General Chapter 7 and 13 FAQ


Law Offices of Mark A. McLaughlin
5109 Lone Tree Way, Suite B
Antioch, CA 94531, USA
TEL: 925.754.2622
FAX: 9257541104

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General Chapter 7 and 13 FAQ

Bankruptcy Frequently Asked Questions

What is Bankruptcy?
Bankruptcy is a legal proceeding in which an individual who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to: Eliminate the legal obligation to pay most or all of your debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start. (see bankruptcy - California exemptions) Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.) Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed. Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt. Restore or prevent termination of utility service. Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

How can I get a copy of a bankruptcy filing?
You can order a copy of a bankruptcy filing. A basic summary if $29, if you include the creditor list it is $69, and a full paper report is $125. Click here to order.

What Doesn't Bankruptcy Do?
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, you may also: Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. You are entitled to pay any mortgage arrears over 5 years and restart regular monthly payments to the mortgage holder as a mean to force stall foreclosure and over time cure the delinquency. Chapter 13 allows you to strip off a second mortgage when the first mortgage is more than the value of the house because the second mortgage really is an unsecured debt in most cases. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process. You generally cannot keep the collateral unless you continue to pay the debt. Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, student loans, court restitution orders, criminal fines, and some taxes are prohibited.

How often can I file bankruptcy?
You can file for Chapter 7 bankruptcy again after eight years has passed from the date of your last filing of a chapter 7. A Chapter 13 bankruptcy can be filed at any time..

What Different Types of Bankruptcy Should I Consider?
There are three types of bankruptcy cases most people can use that are provided under the law: Chapter 7 is known as "straight" bankruptcy or "liquidation." It requires a debtor to give up property which exceeds certain limits called "exemptions", so the property can be sold to pay creditors. Chapter 11, known as "reorganization", is used by businesses and a few individual debtors whose debts are very large. Chapter 13 is called "debt adjustment". It requires a debtor to file a plan to pay debts (or parts of debts) from current income over 3-5 years. Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly..

Is California Chapter 7 (Straight Bankruptcy) Bankruptcy Right for Me?
In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for "exempt" property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors. If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you and a chapter 13 would be better. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

Is California Chapter 13 bankruptcy (Reorganization) Right for Me?
In a chapter 13 case you file a "plan" showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property--especially your home and car--which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind. You should consider filing a chapter 13 plan if you: (1) own your home and are in danger of losing it because of money problems; (2) are behind on debt payments, but can catch up if given some time; (3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time. You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due. Chapter 13 allows you to strip off a second mortgage when the first mortgage is more than the value of the house because the second mortgage really is an unsecured debt in most cases.

What Does It Cost to File for Bankruptcy?
It now costs $306 to file for bankruptcy under chapter 7 and $281 to file for bankruptcy under chapter 13, whether for one person or a married couple. The current chapter 11 filing fee is $1046 and is due to go up in November 2012. Attorney fee varies depending upon complexity of the case. I consider many factors including affordability in quoting a fee and always five a senior discount..

In CaliforniaWhat Property Can I Keep?
In chapter 7 cases you can keep household goods, some jewelry, about $28,000 in money and car equity as well as million dollars in retirement. Although it’s rare for people to have much equity in the current housing crunch , for those with substantial equity they can protect up to $75,000 if single, up to $100,000 if married or part of a family group and if over 65 years old up to $175,000 equity in their home. Please note that car and cash exemptions are limited in these cases.

What Will Happen to My Home and Car If I File Bankruptcy in California?
In most cases 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 will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. However, some of your creditors may have a "security interest" in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case. There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt..

Can I Own Anything After Bankruptcy?
Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt. You can also keep any property covered by California bankruptcy exemptions through the bankruptcy.

Will Bankruptcy Wipe Out All My Debts?
Yes, with some exceptions. Bankruptcy will not normally wipe out: (1) money owed for child support or alimony, fines, and some taxes;(2) debts not listed on your bankruptcy petition;(3) loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;(4) debts resulting from "willful and malicious" harm;(5) student loans owed to a school or government body, except if:-- the court decides that payment would be an undue hardship;(6) mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

Will I Have to Go to Court?
In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation. Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

Can I Get a Credit Card After Bankruptcy?
Yes, there are several options available. While technically not a credit card you could use a bank or debit card to perform activities for which you normally would use a credit card. You also may be able to keep the credit card you already have if the creditor grants approval. If these options do not work you can get secured credit card which is backed by your own bank account. It's common to be offered credit cards shortly after people file their bankruptcy although they may have to wait two years to get a mortgage.

Are Utility Services Affected?
Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

Can I Be Discriminated Against For Filing Bankruptcy?
No. 11 U.S.C. sec. 525 prohibits governmental units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.

Can Bankruptcy Help Get My California Driver's License Back?
If you lost your license solely because you couldn't pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back as soon as you get a discharge which takes about 4 months in chapter 7.

What About Co-signers?
If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

Law Offices of Mark A. McLaughlin
5109 Lone Tree Way, Suite B
Antioch, CA 94531, USA
TEL: 925.754.2622
FAX: 9257541104



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