People often suffer financial setbacks at no fault of their own. It is not uncommon to have financial problems stemming from the loss of employment, individual or family medical issues, divorce, excessive student loan debt, foreclosure, back taxes or a failing business. Our legal system allows individuals and corporations to obtain a fresh start. Our nation’s founders included this idea in the United States Constitution. Article 1, Section 8 instructs Congress to “establish uniform laws on the subject of Bankruptcies throughout the United States.” If you feel overwhelmed by your debts and worry you may never be able to pay them off, you have the ability to seek a fresh start. It is part of our system. Contact us today at 617-431-8071 to discuss your situation with a bankruptcy lawyer in Boston, MA, to see if you qualify for bankruptcy protection.
Types of Bankruptcy
Bankruptcy permits consumers and businesses to eliminate their debts and repay their creditors in an orderly manner. Navigating the process can be complex but an experienced bankruptcy attorney can help. If you can prove that you are entitled to file for bankruptcy protection, the court will provide you or your business with various protections while your case is ongoing. Individual and small business bankruptcies tend to fall under two categories:
- Chapter 7 – Liquidation
- Chapters 11 and 13 – Reorganization and Repayment
Most individuals and businesses file under Chapter 7 and Chapter 13. Liquidation typically occurs in Chapter 7 bankruptcies. While Chapter 7 permits you to keep essential property and assets needed for living, some of your property may be sold to pay your debts. With a few specific exceptions, most of your debts will go away. This often occurs in three to six months after filing your bankruptcy. Chapter 13 permits you to reorganize your debts, and potentially keep more of your property, but requires a repayment plan that is likely to last between three and five years. During that time, you will repay some or all of your debts.
Chapter 7 Bankruptcy
Individuals and businesses are eligible to file under Chapter 7. Depending on the value and type of your assets, some of your property may sold to repay your debts. In return, your unsecured debts go away. The term “unsecured debt” refers to debt that is not backed by collateral. The most common example is credit card debt. Mortgages are secured debt and will usually remain after your bankruptcy. Property required for everyday living is exempt or not subject to sale under this process. If you have property that is not fully exempt due to its value, you may need to repay a portion of the value to your creditors in order to keep the asset.
The Means Test – Eligibility – To be able to file under Chapter 7, you must show that you do not earn enough income after consideration of specific monthly expenses to repay your debts. This is referred to as the “Chapter 7 Means Test” or the “Means Test.”
Chapter 13 Bankruptcy
This is commonly referred to as the “wage earner” bankruptcy. Individuals with regular and reliable income may submit a proposed repayment plan to repay all or some of their debts over a time period of three or five years. Plans are based on income, and the amount and types of debts. Chapter 13 repayment plans allow for the payment of past due mortgages or car payments and back taxes to avoid foreclosure or repossession.
Non-Dischargeable Debts (Debts that will remain after a Chapter 7 Bankruptcy)
Debts such as child support, alimony, student loans, certain back taxes, and other specific debts are not discharged in bankruptcy, and may be paid through a Chapter 13 repayment plan.
Debt Relief Agency – The Law Offices of James Benjamin is a Federally recognized Debt Relief Agency that offers legal representation under the United States Bankruptcy Code.