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Law Offices of Sweet & Rose

South Shore, MA

Frequently Asked Questions

Q: What is the difference between Chapter 7 and Chapter 13 Bankruptcy?

A: Chapter 7 bankruptcy is called liquidation.  It means that the court will appoint a trustee who will take possession of your assets, sell them and then pay as much of your debts as he or she can pay from the available funds.

Fortunately Bankruptcy Law does not allow the trustee to take all of your assets. The assets that you are able to keep are called exempt assets.  In many cases the exemptions allowed by the court will protect your car, home, retirement funds, clothing, a small amount of jewelry and a moderate amount of money in the bank.  In fact the majority of people who file a Chapter 7 bankruptcy petition can exempt (protect) all of their assets so they do not have to give anything to the trustee.

A Chapter 13 bankruptcy is called the wage earner plan.  In this type of bankruptcy, you do not give up any assets; rather you make monthly payments for a period of 3 to 5 years.  The amount of money you pay each month is determined by a formula.  The Chapter 13 trustee then pays your creditors as much of your debts as can be paid from the funds available.  Once you complete your plan, your remaining debts are discharged.

Q: Will I have to give up my car?

A: Rarely does a bankruptcy petitioner have to give up their car.  Bankruptcy law allows an individual a certain amount of value in an automobile.  However, filing a bankruptcy will not eliminate your obligation to pay an automobile loan. If you do not pay your car loan, the automobile finance company may still be able to repossess your vehicle.

Q: Will I lose my house?

Bankruptcy law exempts a substantial amount of equity in your home. So it is highly unlikely that you will lose your home in a bankruptcy.

Q: Can I keep my house and not pay my mortgage?

A: Mostly no. Bankruptcy does not relieve your obligation to pay your mortgage. In some cases we can eliminate a second mortgage in a Chapter 13 proceeding.

Q: Can you stop foreclosure proceeding with a bankruptcy?

A: Once you file a bankruptcy petition, all foreclosure proceedings must immediately stop.  However, your creditor has the right to ask the court’s permission to resume the foreclosure. In a Chapter 7, if you do not make payment arrangements with your lender the bankruptcy will only delay the foreclosure but not stop it permanently.  In a Chapter 13 plan you can use your Chapter 13 plan to make past due mortgage payments, in which event you can stop the foreclosure altogether.

Q: Will bankruptcy ruin my credit?

A: If you are far behind on your payments to creditors, then your credit rating is already impaired. Bankruptcy will not make it any worse. In fact, filing for bankruptcy can be viewed as the first step in repairing your credit. Once you complete your bankruptcy, if you pay your bills on time, you can restore your credit in a reasonably short period of time.

Q: Tell me more about eliminating a second mortgage.

A: In the last few years, home values in Massachusetts have dropped.  Many homeowners now find themselves in the unfortunate position of owing more money on their mortgages than what their house is worth. In cases where the house is worth less than what you owe on the first mortgage and you also have a second mortgage, we can eliminate the second mortgage in a Chapter 13 proceeding.

If you have any urgent questions or comments, please call us at 781-341-6375 or contact us.

Do’s and Don’ts for People in Debt

If you find yourself with more debt than you can pay you are looking for a way out. You are faced with some very difficult choices. Unfortunately many people make choices that only make their situations worse.

The first thing you must do is take a cold hard look at your situation. Write down all of your debts on a piece of paper along with the minimum monthly payments. Then write down your income. Can you make the payments with enough money left over for food, insurance, gasoline, etc.? There is no substitute for writing it all down. Until you do that you will never figure out the best solution

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