Most common questions

Answers:

General

Can a bankruptcy filing help me "clean up" my credit report?

After you obtain a bankruptcy discharge, creditors are required to report your debts as discharged in bankruptcy. While the bankruptcy will be on your credit report and the debts might still be listed, those potentially offering you credit will also see that you no longer have the substantial debt burden that you had before the bankruptcy filing. There is no guarantee that you would be more likely to obtain credit after filing bankruptcy. A bankruptcy will almost certainly negatively affect your credit in the short term. However, there are ways you can rebuild your credit that we can counsel you on.

Can bankruptcy stop my creditors from constantly calling me?

Yes, for the most part. As soon as you file a bankruptcy petition, Section 362 of the United States Bankruptcy Code prohibits creditors from taking most actions to collect a pre-petition debt. This is called the Automatic Stay, and prohibits most calls from creditors. If you hire my office, I will allow you to give the creditor my office phone number, and you can then instruct creditors that you are represented and they need to call your attorney.

Do I need an attorney to file bankruptcy?

There is no legal requirement that individuals must have an attorney file a bankruptcy petition. However, the bankruptcy law can be complicated and a bankruptcy attorney can help walk you through the process faster and with less problems. There are two main benefits to hiring a bankruptcy attorney: (1) maximizing the benefits of bankruptcy and (2) avoiding serious mistakes. Bankruptcy has many obscure provisions that could be quite beneficial to you and unless you hire a competent bankruptcy attorney, you may miss the benefit of these provisions altogether. For example, bankruptcy allows you to avoid judgment liens in some situations. A bankruptcy attorney can also help you avoid serious mistakes.

Types of Bankruptcy

What are the different types of bankruptcy?

There are five different types of bankruptcy. They are identified by the chapter in the bankruptcy code that discusses them. They are as follows: (1) Chapter 7 (liquidation); (2) Chapter 9 (for municipalities); (3) Chapter 11 (Reorganization); (4) Chapter 12 (Re-Payment Plan for Family Farmers); and (5) Chapter 13 (Re-Payment Plan for Those With Regular Income). Chapters 7 and 13 are most frequently used in by consumer debtors. Chapter 11 is primarily used by corporations or individuals with large assets and liabilities. Chapter 9 is rarely used. Chapter 12 is similar to Chapter 13, except that it has special provisions for family farmers. Chapters 7 and 13 are discussed in more detail below.

What type of bankruptcy should I file?

Each type of bankruptcy has its own advantages and disadvantages, and a thorough discussion of each is beyond the scope of this website. While bankruptcy can provide effective debt relief, bankruptcy law contains many traps for the unwary. A competent bankruptcy attorney can help you avoid these traps. You should consult a bankruptcy attorney before deciding whether to file bankruptcy and what type of bankruptcy is right for you.

Chapter 7 Bankruptcy

What is a Chapter 7 bankruptcy?

Chapter 7 is also known as liquidation bankruptcy, because the basic idea of Chapter 7 is that the debtor exempts those assets he can and turns all of his other assets over to the Trustee to be liquidated and paid to creditors. In most cases, the debtor is able to exempt all of his assets. This is called a "no-asset" bankruptcy case.
You may be asking, "what are exemptions?" or "how do I know what is exempt?" Exemptions are provided by California state law and they provide that a debtor can keep certain amounts of several different types of property. There are two different exemption schemes in California and the rules regarding exemptions can be complex. Even if you do not have all of your property in an exempt form now, a bankruptcy attorney can advise you how to (if it is possible) put that property into exempt form so that it would not be lost in a Chapter 7 bankruptcy filing.

What is the timeline for a typical Chapter 7 bankruptcy case?

Once you file the Chapter 7 petition, a Chapter 7 Trustee is appointed and a date is set for the meeting of creditors. The meeting of creditors is usually about 30 days after the petition is filed. Unless a complaint to deny the discharge has been filed, the discharge is usually entered about 90-120 days after the Chapter 7 petition is filed. This is the timeline for a typical no-asset bankruptcy case.

Chapter 13 Bankruptcy

My house is in foreclosure. Can a Chapter 13 bankruptcy filing help save my house?

Possibly. If your house is in foreclosure, that probably means you have a substantial arrearage on the mortgage. Most debtors are unable to pay an accrued arrearage immediately (unless the property can be refinanced) and mortgage holders are reticent to cancel foreclosure proceedings unless the entire arrearage has been paid. Thus, unless something is done, the debtor is often in a situation where the house will be foreclosed upon. Chapter 13 allows the debtor to stop the foreclosure (it cannot proceed because of the automatic stay) and pay the arrearage over time.

What are the benefits of filing a Chapter 13 bankruptcy?

There are many benefits to filing a Chapter 13 bankruptcy, as opposed to a Chapter 7 bankruptcy. These are only some of the benefits of Chapter 13 when compared to Chapter 7.
      "Super-Discharge." The discharge in Chapter 13 cases is broader than the Chapter 7 discharge. For example, the Chapter 13 discharge includes debts related to violation of federal securities law, many fines or penalties owed to governmental units, and obtaining credit by submitting inaccurate information to the creditor, none of which would be dischargeable in a Chapter 7 case.
      Avoid Foreclosure. Chapter 13 allows debtors who have an arrearage on a mortgage to pay off the arrearage through a Chapter 13 Plan. As long as the plan is confirmed and all payments are made, the mortgage holder cannot foreclose on the property. In Chapter 7, the secured creditor will almost always be granted relief from stay to foreclose on the property.
      Lien-Stripping. Where the amount of a secured debt is more than the value of the property it secures (i.e., it is undersecured), the debt is bifurcated and that part of it that is over the value of the property is treated as unsecured debt. Unsecured debt and secured debt are treated differently in Chapter 13 cases. Secured debts must be paid in full (with interest), but unsecured debt does not have to be paid in full. Thus, for most undersecured debts, the debtor may be able to pay substantially less than he would have had to otherwise.
      Debtor Keeps All Property. In a Chapter 13 case, the debtor is allowed to keep all property, including non-exempt property. This is especially important for some people whose primary source of income is rental property.

What is a Chapter 13 bankruptcy?

"Chapter 13" refers to Chapter 13 of the United States Bankruptcy Code (Title 11). In Chapter 13 cases, the debtor proposes a plan to pay back at least some of the debts that are owed. Chapter 13 is often used when Chapter 7 is unavailable for some reason, e.g., if the debtor's income is too high to qualify for a Chapter 7. Chapter 13 also has many benefits over Chapter 7 as described in more detail below. In a Chapter 13, the debtor keeps all of his property, but pays a set amount each month to the Trustee pursuant to a Chapter 13 Plan the debtor proposes. Chapter 13 Plans usually last 3 to 5 years. After all of the Plan payments have been made, the debtor receives a discharge of even more debts than would be discharged in a Chapter 13 (see below for more information). Chapter 13 is more complicated than Chapter 7 and care should be taken in deciding whether to file Chapter 13.

What is the timeline for a Chapter 13 bankruptcy case?

The timeline for a Chapter 13 case is different for every case and depends upon the Plan proposed by the debtor and the jurisdiction in which the case is filed. Most plans are required to last 3 years, but Chapter 13 plans may not run longer than 5 years. The meeting of creditors usually takes place within 30-60 days after the petition is filed. The time from the filing of the petition to plan confirmation for an uncontested case can take anywhere from 25 days to 270 days depending on the jurisdiction. The average is approximately 90 days.

Disclaimer: We are a debt relief agency as designated by federal law. We help people file for bankruptcy protection under the United States Bankruptcy Code. This website may be considered an attorney advertisement under the California Rules of Professional Conduct. This web site contains general information only. The information presented on this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship, nor should the information be relied upon as such.