Chapter 7 Bankruptcy – Discharging Your Debts
Chapter 7 is a type of bankruptcy that is designed for individuals, corporations or other entities who are unable to pay their current debts and seek to discharge those debts. The advantages of Chapter 7 usually include:
- Discharging your unsecured debt, such as credit cards, personal loans and deficiencies from foreclosed homes or repossessed cars
- Stopping lawsuits and annoying calls from collection agencies
- Keeping your home and cars, as long as you are current on your payments
- Discharging old income tax debt
- Giving you a fresh start on your financial life within a few months
Competent, Compassionate Advice
At Madoff & Khoury, LLP, we pride ourselves on providing straightforward, compassionate advice. The only way to be sure of your options is to call us at 508-543-0040 for a free consultation in our Foxborough, Massachusetts offices. The attorneys of Madoff & Khoury have decades of experience helping individuals and companies take full advantage of their debt relief options.
Answers to some frequently asked questions:
I have heard that the bankruptcy laws have changed, and so people can longer eliminate their debt. Is that true?
While it is true that, in 2005, the Bankruptcy Code was changed, with an aim toward making it more difficult for individuals to walk away from their debt, that change did not affect most people. Now, individuals (married or unmarried) who make over a certain amount of money, may have to consider a Chapter 13 bankruptcy, where they repay at least some of their debt (See our Chapter 13 web page). But for most people, Chapter 7 is still available.
Will I lose my house in a Chapter 7?
That depends. If you are current on your mortgage payments and have less than $500,000 (higher if you are a married senior) in equity in the house, you are not likely to lose your house in a Chapter 7. As long as you remain current with your payments, except in rare circumstances, you should be able to keep your house. If you are behind on your mortgage payments, you may have to consider a Chapter 13.
How about the rest of my belongings? Will I lose them?
In a Chapter 7, individuals are generally permitted to keep most of their belongings by taking advantage of the exemptions provided in bankruptcy. There are bankruptcy exemptions for clothing, furniture, cars, cash, jewelry, work tools, etc. Also, IRAs, 401(k) plans and other pensions are generally safe.
Can I reduce my mortgage or eliminate a second mortgage in Chapter 7? How about real estate attachments and executions?
A Chapter 7 will not affect the principal amount of any of your mortgages. If you have a second mortgage, you may be able to eliminate it in Chapter 13, but not in Chapter 7. However, you can remove real estate attachments or court executions on your home if they stand in the way of your homestead exemption.
Should my corporation file Chapter 7?
This is a difficult question, and one on which many lawyers disagree. Under certain circumstances, when you are closing your business, you may not need to file a Chapter 7. However, there are certain times when filing a Chapter 7 is recommended. This must be determined on a case by case basis.
Can I discharge overdue taxes in a Chapter 7?
Sometimes. If you owe unpaid meals, sales or payroll taxes to the IRS or the Department of Revenue, don’t count on discharging those in any bankruptcy, and be cautious of any advertisements you see or hear that promise to eliminate those taxes. However, certain income taxes, if they are old enough, can be discharged. The general rule (subject to exception) is that income taxes are dischargeable if they were assessed more than three years ago.
David B. Madoff
- Over 20 years of bankruptcy law experience, including Chapter 7, Chapter 11, and Chapter 13
- Appointed by the U.S. Department of Justice as a Chapter 7 Trustee for Massachusetts since 1997, overseeing approximately 600 bankruptcy cases per year.
- Named every year since 2005 by the publishers of Boston Magazine as a Massachusetts Super Lawyer, representing the top 5% of lawyers in Massachusetts.
- Featured bankruptcy analyst on FOX News Boston
- Quoted in bankruptcy related articles in the New York Times, Boston Globe, Boston Herald, Providence Journal, and others
- Member of the American Bankruptcy Institute
- Frequent lecturer for Massachusetts Continuing Legal Education, educating other attorneys on bankruptcy law
- Enjoys the highest “AV” rating by Martindale-Hubble, a national attorney peer review firm