|
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 $338 and for a Chapter 13 is $313.
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.
|
