Questions And Answers About Bankruptcy
or BANKRUPTCY FAQ IN ORANGE COUNTY AND RIVERSIDE COUNTY, CALIFORNIA
1. Why file for Bankruptcy ? The simple answer is to have certain debts discharge completely or to enter into a payment plan to pay all or some of these debts. The debtor may be able to protect property from collection by unsecured creditors; may be able to eliminate liens on property secured by debt or may be able to simply get some breathing room to halt such actions as repossessions, garnishments, attachments, utility shutoffs, foreclosures or evictions.
2. What Happens After I File Bankruptcy ? When you file Bankruptcy all of your creditors must stop their collection efforts against you. They can no longer call you at home or work, foreclose on your home or repossess your automobile during the pendency of the bankruptcy.
3. How Often Can I File Bankruptcy ? The answer depends on the type or Chapter of Bankruptcy a person chooses to file. For a Chapter 7 Bankruptcy, you must wait 8 years after the last filing of a Chapter 7 Bankruptcy in order to get a discharge. For a Chapter 13, a debtor cannot get a discharge if he or she received one in a Chapter 7 case within 4 years or 2 years in a Chapter 13 case. This is further complicated as there are reasons to file a Chapter 13 case and not need a discharge. You should check with a Bankruptcy Attorney regarding your individual situation.
4. Does Every Debt Get Discharged ? Most debts are discharged (no longer owed), but some debts including 1) debts arising from fraud; 2) certain tax debts; 3) educational loans; 4) debts owed as a result of injury or death while drunk driving; and 5) spousal support and child support. A debtor may have all of the debts denied a discharge if the debtor is not honest and cooperative in the bankruptcy process. A creditor that has a secured lien on property may foreclose on that lien even after a discharge. But some liens may be removed in the bankruptcy process if the debtor makes a motion to the Court for that relief.
5. How Do I Know If I Am Eligible To File Bankruptcy ? Almost everyone is eligible to file Bankruptcy. Each Chapter has its own eligibility standards. For Chapter 7, this is an income test based on the number of people in your household. This is called the means test. The numbers are also different depending on whether you live in Orange County or Riverside County. For a Chapter 13 bankruptcy, it depends on your level of debt — both secured and unsecured. There are also time limits between certain chapters of the bankruptcy code in which you must wait until you can file again.
6. Will I lose All of My Property When I File Bankruptcy ? You can retain any property that can be exempt under the law. In Orange County and Riverside County, that usually includes the home, furniture, clothes, household goods, pensions, profit sharing, IRA’s retirement plans, 401k’s and other family keepsakes. You can usually file bankruptcy and keep all of this property.
7. Can Creditors Take My Wages ? Prior to the filing of a bankruptcy, a creditor can take up to twenty-five (25%) percent of your take home pay. After the filing of a bankruptcy, the wage assessment will be stopped in all but a few cases and the creditor collecting will probably no longer have a claim against the debtor.
8. Can I Keep a Credit Card Out Of Bankruptcy ? A debtor must list all of his debts in which he or she owes even a small amount to the creditor. If there is zero owed on the credit card then it may be possible to retain the credit card through the bankruptcy process. However, the most likely result is the credit card will be cancelled anyway despite the zero balance.
9. Can I Lose My Job by Filing Bankruptcy ? An Employer is not allowed to fire someone or to take any disciplinary action against you solely because you file bankruptcy. In almost all cases, the employer will not even know you filed bankruptcy.
10. How Does Bankruptcy Affect my Credit? A bankruptcy filing will stay on your credit rating for ten years. However, if you are considering bankruptcy, your credit rating is already probably has been hurt. Bankruptcy allows you to get a fresh start and rebuild your credit. Within the first year of a Chapter 7 bankruptcy, it will be difficult to get credit that is not secured. Even secured credit will probably be at a high rate of interest. After two to three years of making all of your payments, most people recover most, if not all, of their credit ratings.
11. Where Do I File Bankruptcy ? In Orange County, the United States Bankruptcy Court is located at the Ronald Reagan Federal Building and United States Courthouse, 411 West Fourth Street, Santa Ana, CA 92701. In Riverside County the United States Bankruptcy Court is located at 3420 Twelfth Street, Riverside, CA 92501.
12. What do the Different Chapter Numbers of the Bankruptcy Code Mean? The common chapters of the Bankruptcy Code are: CHAPTER 7 – Chapter 7 refers to a “liquidation” bankruptcy and can be used by an individual to obtain a discharge of many debts, (credit cards and medical bills as a example) without making payments in the future. CHAPTER 11 – Chapter 11 is often called the “reorganization chapter,” it allows a corporation, partnership, or individual to reorganize property and debts without liquidating all assets. The basic goal is for a debtor to retain control of property and present a “Plan of Reorganization” for repaying creditors. If the creditors accept the Plan of Reorganization, and the court approves the plan, a debtor is able to reorganize personal, financial, or business affairs. CHAPTER 13 – Chapter 13 refers to reorganization of debts by an individual who has regular income and debts that are below certain statutory limits. A Chapter 13 debtor proposes a “Chapter 13 Plan” which proposes a repayment schedule. It may also be used to pay taxes, child support, mortgage arrears and protect assets that would be liquidated in a Chapter 7.
13. How Long Does the Bankruptcy Process Take? In a Chapter 7, the process takes about 4 and one half months. In a Chapter 13, the process to get approved generally takes a couple months, but the entire process can be three or five years depending on your situation. In a Chapter 11, the approval process and the length of the plan depend entirely on the individual situation of each debtor.
14. When I File Bankruptcy, Do I have to Go to Court? Yes. You have to attend a Meeting of Creditors or 341(a) hearing. This hearing is usually just with the trustee or U.S. Trustee’s Office depending on the Chapter. It usually takes less than an hour.
15. Can I Use Bankruptcy To Stop Foreclosure of My House? Yes. Under a Chapter 13 the mortgage arrears can be paid back to the bank at no interest over five years and you can retain ownership of your home. A Chapter 7 bankruptcy will likely delay the foreclosure process during the time the bankruptcy is pending. For a more detailed discussion, see Avoiding Home Foreclosure under the Practice Areas in this web site.
16. Can I Resolve My Back Taxes In Bankruptcy? All collection efforts by the taxing authorities are stopped upon filing bankruptcy. However, when the bankruptcy process resumes, the taxing authorities may resume collection on the remaining taxes owed. In many cases, taxes which are owed for tax years more than three years before filing are discharged and no longer owed. Penalties may also be discharged.
17. Can I Eliminate Student Loans In Bankruptcy? Student loans can be discharged, but only if you can show repaying the debt would cause you an “undue hardship”. Frankly, the Courts have interpreted this to make it almost impossible to get rid of student loans. You must show a complete inability to pay the loans now, and, that it is not likely that you will be able to pay the loans at any time in the future.
18. How Much Does it Cost To File Bankruptcy? The cost of filing bankruptcy depends on which chapter you file under. The Bankruptcy Court charges different filing fees depending on the chapter you file. At the Law Office of Christopher P. Walker, P.C., we are pleased to provide you with a free consultation where we will quote you a price to represent you in your case. A filing under Chapter 7 or Chapter 13 will be a flat rate price.