We have compiled a few commonly asked questions and provided a response that should help you have a better understanding of bankruptcy. If you have any further questions, please feel free to contact us.

General Bankruptcy Questions:

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• Why should I hire an attorney to file Bankruptcy?

• What types of debt can bankruptcy help me get rid of?

• What is unsecured debt?

• I filed bankruptcy before, can I file again?

• Can I discharge my student loans and alimony through bankruptcy?

• Why would I file Chapter 13 instead of Chapter 7?

• I still owe money on my car, what will happen with that debt?

• How will bankruptcy effect my credit?

• Am I better off consolidating my loans?

• I am behind on my mortgage payments and the bank is foreclosing, can bankruptcy help?

Bankruptcy Reform Questions

• What are the new requirements under the new bankruptcy laws?

• Do the new bankruptcy laws make it more difficult to file bankruptcy and obtain a discharge?

• What is the means test?

• Do I have to take a debt counseling course, and why?

ANSWERS

Q: What types of debt can bankruptcy help me get rid of?

A: Bankruptcy can help you get rid of certain unsecured debt such as credit cards. Bankruptcy can also help you escape certain types of contractual obligations. [top]

Q: Why should I hire an attorney to file Bankruptcy?

A: There are a lot of services and do-it-yourself-kits on the internet that claim can prepare your bankruptcy petition for a low fee. However, only a licensed attorney is allowed to provide you with legal advice, such as which set of exemptions to claim, whether or not liens can be avoided or how to navigate through the new bankruptcy laws. Since these services cannot offer legal advice, if you make a mistake on your petition, you could risk loosing your home, having some debt follow you after bankruptcy, or even having your bankruptcy dismissed.[top]

Q: What is unsecured debt?

A: Unsecured debt is any debt that you owe that is not secured by property you own: namely collateral. For example, a mortgage is a secured debt since your home is used as collateral in the event you default. Another example is an auto loan which a lien is placed on your title.[top]

Q: I filed bankruptcy before, can I file again?

A: Yes, there is no limit to the number times you can file bankruptcy. However, there are limits:

Chapter 7 Bankruptcy: you cannot file a Chapter 7 Bankruptcy unless it has been more than 8 years since you received a discharge from a previous Chapter 7 or 13 bankruptcy.

Chapter 13 Bankruptcy: You cannot file a Chapter 13 Bankruptcy, unless it has been be at least 4 years since you received a discharge in a prior Chapter 7 bankruptcy; or 2 years since you received a discharge from a prior Chapter 13 bankruptcy. [top]

Q: Can I discharge my student loans and alimony through bankruptcy?

A: No, except in very rare situations, certain debts such as support payments, government funded student loans, and taxes are not dischargeable in bankruptcy.[top]

Q: Why would I file Chapter 13 instead of Chapter 7?

A: Generally, if your income falls above the median income for your size family in Massachusetts, then you must file Chapter 13. However, there are a lot of factors that can influence what chapter you should file. For more information, you should contact us. [top]

Q: I still owe money on my car, what will happen with that debt?

A: You will have several options in bankruptcy regarding automobile note. You can reaffirm the debt and keep making payments. The debt will then survive bankruptcy and you can keep your automobile. Another option is to surrender the automobile and have any remaining debt discharged through bankruptcy.[top]

Q: How will bankruptcy effect my credit?

A: A bankruptcy will stay on your credit report for a maximum of 10 years. However, that does not mean that you will have bad credit for that period. Credit can be reestablished by through reaffirming credit accounts, such as automobile notes and mortgage payments.[top]

Q: Am I better off consolidating my loans?

A: That depends. Consolidation is also reported as derogatory credit on your credit report, just like a bankruptcy. However, there is no guarantee that your creditors will participate in your consolidation, with bankruptcy they don't have a choice.[top]

Q: I am behind on my mortgage payments and the bank is foreclosing, can bankruptcy help?

A: In some circumstances, bankruptcy can help. For example, by filing a Chapter 13, you can include your past due amounts in your repayment plan and continue to pay your normal monthly payments. However, every circumstance is different so it is important that you contact us immediately.[top]

BANKRUPTCY REFORM

Q: What are the new requirements under the new bankruptcy laws?

A: The new bankruptcy laws favor creditors over debtors and provide additional requirements that must be satisfied in order to file a bankruptcy petition. All bankruptcy candidates must now complete two credit counseling courses (lasting approximately 90 minutes which can be done over the phone or Internet), and complete a means test that examines your debt and assets in detail. It is also necessary to provide a complete picture of your financial status, including permitting us to review your tax returns and banks statements. This level of inquiry is crucial for determining for which type of bankruptcy you apply.[top]

Q: Do the new bankruptcy laws make it more difficult to file bankruptcy and obtain a discharge?

A: Yes and No. Prior to the latest reform of the Bankruptcy laws, most prudent Bankruptcy Attorneys conducted their own means test to determine whether a candidate qualifies for either a Chapter 7 or 13. The means test that is now mandated by the Bankruptcy code simply standardizes a minimum standard that, if not met, raises a presumption of misconduct. If you do not pass the means test, a presumption arises that you have the ability to repay a portion of your debt.

Moreover, the new Bankruptcy law makes it more cumbersome to file bankruptcy. Your attorney will now likely request evidence of income, bank accounts and tax returns before he will file on your behalf. However, with the advice of your attorney, it is certainly possible to enter into the right Chapter that suits your individual needs. [top]

Q: What is the means test?

A: Debtors above median income (typically $51,543 per year in MA, for an individual) are subjected to a means test to determine if a presumption of abuse arises. Current monthly income is compared against expenses, and a presumption of abuse arises if, after deduction of such expenses from income, the remaining amount over 60 months is at least the lesser of $10,000 or 25 percent of general unsecured claims. This presumption of abuse may be rebutted if the debtor shows that income and expenses should be adjusted to account for special circumstances and such adjustments bring the means test result below the minimum payment thresholds. This means test will help us determine whether you qualify for Chapter 7 or 13. [top]

Q: Do I have to take a debt counseling course, and why?

A: In order to qualify for bankruptcy relief, a debtor must receive a briefing on credit counseling and budget analysis from an approved nonprofit budget and credit counseling agency. To receive a discharge in chapter 7 or chapter 13, an individual debtor must also attend an approved personal financial management instructional course. The company we use for these courses allows you to take them over the telephone or online. [top]

Disclaimer

Nothing in this web page is to be construed as legal advice. This web page is provided for information purposes only. Legal advice can only be obtained by contacting a licensed attorney. For more information and a free consultation, please feel free to contact us. [top]

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At Grantham & Associates, P.C., we believe that you are entitled to know what you are paying for. Therefore, we offer a free consultation with all of our new potential clients. This gives you an opportunity to meet, or speak with the attorney that will be working with you on your matter.

Grantham & Associates is a Massachusetts debt relief agency located in the greater Boston, Cambridge Area. We help people in the Eastern Massachusetts area file for bankruptcy relief under the U.S. Bankruptcy Code.