of Creditors for certain chapter 7 cases in Eastern Massachusetts are held in Brockton.

The Bankruptcy Code prohibits the Court from attending or presiding over the meeting

Debtors are permitted to keep certain property in bankruptcy. The exempt property cannot use used to pay creditors.

Debtors in Massachusetts have a choice to claim under federal exemptions or Massachusetts state exemptions. We can look at your specific bankruptcy circumstance and advise you as to the better choice. For example, the Massachusetts homestead exemption protects up to $500,000 of equity in your house. Whereas, the federal exemptions protect substantially less value per debtor, adjusted yearly for inflation.

Other categories of property that may be protected under the Massachusetts and/or Federal property exemptions include:

• Personal property: such as cars, cash, jewelry or furniture
• Tools of the trade: for example carpenter’s tools
• Wages earned
• Retirement accounts: 401(k)s or pensions
• Unemployment or veterans’ benefits
• Insurance benefits: such as cash accumulated in a life or disability plan

Every bankruptcy case is different, and every bankruptcy case has its own unique issues. Some debtors go through the bankruptcy process without ever seeing the Courtroom or the judge. Whether you can expect the same will depend on your case and the issues it presents.

This is a voluntary agreement between a creditor and a chapter 7 debtor. The debtor agrees to pay all or a portion of an otherwise dischargeable debt. To be enforceable, the agreement must be filed in the debtor’s bankruptcy case before the entry of the discharge. The Court may schedule a hearing on a reaffirmation agreement, and the debtor and their attorney must attend.

The debtor is effectively waiving the discharge on a particular debt, which means that the debtor will have to pay it, even if there is a negative change in the debtor’s financial circumstances in the months and years that follow the bankruptcy case.

No. They are strictly voluntary. Debtors need not reaffirm a debt in order to repay it. The law does not prohibit a debtor from voluntarily paying a discharged debt; it only prohibits the creditor from attempting to collect it.

The Bankruptcy Code allows a debtor to “redeem” collateral. An individual chapter 7 debtor can keep certain kinds of collateral – tangible, personal property intended primarily for personal, family, or household use – by paying the holder of a lien on the property the amount of its “allowed secured claim.” This amount is typically the lesser of the amount still owed to the creditor or the value of the property. The option to redeem applies only to property that a debtor has claimed as exempt or that the trustee has abandoned. With redemption, a debtor can often get liens released on personal household possessions for less than the outstanding debt. Unless the creditor consents to payments over time, a debtor must generally pay the redemption amount in one lump-sum payment to the creditor.

A discharge order issued by the Court permanently prohibits creditors from taking action against a debtor personally to collect debts incurred before the filing of the bankruptcy petition. The discharge does not prevent secured creditors from seizing collateral if payments are not kept up. The discharge does not prevent collection of debts incurred after the filing of the bankruptcy. Some debts are not dischargeable, and some debts are not dischargeable under certain circumstances.

Some examples of debts that may not be discharged include: certain taxes and fines, debts not listed in your bankruptcy, alimony, child maintenance or support, debts from willful and malicious injury to another, debts created through fraudulent conduct or by providing false information to a creditor. For a complete list of non-dischargeable debts, review 11 U.S.C. Section 523 (as it applies to all Chapters) and Section 1328 (for Chapter 13 cases).

Yes. Under certain circumstances, 11 U.S.C. Section 727 provides the Debtor’s discharge may be denied in a chapter 7 case. The grounds for denial exist when the Debtor: (1) failed to keep or produce adequate books or financial records; (2) failed to satisfactorily explain any loss of assets; (3) committed a bankruptcy crime such as perjury; (4) failed to obey a lawful order of the bankruptcy court; or (5) fraudulently transferred, concealed, or destroyed property that would have become property of the estate. The complete list of reasons may be found in Section 727 of the US Bankruptcy Code.

The court may deny the Debtor’s discharge of all debts, or determine that a particular debt or debts are nondischargeable. If the court denies the discharge of all debts, then the Debtor will still be legally responsible for all the debts as if no bankruptcy petition had ever been filed. If only certain debts are ruled nondischargeable, the Debtor will still receive a discharge order. However, the Debtor will remain legally responsible for those nondischargeable debts.

For a discharge to be denied, either as to a particular debt or as to all debts, someone must file an adversary proceeding (lawsuit) with the Bankruptcy Court. That party must then prove one of the grounds for denial of the discharge or for a debt to be declared nondischargeable. If your discharge is not withheld or none of your debts is declared to be nondischargeable, then all the debts listed in your petition will be discharged upon the entry of the order granting your discharge.

The “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered. There are exceptions to the requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling. See the “Resources” section of this website for a list of providers. Others are available on the U.S. Trustee website.

The discharge order sent by the clerk’s office will contain a general statement about the categories of debts that are discharged. The individual debts that are discharged will not be listed on the discharge order. Instead, the discharge order will provide that debts are discharged unless there has been a separate order denying a discharge of a specific debt. If there are no such orders, the debtor can assume that all debts have been discharged which fall into the categories indicated in the discharge order. See Bankruptcy Code Sections 523, 727(b), 1141 and 1328(a) and consult a bankruptcy attorney for more information on categories of debts that qualify for a discharge in chapter 7 or chapter 13 bankruptcy cases.

If a debt has been discharged, a creditor attempting to collect the debt may be violating the discharge injunction. You should speak with your attorney about the rights you may have.

Since all cases have unique circumstances, it is difficult to pinpoint an exact time that your case will be closed. Many Chapter 7 no asset cases are closed within 90-days from filing if no disputes have arisen. Chapter 7 asset cases require that the trustee liquidate the assets which sometimes can take up to a year or longer. Chapter 13 cases remain open as long as the plan payments are being made, generally for three to five years after the plan has been confirmed. Chapter 11 reorganization cases are more complicated and may remain open longer than three years even if a plan has been confirmed.

A debtor is not eligible for a discharge in a chapter 7 case if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within eight years before the petition is filed. If the debtor received a discharge in a chapter 12 or chapter 13 case filed within six years before the date of the filing of a chapter 7, they are not eligible for a chapter 7 discharge. There is an exception: if in the prior chapter 12 or chapter 13 case (1) the debtor paid all “allowed unsecured” claims in the earlier case in full, or (2) the debtor made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims and the debtor’s plan was proposed in good faith and the payments represented the debtor’s best effort. A debtor is ineligible for discharge under chapter 13 if he or she received a prior discharge in a chapter 7, 11, or 12 case filed four years before the current case or in a chapter 13 case filed two years before the current case. Each case is different and it is strongly suggested that you seek legal advice from a competent bankruptcy attorney on this matter.

It depends on a number of factors. There are a wide variety of variables that the Trustee must consider before accepting money intended to pay off a Chapter 13 case early. You should consult with your attorney if you are considering paying off your Chapter 13 case. The Trustee will not automatically accept funds intended to pay off your case early.

The Trustee will send you a semi-annual statement of the progress on your Chapter 13 case. You may also track the progress of your case online. Ask your attorney for details and registration information. You should review activity in your case carefully. The statement will detail the creditors who have filed claims in your case (and the amount and status of each claim), the amount of money you have paid to the Trustee, the amount of money the Trustee has paid to each creditor, and the balance remaining to be paid on each claim. Except with regard to certain secured and priority claims and unless you file an objection to a claim, the Trustee pays claims in the amount filed by the creditor, even if that amount differs from the amount you believe you owe that creditor or the amount that you specified in your Chapter 13 Plan for that creditor to be paid. If you notice a claim that you believe does not belong in your case or a claim in an amount significantly in excess of what you believe you owe that creditor, contact your attorney immediately. If a claim is filed in an amount in excess of the amount you believe you owe that creditor, completing your Plan in a five-year period may prove to be impossible, and your case may be dismissed without your receiving a discharge because you could not complete the Plan in a timely manner.

All Chapter 13 debtors must complete a personal financial management course . This course is in addition to the required credit counseling briefing you were required to complete prior to filing your bankruptcy. Your attorney will provide you with the information you will need to attend and complete this course requirement. If you do not complete the personal financial management course you will not receive a discharge from the Bankruptcy Court even though you may have made all required Plan payments to the Trustee.

You will have to file with the taxing authorities all delinquent tax returns before the Court will approve your Chapter 13 Plan. If you have not filed a tax return for several years, or if you have a tax return for a particular year that has not been filed, you should inform your lawyer. The IRS is authorized to estimate how much you owe if you have not filed a tax return for a particular year. In almost all cases, the IRS estimate is considerably higher than the amount you would owe if you had filed the return, so you may save money over the long run by filing your delinquent tax returns. In addition, you may stop certain penalties from accruing when you file delinquent tax returns.

Even if all your returns have been filed, you should be prepared to turn over your tax return for the most recent tax year to your lawyer so that the return can be delivered to the Trustee. During the term of your Chapter 13 case, you are responsible for continuing to file your tax returns and to pay taxes in a timely manner. If you fail to file returns and/or pay your taxes, the IRS and other governmental agencies may file claims in your Chapter 13 case, which would disrupt the payments to your other creditors, make your Plan run longer than you planned, and may prompt the Trustee or one of your creditors to file a motion to dismiss your case.

Before the Trustee will recommend approval of your Plan you must have filed all applicable Federal, state and local tax returns for all taxable periods in the four years prior to your filing your bankruptcy case. The Trustee requires you to file an Affidavit with the court, whereby you declare under penalty of perjury that you have filed all applicable tax returns required under the bankruptcy law.

In general, your retirement contributions such as IRA or 401(k) contributions will likely be allowed to continue. Similarly, repayments on retirement plan loans will also likely be allowed to continue. There are exceptions to this rule; your attorney can advise you if your circumstances are such that you will not be allowed to continue retirement contributions or loan repayments. Not repaying a retirement plan loan may have tax implications for you. Before you decide to file a Chapter 13 case you should talk to your attorney about the tax implications of not repaying a loan from your retirement account.

Domestic support obligations such as alimony, maintenance and child support are generally unsecured debts. The laws regarding these obligations require that the arrearages you owe be included in your bankruptcy Plan, and that you continue to make your ongoing monthly support payments. Before the Trustee will recommend approval of your Plan you must be current on all domestic support obligations that have come due after you filed your bankruptcy case. The Trustee requires you to file an Affidavit whereby you declare under penalty of perjury that you have paid all domestic support obligations required under the bankruptcy law.

In addition, as a precondition to receiving a bankruptcy discharge you must certify to the court at the time you complete your case that you have paid in full all domestic support obligations that were due since the time you filed your case.

Student loans are generally unsecured debts, and they are not treated any differently from other unsecured creditors during the term of your Plan. However, Congress has passed laws that affect the balance of the student loan debt that is not paid during your Plan. Unlike other unsecured debt that is unpaid in a Plan with less than 100% repayment, the remainder of the student loan debt is usually not forgiven when the discharge is granted upon completion of your Plan. This means that you will be responsible for any part of your student loan that is not paid through the Chapter 13 Plan. For example, if your Plan calls for a payment of 75% of the amount owed to your unsecured creditors, your student loan will also be paid 75% through the Chapter 13 Plan. When your Chapter 13 Plan is over, you will still be responsible for the 25% of your student loan that was not paid through your Chapter 13 Plan, plus accrued interest.

The Bankruptcy Code, your bankruptcy Plan and the court order approving your Chapter 13 Plan combine to prohibit you from borrowing money (or transferring an interest in real estate) without the permission of the Bankruptcy Court. To obtain permission from the court, your attorney must file the necessary documents with the court and request a hearing before the judge.

Actions that require the permission or approval of the Court include:

• Selling your house;
• Refinancing your mortgage, even if you get no money from the transaction;
• Borrowing money using your house as collateral;
• Financing home improvements;
• Financing the purchase or lease of a car;
• Borrowing money from your employer or from a credit union;
• Borrowing money against a 401(k) plan;
• Borrowing money from family or friends;
• Co-signing a loan for anyone;
• Taking out a student loan;
• Leasing, renting, or purchasing on time or on payments any furniture, jewelry, audio/video equipment, or appliances.

In many cases, if you have a car loan you will be responsible for making regular monthly payments directly to the secured creditor (as with the mortgage payments). In other cases you may pay your car payments to the Trustee through your Chapter 13 plan. This is a decision that you and your attorney will discuss prior to the filing of your plan.

If you lease a vehicle and your Plan provides for your retaining the lease, you will be responsible for making regular monthly lease payments directly to the creditor.

Chapter 7 bankruptcy, or “straight bankruptcy”, allows qualifying individuals to discharge (effectively cancel) most or all of their debts, with some exceptions (see “Will filing Chapter 7 discharge all my debts?” below). However, Chapter 7 provides for “liquidation” of non-exempt assets. In many cases, all of your assets will be exempt so you will not lose any of your property. We will analyze your available property and advise you as to whether and to what extent your property is or may not be exempt prior to filing. In certain circumstances, a Chapter 7 bankruptcy may result in the loss of non-exempt assets and/or property, which may, or may not, dictate the choice of an alternative such as a Chapter 13 or Chapter 11 Bankruptcy.

“Liquidation” is a process in which a debtor’s non-exempt property is sold by a Chapter 7 Trustee (“liquidated”), the proceeds of which are then paid to creditors. Sales are handled by an impartial bankruptcy court-appointed trustee. You will likely need to discuss your financial circumstances with a bankruptcy law professional to determine which assets you will be able to classify as exempt.

It is a court order releasing a debtor from all dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.

No (in most cases), unless it is not exempt, and provided that you have kept up on mortgage payments. Massachusetts provides a $500,000.00 homestead exemption. This is a good example of the of the importance of consulting a knowledgeable bankruptcy attorney, as an experienced lawyer such as those at Evans & Evans, P.C. can make a big difference in protecting your high-priority assets. In some cases, it may be advantageous to surrender your home, as you can be relieved of debt associated with it. Again, this is also a complex decision, and one we believe you should discuss with an attorney. Either way, if keeping your home is a foremost concern, and if you are behind on your mortgage payments or real estate taxes and under threat of foreclosure, you should assess whether Chapter 13 is feasible and provides a more comprehensive solution.

While Chapter 7 will allow most people to discharge the majority of their debts (i.e. credit cards, medical bills, private loans, etc.), there are some non-dischargeable debts that you are still required to pay. These exemptions commonly include (but are not limited to):

• Court ordered payments such as alimony and child support
• Government Loans
• Most student loans (unless you can show “undue hardship”)
• Debts from judgements in a criminal case, or debts incurred by fraudulent activity
• Income taxes to the IRS or MDOR may or may not be dischargeable depending on a variety of factors. If you have significant tax debt we will analyze the dischargeability of those taxes prior to filing a petition on your behalf.

A chapter 7 filing will appear on your credit report for 10 years, and will have an impact on your credit score and history. Late payments and other credit issues also have a negative impact on your credit report and generally will appear on your credit report for up to 8 years.  The point of a Chapter 7 filing is to improve your financial health first, and eliminate your debt. Rather than allow the credit score tail to wag the dog, it is important to solve the problem by discharging the debt. You will then be in a position to improve your score (and improve your life) with much less stress. While a bankruptcy filing will (like any existing negative reports in your history) have an impact on your score,  you will (with any applicable exceptions as discussed above) be debt-free after filing and can use many techniques to begin to improve your score after you obtain your discharge.

Typically, you will not have to go to what you might think of as a “trial” in court. Instead, you will receive notice requiring you to appear at a creditors meeting (or “341 meeting”). At this meeting, you will be expected to answer questions (under oath) asked by a court-appointed trustee, whose purpose is primarily clarifying any questions about the forms and documentation that you’ve already filed. Your creditors may attend, but very often choose not to.

Unfortunately, it is impossible to definitively answer this question on this page. Your ability to qualify will be determined by a “means test”, which uses numerous financial factors to calculate your eligibility. In very generalized terms, if the sum of your income, minus the sum of your expenses is lower than the state median, you will probably qualify for Chapter 7. TFactors that might disqualify you for Chapter 7 bankruptcy include:

• Your income level is too high
• You have already received a Chapter 7 discharge in the past 8 years
• A recent filing was dismissed because you violated the terms or failed to appear at a hearing
• Your claim is deemed as “abuse”, meaning you could conceivably pay your debts, but don’t want to

Absolutely, positively. You need to disclose all assets or rights or claims to property. Let us then analyze the applicable exemptions that may apply to that property.

Absolutely, positively not.  Talk to us and we will analyze your exemptions and discuss whether and to what extent we can ethically assist you with any exemption planning.