Q: What is the difference between a chapter 7 bankruptcy and a chapter 13 bankruptcy?
A: Generally, in a chapter 7 you will be able to discharge most of your debt without paying anything. The only time you will pay creditors in a chapter 7 is if you have property that cannot be exempted under the bankruptcy laws.
A chapter 13 is where you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time. This only applies if you are over the income threshold for Massachusetts. This amount is based on how much you earn, the types of debts you have, and the property that cannot be exempted that you own.
An attorney at Cohen & Associates will help you decide what chapter of bankruptcy is best for you.
Q: What can I keep, if anything, if I file bankruptcy?
A: Federal and State exemptions allow you to keep certain kinds of property. An attorney at Cohen & Associates will be able to tailor the exemptions to your advantage as to minimize the amount of property that is subject to distribution in a bankruptcy proceeding.
Q: Will my credit score ever improve?
A: Most definitely. Many lenders offer secured credit cards. These are cards where you can put a certain amount of money in the bank to guarantee payment. As you use your card and pay off the balance each month your credit will improve. Also, paying on time for student loans and mortgage payments (and paying more than the minimum monthly payment) are a great way to improve your credit score.
Q: Can I keep credit cards when I file for bankruptcy?
A: When you file bankruptcy you must include all debts. After your discharge, you may obtain credit cards again. The decision whether to grant you credit in the future is strictly up to the creditor and varies from creditor to creditor.
Q: Will my spouse be affected by my filing a bankruptcy?
A: If your spouse did not sign an agreement or contract for any of your debt, they will not be affected.
Q: If I filed bankruptcy before am I able to file again?
A: Yes, there are no limits as to how many times you may file. However, there are certain restrictions for the following:
- Chapter 7 - You may only file a Chapter 7 if it has been 8 years since you filed a previous Chapter 7,
- Chapter 13 - You may only file a Chapter 13 again if it has been 2 years since you filed a previous Chapter 13 and 4 years since you filed a previous Chapter 7
Q: How long will a bankruptcy stay on my credit report?
A: Generally a bankruptcy will stay on your credit report for 7 to 10 years.
Q: If I am contemplating bankruptcy, when do I have to stop using my credit cards?
A: As soon as you decide that you are serious about filing for bankruptcy, you must stop using your credit cards. Under the bankruptcy laws, charges within 90 days may be excluded from the bankruptcy.
Q: Are there tax consequences if I file a bankruptcy?
A: The Internal Revenue Code excludes the discharge of debt in bankruptcy from its definition of cancellation of debt income. If you do not file bankruptcy, cancellation of debt may be treated as if it were income for tax purposes.
Q: How long will my bankruptcy take?
A: From the time you file, it will take about 3 to 4 months to get a discharge in a Chapter 7. In a chapter 13, depending on your situation, you may be in a repayment plan for 3 or 5 years.
