Bankruptcy

Learn about the different types of bankruptcy filings.

Overview

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, or more specifically, a case that is filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code), is a legal procedure for dealing with debt problems of individuals and businesses.

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
    John W. McCormack Post Office and Court House
    5 Post Office Square, Suite 1150 
    Boston, MA 02109-3945 
    617-565-8950
  • United States Bankruptcy Court
    Harold Donohue Federal Courthouse
    595 Main Street, Room 211
    Worcester, Massachusetts 01608-2076
    508-770-8900
  • United States Bankruptcy Court
    United States Courthouse 
    300 State Street 
    Springfield, MA 01105 
    413-785-6900

Types of bankruptcy filings

Chapter 7: Liquidation

Chapter 7 is designed for individuals and businesses experiencing financial difficulty that 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. A bankruptcy trustee then liquidates all non-exempt property and uses the proceeds to pay your creditors according to a distribution scheme required by the Bankruptcy Code.

The main purpose of filing a Chapter 7 case is to obtain a discharge of your existing debts. A bankruptcy discharge is a court order releasing you from liability for many types of 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. These include certain types of taxes, 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. Generally speaking, a bankruptcy discharge does not remove liens (including tax liens) from your property.

Chapter 11: Reorganization

Chapter 11 is designed for the reorganization of a business. It 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 farmers and fisherman

Chapter 12 is designed to permit family farmers to repay their debts over a period of time from future earnings. It is in many ways similar to a Chapter 13 filing.

The eligibility requirements are restrictive. It is limited 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. Chapter 13 gives them the option to pay their debts 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. Debts such as alimony and child support payments and certain long-term secured obligations are never discharged.

The information contained on this page is not, nor is it intended to be, legal advise or a complete explanation of any topic.

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