FAQ | Bankrupt-Law.com

General Bankruptcy Questions
- What is bankruptcy?
  
  Bankruptcy refers to the federal law that permits certain entities to obtain permanent relief from many debts and obligations. The intent of the bankruptcy law is to enable debtors to get a "fresh start" in their financial affairs. The bankruptcy law underwent a major revision in 2005. Once a bankruptcy has been concluded, the debtor is discharged from many debts, meaning the debtor is no longer legally obligated to pay those dischargeable debts.
- What happens if I file a chapter 7 bankruptcy?
  
  A Chapter 7 bankruptcy proceeding is commenced by filing a petition with the bankruptcy court. The person filing a Chapter 7 is referred to as the "debtor." The debtor is required to disclose to the court all of its property and debts and turn over all nonexempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. The debtor then receives a discharge of all dischargeable debts.
- Who can file a Chapter 7 bankruptcy petition?
  
  Almost any individual, partnership, or corporation may file a chapter 7 bankruptcy petition if he or she resides, has a domicile, a place of business, or property in the United States. If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition.
  If you pass the "means test" and complete the required credit counseling within six months prior, most people can file a Chapter 7.
- Who can file a chapter 13 bankruptcy petition?
  
  Individuals may file chapter 13 bankruptcy petitions if they:
  (1) reside, have a domicile, a place of business, or property in the United States;
  (2) have a source of regular income; and
  (3) on the date the petition is filed owe less than $290,525 in non-contingent, liquidated, unsecured debts and less than $871,550 in non-contingent, liquidated, secured debts.
  Corporations and partnerships may not file a chapter 13 bankruptcy petition.
  If you filed a prior bankruptcy petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition.
- Will the bankruptcy stop creditors from calling?
  
  Yes. The automatic stay prevents creditors from taking any action to collect debts.
- How long after filing will the creditors stop calling?
  
  Once a creditor becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with your case number. In urgent cases, we will contact the creditor immediately upon filing the bankruptcy petition, especially if a lawsuit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy it may be liable for court sanctions and attorney fees for this conduct.
- Who notifies the creditors?
  
  After the bankruptcy petition is filed, the court mails a notice to all the creditors listed in the schedules. This usually takes a couple of weeks.
- Who deals with my creditors during the bankruptcy?
  
  We will deal with your creditors once we undertake your representation.
- Will my employer or landlord find out about my bankruptcy?
  
  Bankruptcy petitions are public records. However, under normal circumstances, unless your employer or landlord is a creditor, it will not know you filed a bankruptcy petition. If your employer or landlord is a creditor it must be listed as a creditor on the schedules and will receive notice of the bankruptcy proceeding.
- Can my employer fire me for filing bankruptcy?
  
  No. The law prohibits government units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.
- Can I go to jail if I file bankruptcy or don't pay my debts?
  
  No. There are no debtor's prisons in the United States.
- Does the spouse of a married person also have to file bankruptcy?
  
  No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, it might be advisable to have only one spouse file.
- Can I keep any credit cards?
  
  Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors which must be considered, including the credit card balance at the time of the bankruptcy, what terms the credit card company is willing to accept and your ability to pay the present and future credit card debt. Frankly, it is usually not advisable to keep credit that would otherwise be discharged.
- Will I have to fill out forms?
  
  Filing bankruptcy means filling out forms. We will ask you to fill out forms to provide us with the information needed to prepare the bankruptcy petition. We will use the information you provide to complete the official forms, using a specialized computer program that complies with all the Court's requirements.
- Will I be required to go to court?
  
  About 30 to 40 days after filing the bankruptcy petition, you will have to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other matters. Creditors will also be permitted to ask you questions, although in the majority of cases creditors do not ask questions at the First Meeting of Creditors. If we are retained to represent you, one of our attorneys will appear at the First Meeting of Creditors with you.
  After the initial meeting you normally do not need to return to court. However, if a creditor or the trustee files a motion or an adversary action, you may have to appear in court.
- Are there alternatives to bankruptcy?
  
  Yes. Sometimes payment plans can be negotiated with creditors. Obtaining loan extensions, compromises and workout agreements require negotiation skills and experience. These alternatives may alert your creditors to the existence of nonexempt property that the creditor could reach and can involve considerable expense. You also have the option of doing nothing. In any event you should seek professional advise in dealing with most of these alternatives.
- What should I do to prepare for filing bankruptcy?
  
  First, you should consult with an attorney. An attorney can help you plan for the bankruptcy, decide when to file a bankruptcy petition, or even avoid filing for bankruptcy. A few specific items are worth mentioning.
  1. If you intend to file bankruptcy you should stop using your credit cards. If you borrow money with the specific intent of discharging the debt in bankruptcy instead of paying it back, the debt is not dischargeable. In addition, (a) certain luxury purchases over $1,075 within 60 days of the bankruptcy filing are presumed non-dischargeable; (b) cash advances aggregating $1,075 taken within 60 days of the bankruptcy filing are presumed non-dischargeable; and, (c) debts involving materially false financial statements are non-dischargeable under certain circumstances.
  2. Don't transfer your assets to friends, family and business associates to protect the assets from your creditors. The transfer may be considered a fraudulent conveyance. If it is, you may lose both the property and your right to a bankruptcy discharge.
  3. Don't destroy any business or financial records. You can lose your right to a bankruptcy discharge as a result.
  4. Carefully choose the creditors you pay. Some creditors, such as landlords, secured creditors, and some utilities should be paid under most circumstances. If you pay a credit card debt that eventually will be discharged, you may be throwing money away. We can advise you on what debts should and should not be paid while you prepare to file a bankruptcy petition.
- Can I file a bankruptcy for my debts, but not include my assets?
  
  No.
- Can I file bankruptcy to delay a creditor?
  
  The Rules of Bankruptcy Procedure require you or your attorney to certify that your petition is not filed "for any improper purpose, such as to harass or to cause unnecessary delay." Bankruptcy is intended as a tool for dealing with debts that can not otherwise be paid. You should not file a bankruptcy petition for the sole reason of delaying a creditor's actions.
- Do I have to disclose all of my assets?
  
  Yes. If you knowingly and fraudulently conceal an asset from the court you have committed a felony and can be fined up to $5,000, imprisoned for up to five years, or both. In addition, the court can deny you your discharge, or dismiss or convert your bankruptcy proceeding.
Treatment of Debts in Bankruptcy
- Does a bankruptcy relieve me of all my debt?
  
  The policy of bankruptcy law is that the honest debtor who is in debt beyond its ability to repay its debts should receive a fresh start.
  However, some debts must still be paid. Generally speaking, the following debts will not be discharged: taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; nondischargeable debts from a prior bankruptcy; student loans; criminal fines and penalties and forfeitures.
  Secured debts generally must be paid if the debtor intends to retain the collateral securing the debt. If they are not paid, the creditor will usually take the necessary legal steps to recover the property.
- Will bankruptcy stop a wage garnishment?
  
  Yes.
- Will bankruptcy stop a foreclosure?
  
  Temporarily, yes. However, the lender is entitled to seek for relief from the automatic stay to allow it to continue foreclosure proceedings. Usually, to keep a home that is in foreclosure, the debtor will have to reach an agreement with the lender and resume making payments. A Chapter 13 can be helpful in accomplishing this if the creditor is not willing to voluntarily work out an agreement.
- Will bankruptcy stop an eviction?
  
  It may delay it, but the owner is entitled to possession of the property and will be able to resume eviction proceedings with court approval or after the discharge. Filing a Chapter 7 solely to avoid an eviction might be considered an abuse of the bankruptcy law. If the Bankruptcy Court finds that this is true, then the court can immediately dismiss the bankruptcy and impose other legal and monetary sanctions on you.
- Will bankruptcy stop a judgment?
  
  Yes. Most collection actions are stopped by bankruptcy.
- Will a bankruptcy remove a lien?
  
  Certain liens may be removed, but this requires a motion to be filed with the court. The procedures are complex and are best done with an attorney.
- Will bankruptcy discharge my obligation to pay community debts after a dissolution?
  
  With a few exceptions you may be discharged from all dischargable community debts. In some circumstances you may still be liable to your spouse if she or he pays the debt, or files a complaint against you in bankruptcy court.
- Is spousal support dischargeable?
  
  Spousal support and child support payments generally are not dischargeable. Certain other dissolution related obligations, such as payments to others, hold harmless provisions and property settlement obligations, are not dischargeable.
- Can I discharge student loans?
  
  Generally, student loans are not discharged in bankruptcy. Although there is an exception to this general rule; the student loan may be discharged if paying the loan will "impose an undue hardship on the debtor and the debtor's dependents."
  The facts of the particular case will determine dischargeability. If a student loan falls into the exception, discharge of the loan is not automatic. The debtor should file an adversary proceeding in the bankruptcy court to obtain a court order declaring the debt discharged.
- If I co-signed for a debt, does bankruptcy affect the obligation?
  
  If the debt is a dischargeable debt then you will not have to pay it. Your co-signer will become primarily responsible for the debt. If you file a chapter 13 petition, a special automatic stay protects certain co-signers during the bankruptcy proceeding.
- What if I do not list a creditor on the bankruptcy papers?
  
  You are required to list all creditors. If you intentionally omit a creditor from your schedules, it is perjury and you may lose your bankruptcy discharge. However, if a creditor is not known to exist at the time the schedules are filed, you may amend your schedules at any time the case is open to add an additional creditor.
Assets and Exemptions
- What is an "Exemption"?
  
  Certain property is protected from creditors in bankruptcy. This property is known as exempt property.
- What property is exempt?
  
  Exactly what property is protected depends on the exemption scheme chosen. California has two schedules of exempt property.
  Determining what property is exempt requires a complete understanding of the laws governing residency and the California exemption laws.
- What happens to my personal property, real property and other assets?
  
  All of the property you own at the time of the filing bankruptcy, and your right to receive property in the future, become the property of the bankruptcy estate. This means that the bankruptcy trustee may take control of this property and liquidate it to satisfy your creditors.
  Certain property is exempt and you will be able to keep that property. California has two schedules of exempt property. The set of exemptions you should use depends on the nature and value of your property.
  Often, all of your assets can be protected.
- Can I keep my home and automobile?
  
  In many cases you can retain your home and automobile in a Chapter 7 bankruptcy proceeding. You will keep your home or automobile in a Chapter 7 if (1) you are current in making payments on a loan secured by the home or automobile; and (2) the home or automobile does not have equity (a liquidation value in excess of the amount owed to creditors with liens against the property) in excess of what you are allowed to exempt. In the event you want to keep your home or automobile, you must continue to make payments after your petition is filed and you may be required to reaffirm the secured debt.
  If you are in arrears on your home home or automobile, you can consider filing a Chapter 13 petition, which allows you to develop a plan for repaying your creditors without necessarily liquidating assets.
- Are pension plans and 401(k) plans exempt?
  
  The United States Supreme Court has held that pension plans, 401(k) plans, and other "ERISA-qualified plans" are generally "excluded" from the bankruptcy estate.
- Are IRA accounts exempt?
  
  Unlike 401(k) plans, IRA accounts are not ERISA-qualified plans and are only exempt to the extent necessary for the support of the debtor and their dependents.
Should You Do It Yourself or Hire an Attorney?
- Do I need an attorney to file bankruptcy?
  
  Individuals may file a bankruptcy petition without an attorney. This is called appearing "pro-per." Keep in mind that the bankruptcy code is very complex and filing a bankruptcy petition requires a thorough knowledge of the bankruptcy code and other laws.
- How do I find an experienced bankruptcy attorney?
  
  If you plan to file in California, consider us at bankrupt-law.com which is sponsored by the Law Offices of Lauren Ross, a federally designated debt relief agency pursuant to Title 11 of the US Code, providing legal assistance to consumers seeking relief under the Bankruptcy Code. Here are some other ways to find a good attorney:
  1. Word of mouth - if you know someone who recently filed bankruptcy and feel comfortable talking with them, ask them about their experience.
  2. Contact a bankruptcy attorney at a larger law firm in your area and ask for a referral. Attorneys at the large firms know who handles consumer cases in their area competently and usually are more than happy to recommend one or more attorneys.
  3. Local bar associations often have referral services that can help you locate an attorney.
  4. Organizations like the American Bankruptcy Institute, Commercial Law League of America, or the National Association of Consumer Bankruptcy Attorneys can refer you to a certified attorney in your area.
  Once you locate an attorney, call and ask for a initial consultation. Most bankruptcy attorneys offer a free initial consultation. Make sure that you are comfortable with the attorney and can communicate with him or her. The attorney should explain the bankruptcy process in a way you understand. Confirm that the attorney carries malpractice insurance. If you are not completely comfortable with the lawyer, do not feel pressured into hiring him or her; find someone else.
- What about non-attorney bankruptcy petition preparers?
  
  Bankruptcy petition preparers are not permitted to provide you with any legal advice.
  The bankruptcy petition preparer's role is limited by law solely to typing. A bankruptcy petition preparer can not advise about the law, advise you on how to answer creditor or trustee questions, assist you in planning, or appear with you at the First Meeting of Creditors or in court.
What Happens After You File Bankruptcy?
- What happens after I file a bankruptcy petition?
  
  The bankruptcy court will mail to each of your creditors a "Notice of Commencement of Case", informing them that you have filed the petition and advising them of the date of the First Meeting of Creditors.
  About 30 to 40 days after filing the bankruptcy petition, you will be required to attend a hearing presided over by a bankruptcy trustee. This hearing is called the First Meeting of Creditors. The trustee is not a judge, but an individual appointed by the United States Trustee to oversee bankruptcy cases. At the First Meeting of Creditors the trustee will ask you questions under oath regarding the content of your bankruptcy papers, your assets, debts and other aspects of your financial situation.
  In an ordinary chapter 7 proceeding the Bankruptcy Court will automatically grant an Order of Discharge 60 to 75 days after the First Meeting of Creditors. In a chapter 13 proceeding, the Court will enter an order confirming your chapter 13 plan once you meet all the requirements. In a chapter 13 proceeding you receive your discharge upon completion of the chapter 13 plan.
- Who deals with my creditors during the bankruptcy?
  
  We will deal with all creditors once we have been retained.
- What is the "automatic stay?"
  
  At the moment a bankruptcy petition is filed, your creditors are automatically restrained from taking any action to collect the debts owed them. There are some exceptions, for example, a bankruptcy petition does not stay the commencement or continuation of a criminal action, an action to collect spousal support, or an action to enforce a government's police or regulatory power.
- If my creditors ignored the automatic stay, what could be done?
  
  Make sure the creditor is aware that you filed bankruptcy and ask it to stop collection efforts.
  If the creditor does not respond, you may seek a court order enjoining the creditor from further action.
  If you are an individual and are injured by your creditor's willful failure to comply with the automatic stay, the law allows you to recover actual damages, including costs and attorneys' fees, and, in some circumstances, punitive damages.
- Will the fact that I filed bankruptcy appear on credit reports?
  
  The bankruptcy will be listed in credit reports for a period of up to 10 years.
- After bankruptcy, can I obtain new credit?
  
  Yes. The decision of whether to extend you credit belongs to each particular lender. However, the fact that you filed bankruptcy, if properly explained, can be less damaging than a history of unpaid accounts.
- How can I re-establish credit after bankruptcy?
  
  You may be able to obtain a secured credit card, where the credit limit is based upon the amount of security given, or obtain credit using a co-signer not long after your case is discharged.

Frequently Asked Questions