Chapter 7 Bankruptcy FAQ
Chapter 7 bankruptcy, also known as "liquidation bankruptcy," allows individuals or businesses to discharge most unsecured debts, giving them a fresh financial start. As the Supreme Court stated in Local Loan Co. v. Hunt, 292 U.S. 234 (1934):
"The purpose of bankruptcy law is to give the honest but unfortunate debtor a new opportunity in life and a clear field for future effort."
Eligibility is determined through a means test, which assesses your income, expenses, and ability to repay debts. I’ll guide you through this test to determine if Chapter 7 is right for you. A recent Massachusetts case, In re Harrington (Bankr. D. Mass. 2023), emphasized strict compliance with means test requirements.
Most unsecured debts, such as credit cards, medical bills, and personal loans, are dischargeable. However, debts like child support, alimony, and most taxes typically cannot be discharged. The landmark case Grogan v. Garner, 498 U.S. 279 (1991), held that debts from fraud or willful misconduct are not dischargeable.
Not necessarily. Many filers keep essential property through state or federal exemptions. I’ll work with you to ensure your exemptions are maximized. For example, the Massachusetts Homestead Exemption can protect up to $500,000 of equity in your primary residence.
The process involves filing a petition, attending a meeting of creditors (341 meeting), and working with a trustee to resolve any asset issues. I’ll handle the filing, represent you at hearings, and guide you every step of the way. The case In re Samosky (Bankr. D. Mass. 2022) highlights the importance of accurate petition filings to avoid trustee challenges.
A typical Chapter 7 case lasts about 3–6 months from filing to discharge. I’ll ensure the process moves smoothly and efficiently.
The automatic stay halts most collection actions, wage garnishments, and lawsuits as soon as you file. The Supreme Court in United States v. Whiting Pools, Inc., 462 U.S. 198 (1983), described the stay as "one of the fundamental debtor protections provided by bankruptcy laws." I’ll ensure this protection is enforced.
You’ll likely only need to attend one meeting of creditors (341 meeting). I’ll prepare you for this meeting and attend it with you to address any concerns raised by the trustee or creditors.
The trustee reviews your case, sells any non-exempt assets if necessary, and distributes funds to creditors. I’ll ensure your interactions with the trustee are smooth and transparent. A Massachusetts case, In re Campbell (Bankr. D. Mass. 2023), underscores the trustee's duty to maximize creditor returns without unnecessary burdens on the debtor.
In many cases, yes, especially if you’re current on payments and the property falls under exemptions. I’ll help evaluate your situation to protect your assets.
Costs include court filing fees and attorney fees. I’ll provide a clear breakdown of these costs upfront and work with you on payment options if needed.
While Chapter 7 bankruptcy will remain on your credit report for up to 10 years, it also provides an opportunity to rebuild your credit. I’ll help you develop a plan to improve your financial health post-bankruptcy.
If you have joint debts, your co-debtor may still be responsible. I’ll explain how this works and explore options to minimize the impact.
Some older income tax debts may be dischargeable if they meet specific criteria. I’ll review your tax situation to determine what may be eligible. In re Richards (
Bankr. D. Mass. 2022) provides guidance on discharging certain tax debts in Massachusetts.
This is an agreement to continue paying certain debts, like a car loan, to keep the asset. I’ll help you decide if reaffirmation is in your best interest.
Once your debts are discharged, creditors can no longer pursue you for payment. The Supreme Court, in Katchen v. Landy, 382 U.S. 323 (1966), affirmed the "fresh start" principle that bankruptcy provides. I’ll guide you on steps to rebuild your financial life and credit.
Yes, but there’s an eight-year waiting period between Chapter 7 filings. I’ll help you explore alternatives if you’re not eligible for another Chapter 7 case.
If a creditor continues collection efforts, I’ll take legal action to enforce your rights and seek damages if applicable.
You’ll need to gather financial documents like pay stubs, tax returns, and a list of debts. I’ll provide a detailed checklist and help you stay organized.
From the initial consultation to your discharge, I’ll handle every step of your case, including filing, court appearances, and communication with the trustee. My goal is to make the process as stress-free as possible for you.
Disclaimer:
The information provided in this FAQ section is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and usefulness of the information, it should not be relied upon as a substitute for professional legal counsel tailored to your specific situation.
Accessing or using this FAQ does not create an attorney-client relationship between you and Nicholas S. Ratush, PC or any of its attorneys. If you require legal assistance, please contact our office to schedule a consultation.
For legal advice related to your unique circumstances, consult a qualified attorney.