The Bankruptcy Code is made up of various “Chapters” that each apply to a different type of debtor or bankruptcy.

Individuals may file for bankruptcy in a federal court under Chapter 7 (“straight bankruptcy”, or liquidation). Chapter 7, as with other bankruptcy chapters, is not available to individuals who have had bankruptcy cases dismissed within the prior 180 days.

Introduction to Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, the individual is allowed to keep certain exempt property. However, many liens on property, (such as real estate mortgages and security interests for car loans), survive. The value of property that can be claimed as exempt varies from state to state. You may be able to choose between federal and Massachusetts state law exemptions. We can help you choose what assets you may wish to retain. Sometimes, some of your assets may be sold (liquidated) by the bankruptcy trustee to repay your creditors.

Many types of unsecured debt are legally discharged by the bankruptcy proceeding, but there are various types of debt that are not discharged such as child support obligations, income taxes less than 3 years old certain property taxes and federally insured student loans. Also, fines and criminal restitution imposed by a court. Spousal support is likewise not discharged by a bankruptcy filing nor are property settlements through divorce. However, all debts must be listed on bankruptcy schedules.

A chapter 7 bankruptcy stays on an individual’s credit report for 10 years from the date of filing the chapter 7 petition. This contrasts with a chapter 13 bankruptcy, which stays on an individual’s credit report for 7 years from the date of filing the chapter 13 petition. This may make credit less available and/or terms less favorable, although some sources of credit look to work with people emerging from bankruptcy. That must be balanced against the removal of actual debt from the filer’s record by the bankruptcy, which tends to improve creditworthiness. Consumer credit and creditworthiness is a complex subject, however. Future ability to obtain credit is dependent on multiple factors and difficult to predict.

Creditworthiness and the likelihood of receiving a Chapter 7 discharge are only a few of many issues to be considered in determining whether to file bankruptcy. We can help you decide how to handle these issues.

Introduction to Chapter 13 Bankruptcy

Chapter 13 of the federal bankruptcy code, governs the various types of relief for bankruptcy may provide an individual. Chapter 13 allows an individual with a regular source of income to propose a chapter 13 plan that provides for their various classes of creditors. Under chapter 13, the Bankruptcy Court has the power to approve a chapter 13 plan without the approval of creditors. Chapter 13 plans are usually three to five years in length and may not exceed five years.

Chapter 13 is unlike Chapter 7, which does not have plan of personal financial reorganization, but provides for the discharge of certain debts and the liquidation of non-exempt property to generate funds to pay creditors. A Chapter 13 plan allows a person to deal with several categories of debt: priority claims, secured claims, priority unsecured claims, and general unsecured claims.

Chapter 13 plans may help cure arrearages on a mortgage, remove certain junior mortgages or other property liens, pay back taxes over time, or partially repay general unsecured debt.

Our firm is required by the federal bankruptcy code to inform you that we are a debt relief agency as defined by the bankruptcy code. There are many twists and turns in the realm of bankruptcy law. What we have covered here only beings to scratch the surface.

We can explain what provisions of Chapter 7 or Chapter 13 bankruptcy are available to you, if you need help restoring your financial status. Call us today at 736-3611 to receive timely, clear advice on your financial situation.