WHY WOULD I FILE FOR BANKRUPTCY?
If you cannot afford to pay your creditors (people or businesses you owe money), bankruptcy help may relieve you of all or part of your debt. Filing bankruptcy also shields you from your creditors’ collection efforts, including foreclosures, lawsuits, garnishments, repossessions and even phone calls.
Whether bankruptcy is right for you is a complex determination dependent upon many considerations unique to your financial position. Don’t decide on your own. I invite you to a free consultation to evaluate what bankruptcy options, if any, would benefit you.
CAN I KEEP MY PROPERTY, INCLUDING MY HOME, IF I FILE BANKRUPTCY?
Yes. Bankruptcy laws allow you to protect, or exempt, your property when you file your case. This includes, but is not limited to, your home, car(s), household furnishings, jewelry, clothing, retirement, bank accounts and cash. Although most filers can protect everything they have, there are limitations depending on what your property is worth, whether you are filing with a spouse and if you are paying anything back to your creditors through your case. Protecting your property is a vital element in evaluating your potential case.
WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY, AND HOW DO THEY DIFFER?
There are several forms of filings, but the primary consumer bankruptcies are either Chapter 7 or Chapter 13.
Nothing is normally repaid to your creditors in a Chapter 7.
In a Chapter 13, though, you do pay at least a portion of your debts over a 3-5 year period.
What you do not repay in a Chapter 13 is usually discharged, or eliminated.
What type of bankruptcy help would work best for you depends on you.
WHAT ARE THE BENEFITS OF FILING CHAPTER 7?
Often a Chapter 7 filing is the simplest solution to eliminating your debt. Nothing normally needs to be paid back to your creditors, your debts are discharged within a few months and you are on your way to reestablishing your credit. For some financial situations, though, you may want to repay your debts, even if only a portion of them; to do so, a Chapter 13 may be a better solution.
WHAT ARE THE BENEFITS OF FILING CHAPTER 13?
Paying back at least a portion of your debts is the purpose of a Chapter 13 bankruptcy. Chapter 13 filers typically take this course for one of two reasons: they have to or they want to.
As is discussed below, some individuals are not eligible to file a Chapter 7 if they earn too much or have filed bankruptcy in the recent past. There are other restrictions, but these are the most common that limit some to filing a Chapter 13. Following the filing of a Chapter 13, debtors (those who file bankruptcy) repay something to their creditors on a monthly basis for a 3-5 year period. This repayment process is referred to as a Chapter 13 Plan. What is not repaid to the creditors through this plan is discharged, or eliminated.
The amount required to be repaid through a Chapter 13 Plan depends on the filer’s finances. The more a debtor makes, the more can be repaid. The more the debtor’s expenses, though, the less that can be repaid. Crafting a Chapter 13 plan is complex and, if not done correctly, can be rejected by the court.
As with deciding whether to file bankruptcy at all, choosing the correct chapter is a complex decision that should be made with the advice of a bankruptcy professional. The simplest solution to choosing the right route is to call me for a free consultation.
CAN I SAVE MY HOME FROM FORECLOSURE WITH A CHAPTER 13 BANKRUPTCY?
Yes. Often people who file Chapter 13 do so to protect their home. Unlike with a Chapter 7, you can pay off any delinquency, or arrearage, on your mortgage through a Chapter 13 plan, even if you are already in foreclosure. Since a Chapter 13 plan can span up to 5 years, you can take that amount of time to repay the delinquent portion of your mortgage without fear of losing your home. As long as you continue to make your Chapter 13 plan payments, the mortgage company can no longer foreclose or sell your home.
CAN I ELIMINATE MY SECOND MORTGAGE/HOME EQUITY LINE OF CREDIT WITH A CHAPTER 13 FILING?
Maybe. You can eliminate, or strip off, your junior deeds of trust (second/third mortgages and home equity lines of credit) with the filing of a Chapter 13; to do so, your home must be worth less when you file your bankruptcy than you owe on your first mortgage. Since stripping off a mortgage is not allowed with a Chapter 7, people often choose to file a Chapter 13 even if eligible for a Chapter 7 for this reason alone.
WILL FILING BANKRUPTCY AFFECT MY FIRST MORTGAGE?
Other than allowing you up to 5 years to get caught up on any mortgage delinquency, bankruptcy will not otherwise modify your first mortgage if you remain in the home. Whether filing for Chapter 7 or 13, bankruptcy will not affect your first mortgage obligation. You will continue to owe what you owe. The bankruptcy filing will not alter the principal amount owed or your monthly mortgage payments. Although bankruptcy won’t modify your first mortgage, it won’t prevent you from modifying your loan with your mortgage lender. You are free to negotiate any mortgage modification after filing bankruptcy the same way you were able to do so before filing.
If you surrender the home, you will no longer have to pay the first mortgage, or any mortgage, if you file for bankruptcy.
AM I ELIGIBLE TO FILE BANKRUPTCY AND, IF SO, FOR WHICH CHAPTER?
Your income and debts dictate your bankruptcy eligibility options. Having filed bankruptcy before, as is discussed below, can also limit your eligibility.
Typically, if you earn less the average, or mean, annual income for a family of your size, you are eligible for a Chapter 7 filing. Even if you earn more than this amount, you can still qualify for a Chapter 7 if your expenses exceed your income. Evaluating Chapter 7 eligibility is done according to what is referred to as the means test, which is an analysis of your particular financial picture, considering all your individual income and expenses.
If you cannot qualify for a Chapter 7, you may still be eligible to file for Chapter 13. In so doing, you would be required to repay what you can afford, and discharge what you can’t. While bankruptcy law may limit you to a Chapter 13, it won’t force you to pay more than you are able to pay.
Even if you are eligible to file for Chapter 7, you can still file for a Chapter 13 if you can afford it. Since some may want to file for Chapter 13, particularly if they seek to save their home from foreclosure or strip off a second mortgage, they may do so even though eligible to file Chapter 7.
DO I HAVE TO GET CREDIT COUNSELING?
Yes. Bankruptcy laws require you receive credit counseling both before and after you file your case. It is not difficult, does not require repayment to your creditors and costs little to complete. The course can be done online or over the phone. Once you complete the hour-long course, a certificate of completion will be sent to you (and usually me) reflecting you have completed this requirement. Although it is a simple step to complete in your case, credit counseling is essential to your eligibility to file and complete your case. Greenpath Debt Solutions, one of the many companies that provide credit counseling that I have recommended for years, is listed in the links page to this website.
CAN IF FILE FOR BANKRUPTCY IF I HAVE FILED BEFORE?
Yes, depending on how long it has been. Generally speaking, 8 years after filing a bankruptcy you are free to file any bankruptcy chapter again. If less than 8 years, you can still file again, but you may be limited in your bankruptcy filing options. If, for example, you filed a Chapter 7 bankruptcy March 1, 2004, you can file another Chapter 7 on March 1, 2012. But if you filed your previous case March 1, 2006, you would be limited to filing a Chapter 13 on March 1, 2012, since 8 years had yet to elapse.
If limited to a Chapter 13 filing in a subsequent filing, you may still be able to eliminate a portion (between 1% and 99%), if it has been over 4 years since you last filed. Less than 4 years you may still be able to file again, but you will have to pay all your creditors back in full.
CAN I FILE BANKRUPTCY WITHOUT MY SPOUSE IF I AM MARRIED?
Yes. Since California is a community property state, most married couples file together. But if one spouse does not want to file for whatever reason or, for whatever reason, cannot file, you can file on your own. This is a common scenario with separated married couples. It is often advantageous for the non-filing spouse to waive his/her right to file while your case is pending, but it is not necessary.
WHAT TYPE OF DEBTS CAN BE ELIMINATED THROUGH BANKRUPTCY?
Nearly all debts can be discharged through bankruptcy. The most common consumer debts include, but are not limited to, the following: credit cards; payday loans; unsecured lines of credit; car repossessions/voluntary surrenders; medical bills; foreclosures; rental/lease payments and fees; auto accidents; overpayment of unemployment; and, with some exceptions, even income taxes.
Secured debts (debts that are secured by collateral), such as mortgages and car loans, can also be eliminated through a bankruptcy. But, with few exceptions, you cannot keep the property if you don’t keep making the payments. If you wish to surrender the property securing the debt, these debts can normally be discharged without consequence.
CAN MY CREDITORS STILL COLLECT AFTER I FILE BANKRUPTCY?
No. Bankruptcy stops, or stays, your creditors from any and all collection activity after you file. You cannot be sued, garnished, levied or foreclosed upon after you file for bankruptcy. You cannot even be called. Bankruptcy, as soon as you file, blocks all creditor collection activity and communication. If you have been sued, garnished, levied or foreclosed upon before filing, any such collection actions will immediately cease after you file.
WILL BANKRUPTCY HURT MY CREDIT?
It depends. Bankruptcy is obviously harmful to your credit, but so is debt. The issue, then, in considering your credit is to compare the cost of bankruptcy to the benefit of eliminating your debt. Although there is no certain rule, bankruptcy is generally better for your credit when your unsecured debt (credit cards, medical bills, car repossessions, etc.) exceeds 3-5 months of your income. It is better to have a bankruptcy on your record than that amount of debt. This is especially so if your debt is rising along with your inability to pay it off.
Lawsuits, garnishments, levies and repossessions that can result from failing to pay your debts are far worse on your credit than is a bankruptcy. The same can be said about debt consolidators since someone besides you is paying your debt and only paying off a portion of it.
Following the filing of a bankruptcy, it typically takes between 1-2 years to rebuild your credit which, for most, is less than the amount of time it would take to pay off their debt—if they could.
HOW MUCH DOES A BANKRUPTCY COST?
Obviously the cost of a bankruptcy depends on the case and the type of bankruptcy filing. But, on average, a typical Chapter 7 ranges between $1,200 and $1,900. An individual Chapter 13 bankruptcy most commonly costs $4,000 over the 3-5 year span of the case, typically half of which is paid prior to the filing of the case, and half after it is filed. The portion paid after the case is filed often comes out at the expense of your creditors, meaning you will not have to pay more to cover the remainder of the attorney fees.
Whatever the fee, payments can be made at any pace you can afford. While the case cannot be filed until the fee is paid, you can take any amount of time to pay it without any interest or other charges added over time.
Consultations for those considering bankruptcy are always free.
WHY HIRE ME?
Experience and personal attention. Filing bankruptcy is a difficult decision, both financially and personally. Often times it is a last option. Having practiced bankruptcy law for over 15 years, all here in Sacramento, I am aware of the anguish that often accompanies the decision to file. I am also aware of the relief a bankruptcy can bring. Debt takes a toll which, for most, is more personal than financial. My approach in representing clients is to address the personal perspective with the same understanding as the financial picture. Only through personal attention to my clients’ personal concerns can this be accomplished.
When you hire my office to file your case, you hire me. I have no associates, only an assistant. From the commencement of your case until its completion, I will represent you—personally. This is how this practice should be done, and it is how I do it.
With over 15 years of bankruptcy practice here in Sacramento, I am experienced in all aspects of the bankruptcy filings. I know the judges, the trustees and the court personnel. I am intimately familiar with the procedures, protocol and practice of processing a bankruptcy case that comes only with experience. And for that there is no substitute.
I invite you to a free consultation to consider your bankruptcy options to regain your financial freedom. Call me for bankruptcy help.