Here are some questions and answers that we frequently hear about filing bankruptcy in Massachusetts.

• Can bankruptcy help me discharge my tax debts?
• I have a civil judgment against me, can bankruptcy protect me from paying?
• The IRS has levied my bank accounts, can a bankruptcy filing stop them from taking my money?
• A creditor put a lien on my house, can bankruptcy help get rid of it?
• Will I lose my house if I file bankruptcy?
• Will a bankruptcy stop a creditor from garnishing my wages?
• Will filing bankruptcy stop bill collectors from calling me?
• Will filing bankruptcy affect my job?
• Will filing bankruptcy destroy my credit forever?
• If I file bankruptcy, will my friends and coworkers find out?
• Should I file for bankruptcy?

Can bankruptcy help me discharge my tax debts?

In some cases you may be able to discharge tax debts in a chapter 7 case. The tax return must have been last due more than 3 years before the bankruptcy case is filed, and the return must have been actually filed more than 2 years before the case is filed. Additionally, you must not be found to have willfully tried to evade the tax, or filed a fraudulent return.Even in situations where you can’t discharge your tax debts in Chapter 7, a bankruptcy can still be helpful in dealing with them. In a Chapter 13 case, you can pay non-dischargeable tax debts through a payment plan over 3-5 years. There are several benefits to doing this compared to working out a payment plan directly with the taxing authority. First, you have the protections granted by the automatic stay provisions of the Bankruptcy Code. This means that the IRS or Mass. Department of Revenue can’t levy wages, intercept tax refunds or attach your bank account while you are in bankruptcy. Second, once you file bankruptcy, penalties (though not interest) stop accruing on the debt, making it much easier to pay it off in less time more less money. Third, in Chapter 13, you make only one payment to the trustee each month, and the money is then distributed to creditors according to the terms of the plan. Many people who owe the IRS, owe MDOR as well as other creditors, making individual payment plans very burdensome. Chapter 13 provides an easy mechanism to resolve many debts with one easy payment plan.

I have a civil judgment against me, can bankruptcy protect me from paying?

Yes. Upon filing a bankruptcy petition, a stay of all collection is automatically put in place. This applies to all creditors’ attempts to collect debts, regardless of whether there has been a judgment entered already. Once a creditor has a judgment against you, there are several ways they can force you to pay, including levying you bank accounts, seizing assets, or garnishing wages. A bankruptcy filing puts a stop to all of these, immediately.

The IRS has levied my bank accounts, can a bankruptcy filing stop them from taking my money?

Yes. The automatic stay imposed by the Bankruptcy Code applies to the IRS, just as it does to general creditors like American Express, or Capital One. In fact, IRS levies are a very common reason many of our clients choose to file as there is often no way to get the IRS to release a levy without making a substantial payment of the debt up front.

A creditor put a lien on my house, can bankruptcy help get rid of it?

If the lien was obtained after an execution on judgment, you are likely to be able to avoid the lien. Judicial liens can be avoided if they “impair the debtor’s exemption.” In Massachusetts, debtors can claim an exemption of up to $500,000 of the equity in their home. So, for example, if a person owns a home worth $350,000, subject to a mortgage of $200,000, a homestead exemption of $500,000 and a judgment lien of $20,000, the lien can be avoided because it impairs the debtor’s ability to claim their full homestead exemption of $500,000, even though the home isn’t even worth that much. The ability to avoid a judgment lien is an enormous benefit of the Bankruptcy system.

Will I lose my house if I file bankruptcy?

Probably not. In the vast majority of cases, a homeowner’s equity is fully protected by the Massachusetts homestead exemption and your house will not be sold in the bankruptcy process. In all cases we carefully review homestead declarations, property deeds and mortgages to ensure there are no defects which might allow a bankruptcy trustee to liquidate property before filing the case. Of course, however, if you do not make the mortgage payments, the mortgage company may still foreclose on the property, either during the case with bankruptcy court approval, or after the case is over when no approval is needed.

Will a bankruptcy stop a creditor from garnishing my wages?

Yes. With the exception of a wage garnishment for the payment of child support orders, a bankruptcy filing will immediately put a stop to wage garnishments by your creditors. Once a bankruptcy case is filed, the automatic stay prohibits any attempts by your creditors to collect a debt, even if the garnishment has already been ordered in a civil suit.

Will filing bankruptcy stop bill collectors from calling me?

Yes. The automatic stay prohibits your creditors from making any attempt to collect a debt you owed prior to filing for bankruptcy. In fact, the protections of the automatic stay are so strong, that if creditors do continue to call you after you;ve filed, you may have a claim for damages against them. For this reason, we rarely see creditors contacting clients after they’ve filed their case.

Will filing bankruptcy affect my job?

No. The Bankruptcy Code is a federal law intended to give people who have had financial difficulties a fresh start in life. The government and society generally, have a strong interest in seeing people who need relief from their debts take advantage of this system. For that reason the Bankruptcy Code prohibits private employers from terminating or discriminating against their employees solely because they a filed for bankruptcy. Additionally, governmental units may not discriminate in hiring or promoting employees, or granting of any licenses, permits or charters based on the fact that an individual has filed for bankruptcy protection.

Will filing bankruptcy destroy my credit forever?

No. Although a Chapter 7 bankruptcy filing remains on your credit report for 10 years (7 years for Chapter 13) this does not mean you will be unable to obtain credit for that entire period. Many of our clients are able to get new credit cards within months, auto loans within a year and in some cases, home mortgages within a couple of years of filing bankruptcy. For many of our clients, filing for bankruptcy is the first and best step to begin rebuilding damaged credit scores. A person with several outstanding and delinquent debts will often have a harder time getting credit than a person who has recently filed bankruptcy, but has no other debt. Following your bankruptcy case, we can recommend ways to help you begin rebuilding your credit immediately.

If I file bankruptcy, will my friends and coworkers find out?

Generally not: A bankruptcy filing, like most court proceedings is a public record. If an individual wanted to know the details of your bankruptcy filing, they could go to the bankruptcy court, request your case number and look at the documents you filed. However, they would have to already know that you had filed, or have some reason to suspect that you had before they would go to the courthouse or open a paid account to access court filings. Personal bankruptcy filings are not published in any newspapers or local directories and even a Google search of your name won’t reveal that you have filed (unless you are famous or the filing is newsworthy for some reason). For most of our clients though, the only people who find out about the bankruptcy filing are their creditors, the bankruptcy court and anyone they decide to tell about it.

Should I file for bankruptcy?

If you are concerned about the amount of debt you have, or your ability to pay it back, you should consider speaking with a bankruptcy attorney and learning about your options.

Next Steps

You can give us a call at 617-338-9400 or submit this form if you want to get a free consultation and fee quote for your case.