Bankruptcy

        Bankruptcy is a constitutional right that pre-dates the Bill of Rights. It was a reaction by our Founding Fathers to the British concept of debtor's prison, which they sought to avoid.  The policy behind Bankruptcy is that of a Fresh Start for the debtor who cannot pay his bills.
        In a standard 'liquidation' bankruptcy or Chapter 7 bankruptcy (which is the most common), the Debtor files a Petition with the Bankruptcy Court which states that he or she cannot pay their debts as they become due. An Automatic Stay automatically issues preventing creditors from contacting the debtor or taking any legal action to collect the debt. The Stay stops any ongoing litigation, repossession, or mortgage foreclosure. The Court appoints a Trustee to represent the interests of the unsecured creditors. The trustee's job is to marshal the non-exempt assets of the debtor, liquidate them, and distribute them on a pro rata basis to the unsecured creditors. The Debtor's attorney's job (i.e., my job) is to evaluate the debtor's financial situation, advise him or her as to the best Chapter of bankruptcy to file under, and advise the Debtor as to how best to arrange his finances and claim exemptions so as to minimize the assets claimed by the Trustee for the benefit of creditors. In addition to that, we prepare the forms, arrange the (electronic) filing of the forms, and represent the Debtor at the Creditor's meeting and any related Court proceedings, as well as deal with ancillary legal issues that occur.
      Through proper planning, the Debtor can often exempt most or all of his or her assets. The key is choosing the right exemptions - State or Federal - and advising the client how to maximize them. State exemptions in Massachusetts include the Homestead exemption, which permits a homeowner to exempt up to $500,000.00 in equity in their home. If the Debtor does not have substantial equity in their home, they may be better off using Federal exemptions. For a look at some of the more oft-claimed federal exemptions, click here!
        The law and procedure regarding Bankruptcy is very complicated, and legal advice should always be sought before filing bankruptcy. Numerous changes in exemptions, rights, and eligibility to file Chapter 7 took place when the new Bankruptcy Act went into effect October 17, 2005 (see 'Bankruptcy Alert' page). Congress has expressed, through legislative fiat, a preference for middle and upper income debtors to file Chapter 13 bankruptcies only. The new rules and procedures are very complicated. Questions as to eligibility for bankruptcy, and the correct choice of which Chapter to file under are paramount. 
    One additional practical limitation in a layman representing himself is that the Bankruptcy Courts in Massachusetts have switched over to electronic filings only, and no longer accept paper filings (they do allow paper filings to be scanned by hand into their computer). Law firms which handle bankruptcy filings on a regular basis must use specialized software, and comply with new filing and other requirements to continue practicing in that area.