Q & A

Should I get a lawyer for bankruptcy?

You may file a bankruptcy on your own, but unless your case is extremely simple, you may not get the best results. Hiring an experienced bankruptcy lawyer will reduce the inevitable anxiety of going through a complex legal proceeding. It is
important to know the law, the local rules, the judges, the bankruptcy trustees, and creditor attorneys. A competent bankruptcy lawyer can analyze the facts of your case and give you a clear explanation of what results you can expect.

What does a bankruptcy lawyer do for you?

A competent bankruptcy lawyer should:
– Analyze the facts of your case and give you a clear explanation of the results you can expect.
– Collect from you all of the information and documentation needed to prepare the bankruptcy petition and schedule describing all of your property, debts, income and expenses and other required financial information.
– Personally review with you all of your documentation and every page of the bankruptcy petition and schedules, which you will sign under penalty of perjury, to be sure it is complete and accurate.
– Communicate with the court, the bankruptcy trustee and creditors on your behalf.
– Appear with you at any court hearing.
– Be available to answer your questions and keep you advised of the status of your case until it is completed and closed.

How much does bankruptcy cost?

The court charges a filing fee of $338.00 for a Chapter 7, $310.00 for a Chapter 13 debt repayment plan, and $1,717.00 for a Chapter 11 reorganization. Attorney fees will vary depending on complexity of your case, the experience of the attorney, and how much time the attorney will actually spend consulting with you directly. Chapter 7 cases generally range from $2,000.00 to $3,500.00, but can be higher in complex cases. Attorneys that charge less than $2,000.00 usually will not spend as much time consulting directly with you and may delegate attorney work to non- attorneys which can affect the quality of the results. In Chapter 13 cases in the Sacramento Bankruptcy Court the attorney can charge $4,000.00 for a non-business case and $6,000.00 for a business case, or can charge hourly (about $250.00 – $400.00/hour) for the actual time needed to represent you.

How much cash can you keep when filing Chapter 7?

In most cases you can keep all of your property because the law allows you to keep “exempt property”. For individuals residing in California for the past two years, there are two sets of exemptions you can choose from to protect your property. Under
one set there is a $30,825.00 exemption you can use to protect any property including cash. Your lawyer should identify all property you own or have a right to and select the set of exemptions that will best protect it. In some cases your lawyer may advise you to liquidate property that is not exempt the proceeds of which can be spent on normal living expenses before you file the case.

What is the minimum debt to file bankruptcy?

There is no minimum nor maximum amount of debt required to file a bankruptcy. If you have more debt than you can afford to pay based on your current income, bankruptcy may be an appropriate remedy for you.

What should you not do before filing bankruptcy?

Don’t file a bankruptcy before you consult with a competent bankruptcy attorney. Most provide a free initial consultation, so even if you don’t hire an attorney, you can get a good idea of what to expect if you get a consultation. Don’t run up charges on your credit cards or borrow money that you don’t intend to repay. Creditors can object to the discharge of a debt they think you incurred fraudulently. Don’t transfer property without receiving equal value in exchange. The bankruptcy trustee can sue the person to whom you transferred property, pay them whatever if anything they paid for it, and sell it for what it is really worth to generate funds to pay creditors. It can also be grounds to deny you a discharge of all of your debt.

Will I lose my car if I file bankruptcy?

Usually no. The bankruptcy trustee will not liquidate it if the equity is claimed exempt. If you have a loan on it, the creditor will not repossess it as long as you continue to make the payments and keep it insured. Some lenders may ask you to reaffirm the loan, which means you agree that the loan is not discharged, but most don’t require it.

Who pays your debt when you file bankruptcy?

In a chapter 7, no one pays your debt, unless the trustee liquidates non-exempt property in which case some of the debt may be repaid. The purpose of a chapter 7 is to get a discharge order that permanently prohibits the creditor from taking any action to
collect the debt from you. So in most cases none of the debt is paid. In a chapter 13, you propose a plan to pay some or all of your debt by making monthly payments over 3 to 5 years.

What is the downside to filing bankruptcy?

If you have more property than you can claim exempt, the trustee may liquidate that property to pay your creditors.
Your credit rating may be negatively affected, but by the time most people choose to file bankruptcy their credit score is already relatively poor. In cases where the score is very low the bankruptcy may actually improve the score.
Creditors that are willing to lend to you may charge higher interest rates. If you want to get a loan to buy a home, FHA and VA guaranteed loans require you wait 2 years from the entry of the bankruptcy discharge order. Conventional lenders normally require you wait 4 years.

How much debt do you have to have to file Chapter 13?

There is no minimum amount, but there are maximum amounts; currently no more than $1,257,850.00 secured debt and $419,275.00 unsecured debt. If you owe more than that, you may need to file a Chapter 11.

What debts cannot be discharged in bankruptcy?

Certain taxes, child and spousal support and other debts owed to an ex-spouse arising out of divorce or separation, most student loans, debts for personal injury or death incurred in a vehicle accident where you were intoxicated, debts incurred through use of a false financial statement or fraud, debts incurred through willful and malicious conduct, court ordered fines, restitution and traffic citations, debts incurred specifically to pay non-dischargeable taxes, unlisted debts.

Can creditors come after you after bankruptcy?

No, creditors can take no action to collect a debt from you personally if the debt was discharged. Creditors that have a security interest in your property, like a car loan, can recover from that property if you do not arrange to keep paying them to retain it.

Does filing bankruptcy ruin your life?

No, filing a bankruptcy can save your life because you will have less stress from dealing with creditors and more money to pay your living expenses. The bankruptcy can be shown on your credit report for 10 years but after that must be deleted in full.
You may be surprised at how soon you will be solicited to borrow money. Some people even receive solicitations for car financing before the case is closed.

Is it better to file a Chapter 7 or 13?

That depends on the facts of your case. If you have dischargeable debts and little or no non-exempt property, Chapter 7 is probably better. The Chapter 7 is over in as few as 4 months and you have fewer costs. However, if you are not eligible for a Chapter 7 because your income is too high, or you have non-dischargeable debt that you need to control, or you have non-exempt property you would lose in Chapter 7, or you’re behind on your mortgage or car loan, then a Chapter 13 repayment plan may be better.

Can you keep some credit cards when filing bankruptcy?

Since you have to list all of your debt, you can expect a listed creditor to close your account. They will not keep the account open because they do not want to violate the discharge order by collecting the debt you owed when you filed. You may be able to keep the account if it is not listed because you owe nothing on the day you file. However, if the creditor finds out about the bankruptcy they may choose to close it
anyway.