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BANKRUPTCY FREQUENTLY ASKED QUESTIONS

WHAT TYPES OF BANKRUPTCY ARE AVAILABLE?  There are four basic types of bankruptcy available to individuals:

1.  Chapter 7  liquidates (or discharges) most unsecured debts for individuals or businesses.

2.  Chapter 13 – develops a payment plan, which requires approval of the bankruptcy trustee, for individuals with a regular source of income in order to repay much of their debt.

3.  Chapter 12 – a payment plan for family farmers and fishermen.

4.  Chapter 11 – a more complex rehabilitation plan used mostly by business debtors, but sometimes by individuals with substantial assets and/or debts.

HOW DO I DECIDE WHICH CHAPTER IS BEST FOR ME?  After meeting with one of our attorneys, who will review all of your assets, income, liabilities, expenses and debt (both secured and unsecured), you will be advised of our recommendation for your specific case.  Most individuals and small businesses are best suited to either Chapter 7 or Chapter 13.

WHAT IF I FILED BANKRUPTCY BEFORE?  There are specific time limitations between bankruptcies.  These depend on the chapter that was previously filed and the chapter that will be filed this time.  Your attorney can advise you which might apply to your situation. 

WILL THE COLLECTION CALLS STOP AFTER I GET AN ATTORNEY?  After the bankruptcy is filed, most creditors must stop efforts to collect debts.  This ‘automatic stay’ can give you some relief from persistent bill collectors.  However, creditors who have a loan secured by either real property (such as a home) or car, may ask the court to remove the automatic stay.  Once you have retained our office, you can advise any creditors of our representation and they will call our office rather than you for information about your case.  If a creditor violates this automatic stay, they may be fined by the Bankruptcy Court.  If a creditor continues to call after being notified of our representation, or after the petition is file, you should provide our office with the name and contact information.

WHERE IS BANKRUPTCY FILED?  Bankruptcy is based on federal laws, although the individual states can modify or ‘opt out’ of certain provisions.  Bankruptcies are filed with the federal District Court for your geographical area.  There are specific Bankruptcy Courts to handle these cases. 

WHO WILL REVIEW MY CASE AT THE COURT?  Every case is assigned a Trustee, who is responsible for reviewing all of your financial information to see if repayment is a possibility or whether there is any property which can be sold to recover some of the funds for the creditors.  The Trustee will hold a creditor’s meeting, also called a 341 hearing (named after a Bankruptcy Code section), in which a creditor can appear to request that a debt not be discharged.  The Trustee can take this request into consideration.  A few weeks after the 341 hearing, you will be advised if your debts are discharged.  If additional situations arise, then the case is heard before a federal judge in the Bankruptcy Court.

HOW DO I KNOW IF I AM ELIGIBLE TO FILE FOR BANKRUPTCY?  If you are an individual with mostly consumer debts (and some business debts), then a ‘means test’ is applied to your situation.  This compares your income to the median income for the state, and checks to see if you will have money left over after you have paid your monthly expenses. If your personal income is close to or above the median income, then your expenses will further refine the means test to see if you are eligible for bankruptcy and which chapter is appropriate.  If it is determined that you have a regular income (from a job or other source), and that your debts do not exceed the statutory limits, and that you have some excess income each month to repay creditors, then you may qualify for a Chapter 13.

ARE ALL DEBTS DISCHARGED?  If a debt is discharged, the creditor must stop trying to collect the debt and you are no longer required to repay the debt.  Some debts are not discharged, such as those secured by property (real estate, vehicles, jewelry or similar items).  In those cases, the creditor can repossess or foreclose on that property.  Also, only those debtors listed in your bankruptcy petition can be considered for discharge; if you haven’t listed a debt, then it can’t be discharged and the obligation to repay still exists.  Other debts which are not discharged are those obtained after the bankruptcy filing date, certain taxes, alimony, child support, some fines and court imposed debts, most student loans and some condo fees.  Our attorneys will help you determine which debts are likely to be discharged by the trustee in your case.

HOW MUCH DOES IT COST TO FILE BANKRUPTCY?  The current filing fee for a Chapter 7 is $299 and for a Chapter 13 is $274.  There may additional court administrative fees in some cases.  The court may waive the filing fee if your income is below certain levels.  Additionally, you will be required to attend (usually by phone or online) a credit counseling session from an approved agency prior to your 341 hearing and an additional session after the hearing.  These usually cost between $35 and $50 each, although some free services are available.  We can provide you with the names of reliable agencies.  The attorney’s fees vary according to the circumstances of your case, which chapter you eligible for, what property you own, and if any problems are encountered along the way.  When you meet with our attorneys, you will be advised of our costs, which is usually a fixed fee that covers gathering the information, preparing and filing the petition, fielding calls from your creditors, and representation at the 341 hearing.  A Chapter 13 is more expensive than a Chapter 7 because a repayment plan must be developed for approval by the Trustee. 

WHAT DOCUMENTS ARE NEEDED TO FILE BANKRUPTCY?  The new bankruptcy laws require a thorough examination of your assets and liabilities and a lot of paperwork.  In order for us to better help you at the initial consultation, we may ask that you bring some documents with you or provide them shortly thereafter.  These include copies of all your bills (credit cards, house payment, vehicle payments, personal loans, etc.), collection letters, lawsuit documents, the last three pay stubs for you (and your spouse if filing jointly), deeds to any real estate that you own (even if you own it with another person), titles to cars or other vehicles that you own (or own with another), any appraisals that you received for any property, any life insurance policy that has cash value, any investment accounts, copies of bank statements and credit reports, and two years of tax returns.  Depending on the circumstances in your case, we may request additional documents prior to the filing of your petition.  Also, the Trustee may request certain documents to support the items listed in the petition.

WHAT ITEMS OR PROPERTY WILL I BE ABLE TO KEEP?  The federal law, and state exemptions, allow you to keep certain assets and to exempt some equity in other assets.  In California , there are basically two sets of exemptions which are used, depending on your personal circumstances.  Additionally, you can reaffirm a debt by agreeing to repay the creditor for certain items (or voluntarily repaying certain debts such as those to family members or friends).  If the creditor has a secured debt (real property, vehicle, etc.), then the lien is usually honored and you must continue to pay those debts or face the possibility of losing the property.  You will likely be able to keep most household items, clothes, a car of limited value, and “tools of the trade” for a business.  Our attorneys will review the exemptions with you. 

WHAT IF MY PROPERTY IS THREATENED WITH FORECLOSURE, SALE OR REPOSSESSION?  The automatic stay discussed above stops all collection efforts including foreclosure, repossession, or sale of a property; however, the creditor for a secured debt has the right to request that the automatic stay be lifted, especially if you are not current on your payments.  The automatic stay does not stop some collections, such as for alimony or child support or taxes, among others.  Also, once the bankruptcy case is closed, the automatic stay ends and the secured creditor can proceed with the foreclosure, sale or repossession if you are not current on payments.

WILL I BE ABLE TO GET CREDIT AFTER FILING FOR BANKRUPTCY?  Any creditor may consider the bankruptcy as one of their factors in extending credit.  It is up to the individual lender to make this decision.  It is important to consider your circumstances carefully before beginning to incur debt again.  Remember that you cannot file for bankruptcy protection again for a certain number of years, so you will be liable for any new debt incurred.  One option is to use a credit card which draws against funds already deposited with a lending institution, then use the card wisely.  The lenders can take your new spending habits into consideration.

OUR OFFICE LOOKS FORWARD TO ASSISTING YOU AS YOU MAKE THESE IMPORTANT DECISIONS, PLEASE CONTACT US VIA EMAIL, OR BY PHONE.

We are a federally designated Debt Relief Agency.  We help people file for bankruptcy under the Bankruptcy Code.

 

 

 

 

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