Answers to General Bankruptcy Questions

How is a bankruptcy case started?

A bankruptcy proceeding is started by filing a "voluntary petition" with the bankruptcy court. The person filing the voluntary petition is referred to as the "debtor." The debtor is required to provide to the court full disclosure of all his or her property and debts. In exchange for full and accurate disclosure of his or her financial affairs and cooperating in the bankruptcy process, the debtor receives a discharge of all dischargeable debts.

Does a Debtor lose all of his or her property when they file for bankruptcy protection?

No. In a Chapter 7 case, the debtor may claim "exemptions" with respect to the debtor's "equity" (the value of the property over and above liens and mortgages) in the property, up to specified dollar amounts. In the vast majority of cases, there simply is no "non-exempt equity" to be liquidated by a Chapter 7 Trustee. In a Chapter 13 case, as long as the debtor pays all of the plan payments, he/she may keep all his/her property regardless of whether the property is exempt.

How will filing for bankruptcy protection affect my credit history?

A Chapter 7 bankruptcy will remain on the debtor's credit report for ten years and a Chapter 13 bankruptcy will remain on the debtor's credit report for seven years. However, with the economy currently doing well, credit is available for a debtor who has filed bankruptcy, although the interest rates charged will be higher.

What is a Chapter 7 bankruptcy?

Chapter 7 is the liquidation provision of the Bankruptcy Code. Under Chapter 7, any assets that are not "exempt" are liquidated and the proceeds are used to repay the debts owed to the creditors. Exemptions are provided under either the Federal Bankruptcy Code or other Federal and Massachusetts statutory law.