NOTE: Labels in bold are required.
Disclaimer
The following statements should not be regarded as legal advice. Always consult a competent attorney in good standing before making decisions about legal matters.
What is bankruptcy?
Bankruptcy is a federal court process by which a person or business legally declares an inability or impairment of ability to pay its creditors and may eliminate or reduce their debts. It allows individuals to keep their homes, cars, businesses, bank accounts, or other assets as long as certain requirements are met. Also, it allows businesses to reorganize under court supervision to in order to keep operating while reducing debt significantly. The 3 main chapters of bankruptcy are 7, 11 and 13.
How long does bankruptcy stay on my credit report?
Seven years is the amount of time that all negative information such as late payments, collection and legal actions, stay on your record. Credit bureaus will report a Chapter 7 Bankruptcy for 10 years, a Chapter 13 for 7 years. However, the fact that bankruptcy stays on your record for several years does not mean that you cannot rebuild credit while it is on your record.
For example, if you need to buy or lease a new vehicle after bankruptcy, you should have no problem doing so provided that you have received a discharge from the court. The interest rate may be high in the beginning until you have reestablished your creditworthiness. After several months or a few years of consistent payments, you may be able to refinance your car loan at a lower interest rate.
Most banks require that your bankruptcy be at least 2-3 years old when it comes to buying a home. Most people in debt, we have come to find, cannot even save the money for a down payment to be able to buy a home. Saving money to achieve their dream of home ownership becomes possible by, first, getting out of debt.
Will I ever have credit again?
Eventually, once your debt has been discharged, your debt-to-income ratio will improve, substantially. Banks, credit card companies and other lending institutions will then consider you a better risk. If you monitor your credit reports after the bankruptcy, you will soon be able to reestablish credit.
Is it still possible to discharge credit cards with the new bankruptcy laws?
YES! President Bush signed a bill which significantly changed the bankruptcy law which went into effect on October 17, 2005. Although the bankruptcy law was changed, it did not eliminate Chapter 7 nor did it make credit card debt not dischargeable.
When will creditors and bill collectors stop calling me?
As soon as you become our client, all calls from creditors will be directed to us. Once you file either Chapter 7 or Chapter 13, something called the "automatic stay" goes into effect. The automatic stay prohibits all creditors from taking any action to collect unless the Bankruptcy Court gives them permission to do so.
Will I lose my house, car or other assets?
The kind and amount of assets an individual can keep through bankruptcy varies from state to state depending on their exemption laws. In California, the exemption laws generally allow you to keep a home, car, and personal belongings. The most commonly used exemption is the "homestead exemption." This is not something you need to have filed prior to filing bankruptcy, but which you can claim through the bankruptcy process. For singles the amount is $50,000, married couples or head of households it is $75,000 and $150,000 for those 65 or older. The homestead exemption is only necessary to keep property that has equity. Equity is the amount you have after you subtract all mortgages and secured loans against the house FROM the current market value of the house. Thus, it is possible to keep multiple homes, even businesses if these "assets" have no equity. You can still lose your house through foreclosure if you do NOT make the mortgage and home equity line of credit payments regardless of whether you file bankruptcy or not.
You will not lose any assets or property in Chapter 13. In Chapter 7, most property and other assets are exempt, including your home. However, it may still make sense to file Chapter 7 if the benefit of a Bankruptcy discharge outweighs the risk of losing certain assets. Bear in mind that most Chapter 7 cases are "no asset" cases. That is, they involve either no assets at all or those which are so insignificant in value to the trustee that they are not worth administering. Therefore, usually, you lose nothing by filing for Chapter 7 but your debts.
Before filing for Chapter 7, we explain to you what exemptions you are entitled to claim. In most of our cases, our clients keep everything they own including their house, cars, bank accounts, retirement accounts and life insurance policies. How the exemptions work will be thoroughly explained to you when you come in for your free consultation. In certain cases, non-exempt assets may be turned into exempt assets as allowed by law prior to filing. This is called "pre-petition planning." If necessary, we may delay the filing of your case while helping you plan your financial affairs so that you receive the most benefit allowed by law when case is filed
Can I Keep My Paychecks and Earnings?
Yes. Any garnishment of your check due to a judgment by a creditor must stop immediately after the bankruptcy has been filed. Also, money collected by the Sheriff Department but not yet sent must be returned.
Can I keep my retirement accounts and life insurance policies?
Yes, generally speaking. Usually, you can exempt retirement accounts and life insurance policies with cash value. You can keep the life insurance policies, without cash value since they are not assets, as long as you make premium payments.
Can I keep using my bank accounts?
Yes, generally speaking. Bankruptcy, itself, does not require you to close your bank accounts. If you have had no bounced checks or other banking problems that required your bank to close your account, you can continue to use them after you file bankruptcy.
Can I get rid of all my debts?
Most types of debts can be discharged. But as with most legal rules, there are exceptions. Some of the most common are recently charged credit cards, child support payments and spouse's debts where the spouse did not file bankruptcy with you. You cannot get rid of secured debts, such as mortgages and car loans unless you give up that item.
Does my spouse need to file with me?
It is not likely. In community property states such as California, however, where the debts of one spouse are also the debts of the other spouse if such debts were acquired during marriage, it may be advisable to file together to obtain a complete discharge of debts. In certain cases, however, it may not be necessary. Again, it is important for us to do a complete evaluation of your situation before we can advise you as to what we believe is best for your situation. Keep in mind, that your spouse is not legally required to file if he or she does not want to. Whatever your reasons may be, you have the right to file by yourself if you so choose.
Are my co-signers at risk due to my bankruptcy?
Co-signers can be protected in some bankruptcies. Generally, in a Chapter 13 bankruptcy, a co-signer is not at risk from collections if the following conditions are met:
- The debt must be a consumer debt
- The debt cannot be incurred in the ordinary course of business
- The co-signer cannot benefit from the proceeds of the debt, and
- The debtor complies with the Chapter 13 bankruptcy payment agreement
Again, failure to complete the requirements of your Chapter 13 repayment plan gives creditors the legal right to pursue your co-signers.
Also, if you file a Chapter 7 bankruptcy, creditors are still able to pursue co-signers and apply all the same collect efforts as they would with the debtor.
It is very important to choose a qualified bankruptcy lawyer to handle your case, especially, when third-party co-signers are involved.
Can I represent myself?
Yes, you may represent yourself. However, courts are not very tolerant of mistakes that occur due to a lack of knowledge of the law or court procedures regardless of whether you are an attorney or not. The judge, trustee and the creditors will be holding you to the same standard as they would hold an attorney. Some mistakes are irreversible and can have devastating consequences. They could lead to loss of property, certain debts not being discharged or denial of the relief you are seeking.
There is no substitute for the knowledge and experience of a professional. Under the new Bankruptcy laws (which became effective in October 2005), laws and procedures have become even more complex. When you hire an attorney, you have a knowledgeable and experienced professional by your side, working to help you obtain a successful outcome at the least cost and inconvenience to you.
How long does the bankruptcy take?
The entire process takes a minimum of four months from start to finish. It also takes time for us to prepare the case.
Do I have to go to court?
One month after your filing there is a Meeting of Creditors known as a 341a. Creditors seldom appear at these meetings since they often have little or no recourse, at this point. In most cases, the questions will be very brief and your meeting will last only a few minutes.
How often can I file bankruptcy?
You may file a Chapter 7, eight years after a prior Chapter 7 discharge and four years after the discharge of a Chapter 13. A Chapter 13 may be filed 4 years after a prior Chapter 7 discharge and 2 years after a prior Chapter 13 discharge.
Why is it legal to file bankruptcy?
The United States Congress recognized a long time ago that even well-intentioned people could run into serious financial problems, from time to time, which may prevent them from paying back their debts. Quite often, bankruptcy is caused by events such as job loss, sickness, disability or other unexpected events. In some cases, it may simply be the result of poor financial planning. Businesses sometimes fail. Regardless of the reason (unless there was dishonesty or fraud involved in getting into debt), federal law says that everyone deserves a second chance. By giving you a chance to start fresh, you become a more productive member of society. This is good for you and good for society as a whole.
Who will know that I filed?
Although bankruptcy documents are a matter of public record, no one will be notified but your creditors that you filed. Of course, if someone was to search Court records, they could get information on your case. However, only your creditors will receive a notice from the Court when your case is filed. Your employer, for example, is not notified unless your employer is also one of your creditors.
How Much Does It Cost To File For Bankruptcy?
Our fees vary from case to case but are very competitive. We will be more than happy to quote you a fee at your free initial consultation. In determining the fees to be charged, we take into account the complexity of your case and the amount of time we anticipate to spend in providing the services that you need. In Chapter 13, we may agree to include some of the attorney fees in your Chapter 13 Plan (thus significantly reducing up-front costs) and apply to the Court for payment. Once you sign a retainer agreement, you can immediately refer all creditor calls to our office even before the case is filed. In every case, we will work with you as much as possible to make debt relief affordable.
How much are the court filing fees for Chapter 7 and Chapter 13?
At present, the court filing fee for a Chapter 7 is $299 and for a Chapter 13 it is $274.
Do I Need an Attorney to File or Can I Represent Myself?
It is not mandatory that you hire an attorney to represent you in a Bankruptcy proceeding. However, remember that there is no substitute for the knowledge and experience of a professional. Under the new Bankruptcy laws (which became effective in October 2005), laws and procedures have become even more complex and confusing to many. Mistakes could be costly especially if assets are involved. They could lead to loss of property, certain debts not being discharged or denial of the relief you are seeking. Keep in mind also that even if you acted as your own attorney, the trustee, creditors and the judge would be holding you to the same standard as they would hold an attorney. Thus, ignorance of the law or court procedures will not excuse any mistakes you make. Mistakes are often irreversible and can have devastating consequences. When you hire an attorney, you have a knowledgeable and experienced professional by your side, working to help you obtain a successful outcome at the least cost and inconvenience to you.
