Bankruptcy Frequently Asked Questions
1. Will my Bankruptcy be published in the Newspaper, and will it stop a pending foreclosure?
Your Bankruptcy is public record, and if someone wants to go to the Bankruptcy Court and search the docket they will find it. However, the only people who will have notice are your creditors.
Yes, a Chapter 13 bankruptcy will stop a foreclosure, and a creditor attempting to obtain a civil judgment and a lien on your property.
2. I am contemplating Bankruptcy. Should continue paying my credit cards?
In my opinion No. Why pay on a debt that could be discharged? Continue to pay the mortgage, automobile payments, Utilities, and other payments for property and services that you wish to keep.
3. I am contemplating Bankruptcy. Can I continue to use my credit cards, and take cash advances?
No. Do not use your credit cards. Your Creditors will argue that the debt is non -dischargeable, and they may be successful in having recent purchases and cash advances not being subject to discharge.
4. Once I file Bankruptcy will my creditors contact me?
Absolute not. Once your petition is filed what is known as the "Automatic Stay" goes in effect. Basically, if your creditors attempt to collect on a debt without the Court's permission, they are in contempt, and will be sanctioned.
5. I know there are different Chapters for individuals, what are they?
Generally, there are two Chapters for individuals, Chapter 7 and Chapter 13. A Chapter 7 is liquidation of your non-exempt assets.
A Chapter 13 is a reorganization, the course of which is dictated by a Chapter 13 Plan. It is analogous to a corporate Chapter 11 Reorganization, but for individuals.
6. What Chapter do you prefer and why?
Assuming that a situation occured that a client could choose either Chapter 7 or a Chapter 13, I would counsel them to choose a Chapter 13. This is predicated on two factors. First, if an unexpected problem arises after the petition is filed, it is easier to dismiss then a Chapter 7.
For instance, I know of several individuals who filed Chapter 7 Bankruptcy and later discovered that a family member had previously gifted property to them. The property was then in jeopardy of being liquidated by the Trustee, and proceeds distributed to the unsecured creditors.
Additionally, if a client's financial or personal situation changes, and the reason that a Chapter 13 Bankruptcy was filed no longer exists, it can always be converted to a Chapter 7 Bankruptcy.
Although, it is a 3 year commitment, the safety and flexibility that this Chapter offers outweighs the disadvantages.
7. I can either declare Bankruptcy or take out a second mortgage, what should I do?
Many people in the last couple years have asked me this. In my opinion, taking out a second mortgage to pay present debts is tantamount to borrowing from a future retirement. Why raid the equity in your home to pay a debt that can be discharged, while protecting your property?
Additionally, you are betting that Massachusetts housing prices will continue to appreciate, and you will not suffer a job loss or some type of financial set back in the future, that may jeopardize your ability to maintain your higher mortgage costs.
8. Should I declare Bankruptcy or employ a debt consolidation organization?
It has been my experience that it is usually cheaper to discharge a debt through the Bankruptcy Court.
Additionally, many of my individual clients have tried these organizations, and could not afford the monthly payments and the continuing charges, and have ultimately had to declare Bankruptcy.
9. Will I lose my home if I declare Bankruptcy?
No. Massachusetts' State Homestead Act allows an individual to exempt from the Bankruptcy Estate up to $300,000.00 in equity. Furthermore, if the residences equity is more than the Homestead amount, an individual can file a Chapter 13 Bankruptcy and pay their creditors dividend over 3 to 5 years based upon your disposable income, and protect the home.
Furthermore, State Bankruptcy exemptions allow an individual to keep equity in personal property ranging from household goods, automobiles, to church pews.
10. I have a pension will I lose it in Bankruptcy?
No, generally any ERISA qualified pension is exempt, and generally an individual 401(K) is also exempt.
11. What about my Life Insurance Policy?
Generally, term life is excluded from the Bankruptcy Estate, and an individual can exclude equity in a whole life plan under the federal exemptions to certain dollar amount.
12. With a personal Bankruptcy on my credit record will I ever get loan or a credit card?
It has been my experience that you will continue to receive solicitations by credit card companies, and a bank will loan to you.
Remember, after your debt is discharged you are in better financial position than you were before the Bankruptcy.
Quite frankly, if a lender wants lend you the money, it will. I advise my clients to establish a relationship with a small bank or credit union. It has been my experience that these organizations will make secured and unsecured loans to former bankrupt individuals on similar terms as non-bankruptcy customers, in a relatively short period of time.
13. Once I decide to file Bankruptcy, what is next step?
Contact a competent attorney that dedicates a great deal of his practice to Bankruptcy. Once, the best Chapter for your situation is determined, the petition will be prepared and filed.
Shortly thereafter, you will receive a notice of a §341 hearing. The §341 hearing is meeting between you, your attorney and the Bankruptcy Trustee. The Trustee will review the Petition, question you and your attorney.
14. How much will this cost me?
Generally, your Attorney will charge a flat fee for individual Bankruptcy. This fee is determined by the complexity of the Bankruptcy.
For example, an individual with tax debt, pending foreclosure, and/or a business, will be charged more than a person with no property and only unsecured debt.
15. What should I look for in searching for a Bankruptcy Attorney?
Always retain an Attorney that devotes a substantial amount of their practice to the Bankruptcy area. Modern laws change quickly and it is difficult for an Attorney to remain current in more than two areas of practice.
Additionally, always ask a potential bankruptcy Attorney if he has every been in Bankruptcy court. Many attorneys have only accept straightforward cases and appear at the §341 hearing. They have never argued in front of a Bankruptcy Judge.
Advertising. In accordance with rules established by the Supreme Judicial Court of Massachusetts. This web site must be labeled "advertising." It is designed to provide general information for clients and friends of The Law Offices of Richard A. Rogerson and should not be construed as legal advice, or legal opinion on any specific facts or circumstances.This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.
