As a result of changes made to the Bankruptcy Code in 2005, I am required to advise you that we are a debt relief agency and that I help people file for bankruptcy relief under the Bankruptcy Code.

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Frequently Asked Questions

United States Bankruptcy Court Video Series

Please click on the following link to view nine brief videos about the bankruptcy process created by the Court System: www.mab.uscourts.gov/mab/bankruptcy-video-series

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is the most common bankruptcy filed by individuals. The vast majority of people who file a Chapter 7 bankruptcy case are able to “discharge” (eliminate) their debts and keep all of their property.

How much will it cost?

 

It can vary depending on the complexity of your financial situation but typically the legal fee for a Chapter 7 bankruptcy case will be between $1,200 and $2,000.  The filing fee for a Chapter 7 bankruptcy case is $335.  After I review your financial circumstances with you, I should be able to quote you a “flat fee” for the services to be provided in your bankruptcy case.

What are exemptions?

 

Exemptions are the laws that protect the property of a person filing a bankruptcy including your house and car.

If I file for a Chapter 7 bankruptcy will I be able to keep all of my property?

 

Generally, YES.  A Chapter 7 bankruptcy is called a “liquidation” bankruptcy because if you have any assets that are not “exempt”, a bankruptcy “trustee” liquidates or sells your property and distributes the proceeds to your creditors.  In Massachusetts, there is an exemption of up to $500,000 of equity (the value minus any loan on it) in your house.  You can also protect $7,500 of equity in a car, or $15,000 of equity if you are 60 years old or older. However, if you have a mortgage or a car loan, you are required to continue to pay those “secured” debts in order to keep your house or car.

 

What is a creditor/debtor?

A creditor is the individual, bank, taxing authority, or other company that is owed money.  A debtor is the person who owes the money.

What is secured/unsecured debt?

 

A secured debt is a loan secured by collateral, like a mortgage or car loan.  The agreement between the bank and the debtor is that if the debtor does not pay the loan the bank will foreclose or repossess the collateral.  An unsecured debt has no collateral.  Credit cards, medical expenses and personal loans are all examples of unsecured debts.

What is the automatic stay?

 

Immediately upon the filing of a bankruptcy case, the automatic stay goes into effect.  It is a law that requires all creditors to stop all collection efforts.  The automatic stay that can prevent a foreclosure or repossession, and can prevent or stop wage garnishments.

What is a Chapter 13 bankruptcy?

 

A Chapter 13 bankruptcy is a repayment plan.  It lasts from 3 to 5 years and it is often filed to prevent a foreclosure.  In a Chapter 13 bankruptcy case, the debtor is able to pay the mortgage arrears over the course of the bankruptcy while at the same time making regular monthly mortgage payments.

What is the means test?

 

The means test is a mathematical formula used to determine whether a debtor qualifies for Chapter 7. The test starts by comparing the debtor’s and their spouse’s previous six months of income to the median income for their household size in their state.  If the debtor is above the median income, then there is a more complicated analysis of expenses to determine whether they can pass the means test and file Chapter 7.  If a debtor fails the means test, they will still qualify for bankruptcy, however, they would usually file a Chapter 13 bankruptcy or wait until the time that the debtor can pass the means test.

What is a reaffirmation agreement?

 

A reaffirmation agreement is a contract that places the Debtor (the person who filed bankruptcy) and creditor (usually a bank) in the same position they were in before the Debtor filed bankruptcy. 

Should I sign the reaffirmation agreement?

 

That is a complex question that depends on your particular situation.  You should consult with your bankruptcy attorney to help you with that decision.