Bankruptcy Frequently Asked Questions (FAQ’s)

1. What is the “means test”?

Individuals who file under chapters 7 or chapter 13 must complete an income-based “means test.” The means test, does not apply to debtors who earn below the median family income for the state in which they reside.  Currently the current yearly median income values for Massachusetts are:

This test calculates the difference between the current monthly income of an individual and his/her allowed expenses (not actual). The means test is intended to determine whether a debtor has the “means” or ability to repay some of his or her non-priority unsecured debts (like credit cards) and would need to file a Chapter 13 instead of a Chapter 7.  This test is also used in a Chapter 13 to help determine plan payments.

2. Who is the Trustee?

The trustee is a federal employee appointed by the court to monitor your case and make sure you are eligible for bankruptcy. The trustee will review your petition, make sure that it is complete, and then schedule a meeting of your creditors. In a chapter 13 case the trustee will also take your payments and make the distributions to your creditors.

3. What if I don’t have all the documents but need to file NOW due to foreclosure?

We can file what is known as a “skeleton filing.”  This is where we file only basic information in order to gain the protection of the automatic stay.  The remaining documents must be filed with the court within 15 days or the court will dismiss your case. If your case is dismissed, it can impact the automatic stay provisions in any future filings.

4. What does the “automatic stay” mean?

Filing for bankruptcy under either chapter immediately stops any action by any creditor against you or your property.  If you file for Chapter 13 bankruptcy, this also extends to anyone else who is obligated to repay your debts, like a co-signer.  The automatic stay applies only to debts that are incurred before the
date your Bankruptcy was filed. The automatic stay gives you protection from your creditors during the bankruptcy case. In order for a creditor to continue to take action against you, that creditor must obtain court approval first.

The automatic stay can stop:

1.   Utility disconnections
2.   Foreclosure
3.   Eviction (unless there is a judgment of possession against you)
4.   Wage garnishments
5.   Lawsuits

The automatic stay has no effect on:

 

1. If you had two or more prior bankruptcy cases pending in the last year which was dismissed then the automatic stay does not take effect at all unless you or your lawyer gets a court order allowing the automatic stay
2. Child support.
3. Criminal matters.
4. Debts incurred after filing.

5. How long will my repayment plan in a chapter 13 be?

As a general rule, if your average monthly income for the six months prior to your bankruptcy filing was more than the median income for your state (see means test above), your repayment plan will be for five years.  If your average income is less, then your plan can be three years. However, the repayment plan can be extended to the five years if needed to pay the arrearages.  If you pay off all of your debts in full before the end of the repayment plan, your repayment plan will end at that point.

6. I Filed bankruptcy before, Can I file again?

The date of filing of the new and old cases are the key dates, not when those cases were discharged.

The rule is that if you want to get a discharge in a second case, you must file…

A new Chapter 7 case – more than 8 years from the date of filing of a previous Chapter 7 case, or more
than 6 years from the date of filing of a previous Chapter 13 case;

and

A new Chapter 13 case – more than 2 years from the date of filing of a previous Chapter 13 case, or more than 4 years from the date of filing of a previous Chapter 7 case.

Even if the time between filings is shorter, you can still file a new case, but will not be granted a discharge.  There are times when this can make sense.

7. Can I keep my credit cards?

All credit cards must be listed on your petition.  Whether you keep your credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card they will cancel the card unless you reaffirm the debt. Even if you have a zero balance the credit card company might cancel the card.

8. Will I ever get credit again?

YES!!  Actually, your credit score usually improves after you file because the late and missed payments are not accumulating on your credit report.  You’ll be surprised to find that you will get offered credit cards not long after your bankruptcy discharge.

You will pay higher interest rates and maybe even need to provide security (ie: your own cash which you’ll be charging against) in order to get a card.  Banks are willing to offer credit because after a bankruptcy you are a lower risk to creditors since you cannot file bankruptcy again right away.

A Bankruptcy filing stays on your credit report for 10 years.  However, it becomes less significant the further in the past the bankruptcy is.  What will matter is what types of credit you have and paying your bills on time.

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