Encino Law | Encino Common Bankruptcy Questions | | Asher Levin, Esq. |

FAQS

A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems.

There have been many news reports suggesting that changes to the bankruptcy law passed by Congress in 2005 prevent many individuals from filing bankruptcy. These changes have made the process more complicated, but the basic right to file bankruptcy and most of the benefits of bankruptcy have not changed for most individuals.

WHAT RELIEF CAN I GET FROM A BANKRUPTCY?

Bankruptcy may make it possible for you to:

• Eliminate the legal obligation to pay most or all your debts. This is called a discharge of debts. It is designed to give you a fresh financial start.
• Stop foreclosure on your house 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.
• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
• Restore or prevent termination of utility service.

What Bankruptcy cannot do:

Bankruptcy can not cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

• Eliminate certain rights of secured creditors. A creditor is secured if it has taken a mortgage or other lien on property as collateral for a loan. Common examples are car loans and home mortgages. You may be able to force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money on the debt if you decide to give back the property. But you generally can not keep secured property unless you continue to pay the debt.
• Discharge certain types of debts: for example, child support, alimony, most student loans, court restitution orders, criminal fines, and most taxes.
• Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
• Discharge debts that arise after bankruptcy has been filed.

There are three types of bankruptcy relief available for individuals. Most individuals will pursue a Chapter 7 Bankruptcy or, if unable to qualify, a Chapter 13. For a few individuals the more complex and expensive procedures of Chapter 11 will apply.

WHAT IS A CHAPTER 7 BANKRUPTCY?

In a Chapter 7 bankruptcy, or a straight bankruptcy, your goal is to keep most of your property - your "exempt property" and be discharged from most of your debts. Generally, people who file chapter 7 keep all their property except property which is very valuable or which is subject to a lien which they cannot avoid or afford to pay.

HOW DO I QUALIFY FOR CHAPTER 7?

If your income (for the last 6 months) is less than the median income for a similar sized family in California, you qualify. If your income is higher, your income and expenses are computed (based upon certain standards in the law) to determine if you have money left over that could be paid to unsecured creditors. If so, the bankruptcy court may decide that you do not qualify for a Chapter 7, unless there are extenuating circumstances. If you do not qualify for Chapter 7, Chapter 13 relief may be your only option.

WHY WOULD I FILE FOR CHAPTER 13?

You should consider filing a Chapter 13 plan if you:

• Are in need of a fresh start but do not qualify for Chapter 7.
• Own your home and are in danger of losing it because you are behind in payments, but can catch up if given some time;
• Have valuable property which is not exempt, but you can afford to pay creditors from your income over time.

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, such as 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 will need to have enough income during your chapter 13 case to pay for your necessities and to keep up with the required payments as they come due.

HOW LONG WILL A BANKRUPTCY TAKE?

In a chapter 7 proceeding, you will typically receive a discharge from you dept within 120 to 150 days of filing your petition. On the other hand, a Chapter 13 plan will run either 36 or 60 months.

WHAT ASSETS CAN I PROTECT?

Under either a Chapter 7 plan or a Chapter 13 plan, if there is equity in your home, you can protect some or all of it under the homestead exemption. For a single person under 65, the exemption is $50,000; for a married couple or a parent and minor child, that amount grows to $75,000; for someone over 65, or disabled, or over 55 with a very limited income, the amount grows to $150,000. You can also protect other assets as provided under California law, including some or all of your assets in a retirement plan, furniture and furnishings, clothing, some equity in a car, some tools used in a trade, etc. If there is no equity in your home, you may have even more flexibility in protecting you other assets.

HOW WILL BANKRUPTCY AFFECT MY CREDIT?

If you file bankruptcy, remember that debts discharged in your should be listed on your credit report as having a zero balance, meaning you do not own anything on the debt. Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult or costly to get credit. You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is not correct.

HOW DO I GET STARTED?

Call us at (818) 981-4556 or email us at Asher@AsherLevinLaw.com to set up an appointment.