There are a lot of myths and false information out there about bankruptcy. The truth is that bankruptcy can be a great way to get out of debt and get a fresh start, depending on your particular circumstances. In some situations, bankruptcy can save your home. In others, it can be a way to get rid of your home or car without any liability. Bankruptcy will get rid of UNSECURED DEBT, including CREDIT CARDS, MEDICAL BILLS, PERSONAL LOANS, PAYDAY LOANS, and REPOSSESSION COSTS. The combination of the bad economy and aggressive creditors have left many good people in a position where they just can’t pay the bills each month. Your credit can survive bankruptcy, but your debts will not. Call or email today for a free consultation.

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• What is bankruptcy?

• What is chapter 7 bankruptcy?

• What is chapter 13 bankruptcy?

• Are there other kinds of bankruptcy?

• Will I qualify for bankruptcy?

• How can I stop creditor harassment?

• Will filing bankruptcy effect my credit?

• Can co-signers be protected In bankruptcy?

• What is a debt discharge?

• How do I know if I should file for bankruptcy?

• Do I need an attorney To file bankruptcy?

• What happens to my retirement plan in bankruptcy?

• If I file for bankruptcy, can I keep my property?

• I’m facing foreclosure and want to keep my home. Is bankruptcy my best option?

• What happens after my debts are discharged in bankruptcy?

• Other Topics

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What is bankruptcy?

Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as “liquidations” or “reorganizations.”

Chapter 7 bankruptcy is the liquidation variety: If you own property that isn’t exempt under your state’s laws, it may be taken and sold (“liquidated”) to pay back some of your debt. Chapter 13 bankruptcy is the most common type of “reorganization” bankruptcy for consumers: You get to keep all of your property, but you must make monthly payments over three to five years to repay all or some of your debt.

Both kinds of bankruptcy have numerous rules — and exceptions to those rules — about what kinds of debts are covered, who can file, and what property you can and cannot keep.

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What is chapter 7 bankruptcy?

Chapter 7 bankruptcy can be filed by individuals (called a “consumer” Chapter 7 bankruptcy) or businesses (called a “business” Chapter 7 bankruptcy).

Property liquidation. In Chapter 7 bankruptcy, some of your property may be sold to pay down your debt. In return, most or all of your unsecured debts (that is, debts for which collateral has not been pledged) will be erased. You get to keep any property that is classified as exempt under the state or federal laws available to you (such as your clothes, car, and household furnishings). Most debtors that file with us are able to exempt ALL of their property.

Secured debt. If you owe money on a secured debt (for example, a car loan for which the car is pledged as a guarantee of payment), you have a choice of allowing the creditor to repossess the property; continuing your payments on the property under the contract (if the lender agrees); or paying the creditor a lump sum amount equal to the current replacement value of the property. Some types of secured debts can be eliminated in Chapter 7 bankruptcy.

Eligibility for Chapter 7. Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is sufficient to fund a Chapter 13 repayment plan — after subtracting certain allowed expenses and monthly payments for certain debts — you won’t be allowed to use Chapter 7 bankruptcy. We can determine what your eligibility is during your free consultation.

Bankruptcy doesn’t work on some kinds of debts. Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills, and unsecured loans, there are some types of debts, including child support, most student loans, spousal support obligations and some tax debts, that cannot be wiped out in bankruptcy.

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What is chapter 13 bankruptcy?

Chapter 13 bankruptcy is also known as “wage earner” bankruptcy because, in order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt.

When you file for Chapter 13 bankruptcy, you must propose a repayment plan that details how you are going to pay back your debts over the next three to five years. The minimum amount you’ll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you’d filed for Chapter 7 bankruptcy.

Your debts must be within limits set by the federal government: Currently, you may not have more than $1,010,650 in secured debt and $336,900 in unsecured debt.

If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over time.

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Are there other kinds of bankruptcy?

Yes. In addition to Chapter 13 bankruptcy, there are two other types of reorganization bankruptcy: Chapter 11 and Chapter 12. However, these are quite uncommon in San Diego County.

Chapter 11 bankruptcy is typically used by financially struggling businesses to reorganize their affairs. It is also available to individuals, but because Chapter 11 bankruptcy is expensive and time-consuming, it is generally used only by those whose debts exceed the Chapter 13 bankruptcy limits (rare) or who own substantial nonexempt assets (such as several pieces of real estate).

Chapter 12 bankruptcy is almost identical to Chapter 13 bankruptcy. But to be eligible for Chapter 12 bankruptcy, at least 80% of your debts must arise from the operation of a family farm. Chapter 12 bankruptcy has higher debt ceilings to accommodate the large debts that may come with operating a farm, and it offers the debtor more power to eliminate certain types of liens.

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Will I qualify for bankruptcy?

Most people will qualify for bankruptcy, either through Chapter 7 or Chapter 13. In order to qualify for a Chapter 7 bankruptcy, you must be able to pass the “means test.” There are several factors involve in the means test which stand for median in for the area where you live. In San Diego we use the Median income in San Diego County. The first part of the form is to figure your “current monthly income” (CMI). This is based on your average income over the past six calendar months. This number will determine whether you must complete the rest of the form to determine if you qualify. If you don’t past the first part you could have a probably filing a chapter 7. Even if you do past the first part that does not guarantee that the trustee or the court will not object to it if you have enough money to make payment under a chapter 13.

If your CMI is below the median income for California or where you live, and based on your household size, then you do not need to complete the means test.

If your CMI is higher than the median for California for a household your size, you must complete the means test to compute your monthly “disposable” income (that is, income minus expenses). The result of that computation will determine whether you are eligible for Chapter 7 bankruptcy.

We will be able to inform you whether you qualify for a bankruptcy based on the information you provide. We will not charge you for the consultation and you will not have to pay us for the analysis.

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How can I stop creditor harassment?

We don’t have to tell you that creditors can be annoying.

But we can tell you that you have the power to silence them.

If you decide to file bankruptcy, you can silence your creditors and reclaim your phone, voicemail and mailbox. This is because a bankruptcy filing results in an automatic stay order, which makes it illegal for creditors to attempt to collect on your debt.

Call us today for a free consultation. As soon as you decide to work with us, we can have all creditor calls and mail referred to our office and get you on the road to freedom from creditors.

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Will filing bankruptcy effect my credit?

Bankruptcy can be an effective way to regain control and tackle mounting debt. Many people find that their credit scores improve not too long after they file bankruptcy.

You’re credit will likely be affected if you decide to file bankruptcy – but that’s not necessarily bad news! Many people who decide to file bankruptcy don’t have the greatest credit to begin with and they find that once their debt is relieved, their credit score starts to improve.

You should also know that most types of bankruptcy will stay on your credit report for a period of at least ten years. (In some cases, the time period can be reduced.)

But bankruptcy can also provide you with a chance to “start fresh” and rebuild your credit.

Keep in mind that how your credit will be affected will depend on a number of factors, such as where your credit level is at today, your amount of debt, and which type of bankruptcy you file.

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Can co-signers be protected In bankruptcy?

Co-signers can be protected in certain bankruptcies. If you are concerned about protecting your co-signers, a bankruptcy lawyer may be able to help you determine which bankruptcy filing is best for you.

In general, if you decide to file Chapter 7 bankruptcy, creditors are still able to proceed with collection efforts against your co-signers-even if you were let off the hook for the debt.

However, if you file Chapter 13 bankruptcy, a co-signer is protected if the following provisions are met:

• the debt must be a consumer debt;
• the debt can’t be incurred in the ordinary course of business;
• the co-signer can’t benefit from the proceeds of the debt; and
• the debtor sticks to the Chapter 13 bankruptcy payment agreement.

You should note that if you fail to complete the requirements of your Chapter 13 repayment plan, the creditors have the legal right to pursue your co-signers.

Our firm can help you decide whether a bankruptcy can protect you and your co-debtors, or whether you should use a different approach to your debts.

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What is a debt discharge?

Under Chapter 7 bankruptcy, a debt discharge eliminates debt.

That’s right-the Chapter 7 debt discharge releases a debtor from personal liability for his or her debts. That means that the debtor never has to pay those debts off.

There are requirements to who may be eligible to file Chapter 7 bankruptcy. During our free consultation, we will help you decide if you qualify for Chapter 7 bankruptcy and if this is the right debt solution for you.

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How do I know if I should file for bankruptcy?

You should file if you are unable to pay your debts and you don’t think you will in the future. The most common reasons for filing for bankruptcy are unemployment, large medical expenses, overextended credit and other large unexpected expenses. Deciding to file for bankruptcy is a difficult decision. Valuable factors to consider are your alternatives, the type of bankruptcy that is best for you, and which debts will be discharged if you file bankruptcy.

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Do I need an attorney To file bankruptcy?

Federal law does not require you to have an attorney. You are allowed to file pro se, that is, on your own without an attorney. However, without the assistance of an attorney, it may be extremely difficult to do so successfully. Hiring a competent attorney is highly recommended.

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What happens to my retirement plan in bankruptcy?

If you file for bankruptcy, you get to keep your pension and retirement plan funds, with a few limitations. Under the new bankruptcy laws, virtually all retirement account and pension plan funds are exempt from creditors, meaning you get to keep them if you file either Chapter 7 or Chapter 13 bankruptcy. Contact us to learn more about protecting your retirement in bankruptcy.

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If I file for bankruptcy, can I keep my property?

If you file for Chapter 13 bankruptcy, the answer is yes. In Chapter 13 bankruptcy, you repay all or a portion of your debts through a repayment plan over a period of three to five years. In exchange, you may keep your property (including your car and home), assuming you keep up with payments on any loans secured by the property — and keep making your repayment plan payments. Your plan will also have to ensure that your creditors will get as much through the Chapter 13 bankruptcy as they would have received in a Chapter 7 bankruptcy. For instance, if you own non-exempt real estate valued at $10,000, your plan will have to pay your unsecured creditors at least $10,000 (less costs of sale and the trustee’s commission).

In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection, sell it, and distribute the proceeds to your creditors. Under California law, you will be able to exempt at least $75,000 in equity in your real estate, provided you are residing at the property. Exemptions also include some equity in your car, retirement funds, public benefits, and most household goods, furniture, furnishings, clothing (other than furs), tools of your trade, and other property.

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I’m facing foreclosure and want to keep my home. Is bankruptcy my best option?

Filing for Chapter 13 bankruptcy can be a good way to save your home from foreclosure. Chapter 13 bankruptcy lets you pay off a mortgage “arrearage” (late, unpaid payments) over the length of a repayment plan that is approved by the court — usually between three and five years. In order for this option to work, you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage.

In Chapter 7 bankruptcy, if you have sufficient equity in the home, the bankruptcy trustee may sell your home to repay unsecured creditors. Given the state of the real estate market, this rarely happens these days. But if you’re behind on your mortgage payments, Chapter 7 doesn’t provide a way for you to catch up, and the lender may get permission from the bankruptcy judge to go ahead with a foreclosure.

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What happens after my debts are discharged in bankruptcy?

Once your bankruptcy case is over, you are legally free of your included debt obligations. You now do not owe any credit card debt, utility expenses, medical bills or loans, and may even have been forgiven for old tax bills. When your bankruptcy is officially discharged, you will be able to focus your energy on saving money and paying off any debts that were not excused (such as student loans, child support, recent taxes, court costs, or alimony), rather than being subject to financial examination by the federal bankruptcy court and its representatives.

Once you are officially out of bankruptcy, which is usually about 6 months after you initially filed Chapter 7 or right after you finish your Chapter 13 repayment plan, you can resume getting credit. However, you should be careful what new obligations you take on. Once your bankruptcy case is discharged, you have no legal protection against new debt. You can only file for Chapter 7 debt forgiveness once every 8 years, while you can file for Chapter 13 debt repayment every 4 years.

If you are trying to buy a car or house or get a personal loan, you may need to explain why you filed bankruptcy. Lenders could be concerned that you did not learn anything from your past experience and may default again. The good news is they are also aware that those with a recently discharged bankruptcy are not going to readily be able to file again, and they will have much more legal recourse with a nonpaying debtor with a recent bankruptcy than one who has not filed. Common acceptable reasons for a bankruptcy to lenders are medical emergency or sudden job or business loss. Keep in mind that getting credit cards and personal loans right after bankruptcy may be difficult and the interest rates may be high. You may need to wait several years before being eligible for the best products.

Checking your credit regularly with Equifax, Experian and TransUnion is a good idea. You will want to make sure all your debts included in bankruptcy are marked as closed, included in bankruptcy, rather than open collection accounts. If you have incorrect information on a credit report, write a letter or make a phone call to the appropriate company to dispute the data.

Occasionally those with a discharged bankruptcy may still get a phone call or letter from a creditor trying to collect a debt. Any debt included in a bankruptcy case is legally uncollectable. If you receive such calls or letters, contact the creditor in writing, explaining that your debt was included in bankruptcy. If a creditor contacts you and we are representing you, let us know and we will stop the collection efforts of any creditor discharged in the bankruptcy.

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Other Topics

• I would like more information on stopping credit card harassment »
• I would like more information on stopping wage garnishments »
• I would like information on filing bankruptcy and keeping and/or surrendering my motor vehicle(s) »
• I would like information on getting rid of payday loan debts »
• I would like to know whether I qualify for bankruptcy »