Bankruptcy is a process under federal law that allows debtors who owe more money than they can pay to either eliminate their debts or work out a payment plan to pay a portion (or all) of their debts over time. Once the case is filed, federal law provides that creditors must stop all collection efforts against the debtor. What chapter you choose to file under, what possessions you can keep and other details are controlled by the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.
Question:
What Is A Chapter 7 Bankruptcy?
Answer:
Bankruptcy is a legal action making your possessions (called assets) available to creditors (to whom you owe money) in exchange for eliminating your debts. The action takes place in federal court and is started by filing a petition by you (the debtor) listing all of the things you own and ALL of the debts you owe.
When your petition is filed, the court notifies all creditors within 20 days. Once notified, creditors cannot legally continue collection, foreclosure, repossession, garnishments or lawsuits against you. You are required to attend a court hearing called the first meeting of creditors. This hearing is held about five weeks after you file.
At the court hearing, a trustee, who represents all of the creditors, may question you regarding your financial affairs. The trustee may be a lawyer. No judge will be present. There is no certain amount that a person must owe to file bankruptcy. The trustee’s job is to ensure that you don’t have extra money or property that may be sold or given to creditors. You are usually able to protect most property. The final discharge in bankruptcy is usually entered between one and three months following the court hearing. Discharge means that you are no longer required to pay the bills you owe. You can, however, pay some bills and property.
Question:
What Are Some Of The Alternatives To Bankruptcy?
Answer:
If you are contemplating filing Chapter 7, you should consider some alternatives that are available. They include a debt consolidation loan, Debt counseling, and debt work-outs.
Other alternative to Chapter 7 bankruptcy include a Chapter 13 Wage Earners Plan, a Chapter 11 Debt Reorganization or a Farmers Plan under Chapter 12.
Question:
Are There Certain Debts That Are Not Discharged In Bankruptcy?
Answer:
Yes. Generally income taxes incurred in the last three tax years, fines, other taxes, and penalties of courts of law and administrative agencies are not discharged in bankruptcy. Alimony and child support obligations are not discharged in bankruptcy, but past due amounts can be included as part of a Chapter 13 Plan. Student loans are not discharged without filing a special hardship complaint. Any indebtedness obtained by fraud or deceit is not discharged. A money judgment for damages resulting from drunk driving is non dischargeable. Also, the United States Supreme Court has ruled that probation restitution owed to victims of crime is not dischargeable. Debt that is not listed in the bankruptcy petition may not be discharged. Any debt seemed not dischargeable in a former bankruptcy is not dischargeable, and eight years must elapse after filing prior Chapter 7 bankruptcy petition. A Chapter 13 can be filed sooner after a Chapter 7.
Question:
Can I Keep My Home And/Or Car After I File Bankruptcy?
Answer:
You will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt you may still be able to keep your property by filing a chapter 13 bankruptcy instead of a chapter 7 bankruptcy. In a chapter 13 plan you will be required to pay at least the equivalent of the non-exempt equity you have in your home or car and any amount you are behind on your home or car loan over the course of a three to five year plan. You also will be required to continue making the regular monthly payments.
Question:
Do You Lose All Of Your Property And Possessions If You File Bankruptcy?
Answer:
Both federal and state law determine what possessions you can keep in a bankruptcy proceeding. These are exemptions. Exemptions are amounts of property that you can keep if you own it free and clear, or you can protect part of, the property equal to your equity. California state law determines which property is exempt, following is a sample of a few of the exemptions currently allowed. Be aware that these amounts change frequently and may not apply in your situation:
- Equity in real estate used as a residence (or with mobile home)
- Tools, equipment or books of your trade
- Household furnishings and personal property
- Motor vehicle
- Jewelry
- Property of any kind (Wildcard)
- Life insurance cash value
- Pensions
The bottom line is that in most cases you do not lose everything and often may keep all your property, but the more property you own the more likely it is that you will lose some of that property.
Question:
What Is A Chapter 13 “Wage Earners Plan”?
Answer:
A “Wage Earners Plan” refers to a proceeding under Chapter 13 of the Bankruptcy Code and is also called “Adjustment of Debts of an Individual with Regular Income.” This repayment plan is now available to individuals with regular income from any source, such as wages, self-employment, investments, various benefit payments, and so forth. Under Chapter 13 you repay all or a portion of your debts under the supervision and protection of the Bankruptcy Court. Filing a plan of repayment with the court prohibits the creditors from direct collection of the debt. The creditors are forced to accept the plan. The plan usually lasts between three and five years. Upon completion of the payments called for in the plan, you are discharged from any liability for the remainder of your debts because you have paid all that you must under the law.
A Chapter 13 proceeding is often preferable if you wish to repay all or most of your debts and you have the income with which to do so. The court will provide for the additional time needed to pay and provide for better terms of payment. It is particularly valuable if you have valuable nonexempt property or exempt property pledged as security for debts, either of which you could lose if you filed under Chapter 7. If you are not eligible for a discharge under Chapter 7, or you have one or more substantial debts that are not dischargeable under Chapter 7, you might want to consider filing a petition under Chapter 13 of the Bankruptcy Code.
Question:
What Other Types Of Bankruptcies Are Available?
Answer:
Debt reorganization under Chapter 11 is designed for more complex situations. High income individuals as well as businesses, often find the time and flexibility provided by Chapter 11 as a better alternative than filing a Chapter 7 bankruptcy.
Chapter 12 is for farmers and works similar to a Chapter 13 but has some aspects of Chapter 11. Because it also is more complex, farmers should be personally advised regarding its advantages and disadvantages and whether they qualify.
Question:
Does A Bankruptcy Ruin My Credit?
Answer:
Most people get credit quickly even after bankruptcy. Generally, a bankruptcy has some effect on your credit rating, but so does being late with payments or being sued or garnished. A small percentage of lenders will not do business with you ever again. Most will eventually. All of these laws are created to help you get “back on your feet” again and allow you to be productive without constant worry of lawsuits or embarrassment. Many very successful people take risks and circumstances beyond their control may occur. These circumstances require that they avail themselves of this help. It is for this reason that our constitution provides for such laws.
Question:
Can I Keep Financed Property And Pay The Debt?
Answer:
Yes. Even under Chapter 7 you can keep some items like a good car that is financed, pay that debt and eliminate most or all of the other debts. Typically people want to keep their car or truck and a home. These items can usually be kept with proper legal help.
Question:
What Is A Debt Work-Out?
Answer:
Debt Consolidation is a widely used term to describe debt repayment plans that allow you to get out of debt as quickly as possible. Debt negotiation and settlement is a great alternative to bankruptcy for those who want to, or are able to, pay back at least a portion of their debt.
The Turoci Firm will work to negotiate with your creditors for a less-than-full repayment or settlement. When settlements are reached with creditors one payment is made to the creditor and no further debt is owed.
Question:
Can Filing Bankruptcy Stop Bill Collectors From Calling?
Answer:
Yes. The automatic stay prevents bill collectors from taking any action to collect debts.
Question:
What Documents Does My Attorney Need From Me?
Answer:
Bring two most recent years’ tax returns, six month’s proof of income (paystubs or, if self employed, a year to date Income and Expense report and bank statements), copy of your social security card and state issued ID (such as a drivers license), a list of all of your debts (including address and account number), and a list of all your major assets.
WARNING
None of the above should be considered a substitute for individual legal advice and additional information is available for confidential discussion of your unique problems.
Our Assistance Can:
Help you pay significantly less than the full amount owed.
- Help you pay off your debt faster.
- Get you back on track financially.
- Protect you from harassing creditor calls.
