The provisions of the Bankruptcy Code are complicated. It is advisable for businesses and individuals to consult with an attorney before filing a bankruptcy petition.
Bankruptcy is a legal procedure for dealing with debt problems of individuals and businesses, or more specifically, a case that is filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).
If an individual or a business is having financial difficulty and is unable to immediately pay existing debts, the individual or business may file for bankruptcy in the United States Bankruptcy Court. The Office of the U.S. Trustee is charged with overseeing the administrative aspects of the bankruptcy process.
For complete information on bankruptcy filing, fees and proceedings, visit the United States Bankruptcy Court, District of Massachusetts website or contact them at:
United States Bankruptcy Court
1101 Thomas P. O'Neill, Jr. Federal Building
10 Causeway Street, Suite 1101
Boston, Massachusetts 02222-1074
United States Bankruptcy Court
Harold Donohue Federal Courthouse
595 Main Street, Room 211
Worcester, Massachusetts 01608-2076
Types of Bankruptcy Filings
- Chapter 7: Liquidation
Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Under Chapter 7 a trustee takes possession of all of your property. You may claim certain property as exempt under governing law. The trustee then liquidates all non-exempt property and uses the proceeds to pay your creditors according to priorities of the Bankruptcy Code.
The purpose of filing a Chapter 7 case is to obtain a discharge of certain of your existing debts. If, however, you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, your discharge may be denied by the court and the purpose for which you filed the bankruptcy petition will be defeated.
Even if you receive a discharge, there are some debts which are not discharged under the law. Therefore, you may still be responsible for such debts as certain taxes and student loans, alimony and child support payments, debts fraudulently incurred, debts for willful and malicious injury to a person or property, and debts arising from a drunk driving charge.
- Chapter 11: Reorganization
Chapter 11 is designed primarily for the reorganization of a business but is also available to individual debtors who exceed the thresholds for Chapter 13 bankruptcies. Under Chapter 11 the Bankruptcy Court approves a plan of reorganization which provides for payment of claims in full or in part, depending on the priority and type of claim.
- Chapter 12: Family Farmer
Chapter 12 is designed to permit family farmers to repay their debts over a period of time from future earnings, and is in many ways similar to a Chapter 13 filing. The eligibility requirements are restrictive, limiting its use to those whose income arises primarily from a family-owned farm.
- Chapter 13: Repayment of All or Part of the Debts of an Individual with Regular Income
Chapter 13 is designed for individuals with regular income who are temporarily unable to pay their debts but would like to pay them in installments over a period of time. You are eligible for Chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code.
Under Chapter 13 you must file a plan with the court to repay your creditors all or part of the money that you owe them, using your future earnings. Usually the period allowed by the court to repay your debts is three years, but may be extended to five years. Your plan must be approved by the court before it can take effect.
After completion of payments under your plan, most debts are discharged. However, debts such as alimony and child support payments and certain long-term secured obligations are never discharged.