How will a bankruptcy filing affect my credit?

A personal bankruptcy filing will be on your credit for ten years. However, debtors often find this advantageous to the alternative: a risky credit score that endangers employment and other financial opportunities and exposes debtors to personal liability. Bankruptcy filers are often able to obtain unsecured credit lines and eventually secured loans.

What are the different bankruptcy chapters?

Persons may file a Chapter 7 petition. A Chapter 7 filing is by its nature a “no asset” case and involves liquidation of the debtor's property. A successful Chapter 7 bankruptcy filing should result in a discharge, relieving the filer of personal liability for debts.

Persons may also file a Chapter 13 petition. A Chapter 13 filing is a “wage earner's” case and involves reorganization, repayment of debts while retaining personal property. A successful Chapter 13 bankruptcy filing should result in a monthly payment plan based on the difference between the filer's income and share of household expenses.

Those whose household incomes fall below the state's median should qualify for Chapter 7 relief. Those over might be able to qualify using means testing or will qualify for Chapter 13 relief.

What protection is afforded to me by filing for bankruptcy?

A bankruptcy filing results in an automatic stay. By law, creditors, those owed money by debtors, must stop all collection activities, including phone calls, letters and lawsuits. Thus, bankruptcy insulates debtors from loss of their property and wages.

Must my spouse also file for bankruptcy?

Married couples may but are not required to file together a joint petition. A individual bankruptcy filer's spouse will not be affected other than as a co-debtor on joint accounts.

Can I keep my property after filing bankruptcy?

Massachusetts law allows homeowners to exempt the equity held in their personal residence. Personal property exemptions are also allowed under both state and federal law for automobiles, financial accounts and household items.

What debts can be discharged by filing for bankruptcy?

Most debts with the prominent exception of student loans and government obligations can be discharged. This includes credit cards, medical bills and loan balances owing after repossession/foreclosure.

Do I have to go to court?

Usually the only personal appearance required by a bankruptcy filer is attendance at a creditors' meeting. This meeting is scheduled approximately one and a half months after the date of filing. In Massachusetts the location(s) for the creditors' meeting can be found on the Bankruptcy Court Website. On that date, the trustee, a lawyer appointed by the court to preside over the case, will question the bankruptcy filer who is under oath and in the presence of his attorney. All questions should pertain to financial information already reviewed and signed off by the filer on his bankruptcy petition. Creditors owed money by the filer are permitted to but rarely exercise their right to appear at this meeting. Even if a creditor/creditor's representative appears, their questions are limited to the subject of filer's assets they believe are available to be seized by the court. Otherwise, the trustee should after this meeting issue the filer a report of no distribution, meaning that the filer has no assets nor has transferred property. The petition then goes to the judge of the court without a further need for the filer's personal appearance and the court's order follows.

How long does the bankruptcy process take?

Once this office has a full retainer payment and all information requested, the petition is prepared within a week's time. The filer then reviews and signs off on the petition that is filed electronically. The filer will get instant notice of the date of the creditors' meeting, held after approximately one and a half months. A court's order usually follows a successful creditors' meeting after approximately two months, after which time the filer's case is also closed by the court.

For more information and resources on filing Bankruptcy read Attorney Sankaran's blog.