Massachusetts Consumer Rights Attorney Kenneth D. Quat
Bankruptcy
Filing bankruptcy can be the best option for persons struggling to pay their debts. Upon filing bankruptcy all collection efforts must stop, including foreclosure, and any creditor or debt collector who does not respect this may have to pay damages. In addition, most people who file bankruptcy are permitted to keep all their assets. At the end of the process, the consumer receives a "fresh start," meaning all dischargeable debts are eliminated.
Although some consumers are helped by debt consolidation and debt settlement companies, many of these companies are not reputable and do not achieve good results even though substantial fees are charged.
There is no "shame" in filing bankruptcy. The bankruptcy laws are designed to assist people who, for various reasons, have become overwhelmed by debt. The bankruptcy laws are, in fact, an important element in the American economy, since they act as a safety-valve for risk taken on by creditors as well as consumers.
Bankruptcy Overview
Filing for bankruptcy allows an individual or a couple to eliminate or reduce debts. There are 2 primary forms of bankruptcy relief for consumers: Chapter 7 and Chapter 13.
A Chapter 7 bankruptcy can provide for the complete elimination of debt for persons who qualify (which means not having income over the median income for households of similar size in Massachusetts). Assets will not be at risk unless they are fully or partly "non-exempt." State and federal law provide all consumers with certain exemptions which may protect some or all assets from being used to satisfy debts. For example, a Massachusetts homeowner who has filed a "homestead declaration" with the appropriate Registry of Deeds may be able to protect equity in the property up to $500,000. In addition, retirement assets are usually exempt. Prior to filing a Chapter 7 petition the attorney will conduct an analysis of assets and determine whether any will be at risk. In addition, a Chapter 7 case allows the consumer to keep any property which is collateral for a debt - such as real estate and vehicles - provided payments are kept current. A typical Chapter 7 case is relatively straightforward, and will last about 3 months, after which time all debts will be discharged (subject to certain exceptions, most notably student loans and taxes).
A Chapter 13 bankruptcy operates essentially as a debt repayment plan; however, in nearly all cases less than 100% of debt is repaid. The general principle is that the consumer's disposable income (income which remains after salary deductions and living expenses) is paid on a monthly basis through a court-approved plan which lasts from 3 to 5 years. The plan can be used to pay arrearages on any secured debt (such as mortgages and car loans) and to pay unsecured debts (such as credit cards). Therefore, Chapter 13 can be particularly helpful for homeowners who have fallen behind on mortgage payments and may be facing foreclosure, but are unable to meet the lender's conditions for rehabilitating the loan. It can also be beneficial for persons who are having difficulty keeping up with student loan and/or tax payments. Upon successful completion of the plan the unsecured debts are completely discharged, again subject to certain exceptions.
Both Chapter 7 and Chapter 13 bankruptcies are filed with the United States Bankruptcy Court, which holds sessions in Boston, Worcester, and Springfield. Both kinds of cases are administered by an attorney appointed by the Court who is known as the Bankruptcy Trustee. At the beginning of the case a meeting is held by the Trustee for the primary purpose of verifying financial information contained in the petition. Most persons who file bankruptcy complete their cases without having to attend any actual court proceedings.
Once a bankruptcy petition is filed, certain claims which the consumer may have against creditors can be pursued by means of an "adversary proceeding" in Bankruptcy Court. For example, if a bank or mortgage company has engaged in misconduct, the validity and/or amount of the mortgage can be challenged. An adversary proceeding proceeds like any civil lawsuit, with the ultimate decision made by the Bankruptcy judge.
A person who has previously filed bankruptcy may be eligible to file again. Whether or not all of the relief offered by the Bankruptcy Code can be obtained will depend on whether the prior filing was Chapter 7 or Chapter 13, whether a discharge was obtained, and how much time has passed.
Basic Bankruptcy Information and Resources
The fee for filing a Chapter 7 case is $299. The fee for filing a Chapter 13 case is $274. Filing fees can be paid in installments if absolutely necessary, but is discouraged because failure to pay an installment can result in dismissal of the case.
Prior to filing bankruptcy each individual must complete a credit counseling course from an approved agency, and then subsequently complete a post-filing debtor education course. These each take about an hour and can be done on-line or on the telephone. Fees for each tend to be in the $40-$50 range.
Certain aspects of bankruptcy law are complex and while a consumer is perfectly entitled to proceed pro se (without an attorney), this is discouraged. Many attorneys are willing to negotiate fees and payment arrangements.
Quat Law Offices can assist you with learning more about the bankruptcy process and legal options. Please call us to learn more about our services.
Quat Law Offices is a 'debt relief agency' as defined by 11 U.S.C. §101(12A). We assist people in filing for relief under the Bankruptcy Code.
