Bankruptcy

Bankruptcy is a legal process used to eliminate (“discharge”) debts, avoid liens on your property, stop lawsuits, and reorganize debts.

A Chapter 7 is a “liquidation bankruptcy” whereby an individual or couple receive a “fresh shart”. Although certain “non-exempt” assets can be sold by the bankruptcy court to help repay creditors, in practice this is rare. Most individuals and couples who file a Ch. 7 do not have any assets that are non-exempt, and they keep their home and personal property. The Ch. 7 case ends when you received a “discharge” of your debts. Some exceptions are student loans, some income taxes, child support and alimony.

Eligibility to file a Ch. 7 is based upon the last 6 months of income. If the income for your household size is below the median income for the State of Massachusetts, you are generally able to file. However, even if your income is higher, you may still qualify to file Ch. 7 if you pass a “means test”. The means test is a formula of income and expenses used to determine if you are eligible to file a Ch. 7 bankruptcy.

In some cases, where the majority of your individual debts are business type debts, such as trade debt, or items charged on a credit card for business purposes, the means test is not applicable, even if you exceed median income.

Chapter 13 Bankruptcy

A Chapter 13 is a “reorganization”, whereby you keep your property, and make monthly payments over the course of 3-5 years to pay a portion of your debt.

A Chapter 13 is filed if you don’t pass the means test, if you have more property than you can exempt in a Ch. 7, or if you need to catch up on mortgage payments and/or other non-dischargeable debt. It will stop a foreclosure. A Chapter 13 acts like a consolidation loan, wherein the debtor makes one monthly payment to the Trustee. The Trustee then disburses payments to your various creditors. In most cases, you will only pay your unsecured creditors a small percentage of their obligation though the Ch. 13 reorganization. The balance of these obligations will be discharged.

Chapter 7 Business Liquidation

Corporations and LLC’s may file a Chapter 7 where the business ceases operations. A Ch. 7 Trustee will be appointed by the Bankruptcy Court to collect and sell any property not encumbered by a lien. After the assets are sold, the proceeds are used to pay unsecured creditors.

Chapter 11 Bankruptcy Business Reorganization

A Chapter 11 allows a business to reorganize, giving it an opportunity to restructure its secured, unsecured and tax debt, and terminate or restructure burdensome leases and contracts. The business continues operations, and management typically remains in control.

Our firm offers a free consultation, at which we will provide you with a detailed assessment of your bankruptcy and non-bankruptcy alternatives. We will also quote the fees and expenses associated with a bankruptcy filing, which are generally very affordable. In most instances we quote a flat fee, rather than an hourly or open-ended fee, and have payment plans.

Call Attorney Louis W. Mountzoures to schedule your free consultation.