The Law Office of Peter M. Daigle, P.C understands that, when forced with the possibility of bankruptcy, many common questions arise. Below are the most often asked questions we receive about filing for bankruptcy.
Commonly Asked Questions/Frequently Asked Questions (FAQs):
- What is Bankruptcy?
- Which Bankruptcy Type or Chapter Should I File?
- Will Bankruptcy Stop My Creditor from Harassing Me?
- Who Will Know I Filed For Bankruptcy?
- Will Bankruptcy Affect My Credit?
- Do I Have to Liquidate or Surrender Any of My Property?
- How Long Does it Take?
- Can You Only Claim Bankruptcy Once in Your Lifetime?
- Can I Keep My Home in a Bankruptcy?
- Do I Qualify for Chapter 7 Bankruptcy?
- Can I Stop the Bank from Foreclosing on Me?
- The Automatic Stay: Delaying Foreclosure
- How Can Chapter 13 Help Me?
- What is Chapter 13 Bankruptcy?
- How Chapter 13 Works?
- Will I Lose My Vehicle if I File Bankruptcy?
- Will I Lose My Retirement Funds if I File Bankruptcy?
WHAT IS BANKRUPTCY?
Bankruptcy allows individuals or businesses (debtors) who owe others (creditors) more money than they’re able to pay to either work out a plan to repay the money over time or completely eliminate (discharge) most of the debts.
WHICH BANKRUPTCY TYPE OR CHAPTER SHOULD I FILE?
Consumers can either file Chapter 7 or Chapter 13 bankruptcy, depending on their circumstance. The type of bankruptcy will determine:
- What bills can be eliminated
- How long payments can be stretched out
- What possessions you can keep
- Additional information
The type depends on your circumstances and if you have sufficient income or assets available to repay all or part of your debts. Bankruptcy laws can be tricky and involved, so determining if, when and which type of bankruptcy you need should be made with careful thought or the input of a bankruptcy lawyer.
WILL BANKRUPTCY STOP MY CREDITORS FROM HARASSING ME?
Generally, from the time you file for bankruptcy, all creditor collection activity is stayed or stopped and you creditors may no longer contact you regarding your debts. Once your bankruptcy is completed and you receive a final discharge order, the order prevents any creditors listed in your bankruptcy from seeking to collect against you in the future.
WHO WILL KNOW I FILED FOR BANKRUPTCY?
Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 7 to 10 years.
WILL BANKRUPTCY AFFECT MY CREDIT?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you’ve filed a bankruptcy can appear on your credit from 7 to 10 years. But since bankruptcy wipes out your old debts, you are likely to e in a better position to pay your current bills, and you may be able to get new credit.
DO I HAVE TO LIQUIDATE OR SURRENDER ANY OF MY PROPERTY?
Since a Chapter 7 bankruptcy is called the straight liquidation bankruptcy, there is a common misunderstanding that you must give up, liquidate, or otherwise lose your property, both real and personal. This is not always the case. In fact, many times this is not the case. Both State and Federal laws exist which protect your property from your creditors in bankruptcy.
HOW LONG DOES IT TAKE?
A chapter 7 case is generally very fast. The court will schedule a creditor’s meeting in approximately 30 days after the bankruptcy petition has been filed. At the meeting, the trustee will ask you about the information contained in your bankruptcy schedules. The meeting may only last a few minutes, and is generally the only formal appearance you will have to make. In approximately 120 days you will receive your discharge and the final decree will follow a few weeks later. A Chapter 13 takes longer. Not only will our bankruptcy attorneys guide you through this process, we can give you a rough estimate of the amount of time involved.
Can You Only Claim Bankruptcy Once in Your Lifetime
The answer is no, you can claim bankruptcy more than once in your lifetime. The time allowed for additional filings: Currently, the time between filing for an additional chapter 7 is 8 years. However, one may legally file a chapter 13 outside of 4 years of a chapter 7 discharge.
Can I Keep My Home in Bankruptcy?
In many cases the answer is yes. There is a Massachusetts Homestead Act which prevents creditors from having their homes sold to pay off unsecured debts. The law applies only if the homeowner lives in the home as his/her principal residence. The protection applies to unsecured creditor claims such as credit card debt or lawsuits. The home is not protected from claims secured by the home, such as a mortgage or lien on the property, or certain other types of debts.
The Homestead Act is found in Massachusetts General Laws Ch. 188, §1-10, as amended by An Act Relative to the Estate of Homestead that went into effect on March 16, 2011. Under the amended Homestead Act, up to $125,000 of a homeowner’s equity is automatically protected by law. A homeowner can protect up to $500,000 in equity by filing a Declaration of Homestead with the Registry of Deeds.
Do I Qualify For Chapter 7 Bankruptcy?
Whether or not you qualify for a Chapter 7 bankruptcy depends upon various factors. The primary aspects that determine your qualification are income, assets, or any recent transfer of property. When it comes to income, you must make below the median household income of your particular state in order to qualify under what is known as the “means test”. Attached is an article from www.legalconsumer.com that shows the median income in the previous year for the state of Massachusetts and also includes a “means test” calculator for your particular county.
Can I Stop the Bank from Foreclosing on Me?
Generally the foreclosure process starts after a homeowner gets behind on paying their mortgage. The lender will then commence the legal action of selling the property through auction in order to regain payment for the loan.
This won’t occur immediately after missing one payment. Usually a lender won’t begin the foreclosure process until you’ve missed multiple payments, many times three of four. That buys you some time to seek what options you have, such as loan modification, a short sale, or a deed in lieu of foreclosure.
But if you’ve already attempted these solutions and failed, now is the time to consider bankruptcy to halt the foreclosure sale. These are some alternative ways to help you by filing for bankruptcy.
What Does an Automatic Stay Do?
An automatic stay can immediately put a stop to creditors taking action against you in an attempt to collect on the owed debt. An automatic stay can prevent any of the following:
- Car Repossession
- Foreclosure of Your Home
- Harassing Creditors
- Utility shutoffs
- Wage Garnishment
How Can Chapter 13 Help Me?
Many people will do anything it takes to stay in their home for the foreseeable future. If that is something important to you, and you’re behind on your mortgage payments with a likely way to become current, the only way to keep your home is to file a Chapter 13 bankruptcy.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy lets you pay off the “arrearage” (past due payments) over the length of a repayment plan that is agreed upon. However, you’ll need sufficient income to at least meet the current mortgage payment at the same time you’re paying off the arrearage.
How Chapter 13 Works?
Providing you comply with all of the mandatory payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home. Chapter 13 could also help you eradicate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the total value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages.
That allows the Chapter 13 court to “strip” the second and third mortgages and re-categorize them as unsecured debt. Under Chapter 13, these debts would take last priority and often does not required to be paid back at all.
Will I Lose My Vehicle if I File Bankruptcy?
If a chapter 7 bankruptcy has been filed, a lender is not able to repossess a vehicle or otherwise collect a debt. The Automatic Stay goes into effect once the Chapter 7 bankruptcy is filed. Creditors are prohibited to contact you in any way at this point for collection. So your vehicle is protected. However, the court can sometimes grant permission for the lender to take the vehicle.
Will I Lose My Retirement Funds if I File Bankruptcy?
Most retirement accounts are considered exempt through bankruptcy. Congress reconstructed the bankruptcy laws in 2005. Under the changed law, barring a few exceptions, pension plans and retirement accounts are exempt and have no impact on what is paid out to your unsecured debt.
Plans that that qualify for this exemption include and ERISA qualified account:
- Profit Sharing Plans
- Defined Benefit Plans
- IRAs (Roth, SEP, and Simple)
- Money Purchase Plans
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