Feeling that you have lost control of your finances can be a scary and overwhelming concept. Many individuals find themselves feeling trapped and confused, uncertain as to the best course of action or next move forward.

If you have found yourself in this situation, bankruptcy can be the answer to your prayers. This can offer an opportunity to wipe the financial slate clean, have your debts cleared away, and start again with a new record. Individuals typically find themselves with two main options: Chapter 7 or Chapter 13 bankruptcy.

What Are the Types of Bankruptcy Available?

Massachusetts recognizes two primary forms of bankruptcy: Chapter 7 and Chapter 13. The former is often the preferred option for those with large amounts of debt, as it essentially offers the chance for everything to be wiped out. On the flip side, you will need to sell or liquidate most of your assets and use the results to pay your creditors.

Chapter 13 is known as ‘reorganization.’ It offers the individual a chance to set up a payment plan – usually around 3 to 5 years – after which any remaining debt is cancelled. Unlike Chapter 7, those filing can keep most of their assets.

What Happens If I Change My Mind?

Bankruptcy can seem like an intimidating concept, and it is only natural to get nervous. While Chapter 13 filings offer you some breathing space, you need to be totally sure before you file for Chapter 7 bankruptcy – there is no backing out.

Once you have filed for Chapter 7, you have no legal right to dismiss the ruling voluntarily. Your claim will only be considered if one of the following applies:

  • You own nonexempt assets
  • Your dismissal will not prejudice your creditors
  • You have valid reasons
  • The policies and procedures in your jurisdiction permit a dismissal

You must be deemed to have ‘good cause’ to dismiss your case; it is not enough to suddenly realize that you will lose the property you had planned on keeping.

Will Your Dismissal Impact Your Creditors?

If your dismissal adversely impacts your creditors, you will not be permitted to proceed. As soon as you file, your assets automatically become the property of the bankruptcy estate and will be placed under the control of the appointed bankruptcy trustee. All non-exempt property will be sold to pay creditors. As long as the nonexempt property is present, a dismissal will negatively affect your creditors – they will not get the money that would be released in selling this property. In short, they will not be paid. This means that you will not be permitted to dismiss the filing unless you can show an alternate way to pay your creditors.

If you can provide proof that you can pay your creditors outside of bankruptcy, you may be permitted to dismiss the filing. Otherwise, the court will likely deny your claim.

What Happens If I Am Refused a Dismissal?

There are options available if you are denied your dismissal. You may have the opportunity to convert your case to a Chapter 13 bankruptcy as an alternative; this will usually be granted if you can show that you have a regular income and can afford the payment plan proposed. This allows you to keep assets and pay back a portion of the debt.