Frequently Asked Questions
Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 vs. Chapter 13 bankruptcy: Both Chapter 7 and Chapter 13 bankruptcy can help individuals achieve debt relief, but there are many differences between the two:
Chapter 7 bankruptcy liquidates debt. Debtors are not required to pay back debt as they are in Chapter 13 bankruptcy. Not everyone is eligible for Chapter 7 bankruptcy. A means test is administered to determine if the debtor qualifies. California has exemptions that allow you to keep certain property.
Chapter 13 bankruptcy reorganizes debt. Debtors are required to repay a portion or all of their debts once the debts have been restructured. The repayment plan usually lasts a period of three to five years. Chapter 13 bankruptcy stops foreclosure. Debtors are often able to keep certain assets after filing Chapter 13.
Will I be able to keep my assets?
California has exemption laws where you are allowed to exempt certain property and be able to keep the property in Chapter 7 cases. You will not lose any assets or property in Chapter 13. Each State has different exemption laws and limits. Before filing a Chapter 7, we explain to you what exemptions you are entitled to claim. Most chapter 7 cases are considered “no asset” cases, meaning there are no assets at all, or the assets are so insignificant in value to the trustee that they are not worth administering.
Can I use my credit cards before if file bankruptcy?
No. Use of credit-cards within 90 days of filing a bankruptcy petition is grounds for, at best, a finding that the debt for that card may be non-dischargeable and, at worst, a criminal charge for fraud.
Can some debts be left out of my bankruptcy?
No. Under the Bankruptcy Code, all debts must be disclosed and listed in the bankruptcy petition.
Can I be fired from my job for declaring bankruptcy?
No. It is a violation of Federal law under the Bankruptcy Code for terminating an employee’s employment or denying employment to a potential employee based on having filed for Bankruptcy.
Are my retirement savings protected?
If your retirement is safely ensconced in a qualified retirement plan as defined by the IRS Code, such as a non-rolled-over 401(k) or an IRA or Roth IRA, the funds in that plan have a limitless exemption to protect them from liquidation in a bankruptcy.
What is an automatic stay?
This is an injunction that goes into effect automatically upon the filing of a bankruptcy. It strictly prohibits the commencement or continuation of any acts to collect on a debt that arose prior to filing the bankruptcy. This includes enforcement of judgments, creating or perfecting liens, and many other actions. (It does not apply to collecting alimony maintenance and support).
I am being sued and/or I have a judgment against me, is it too late to file bankruptcy?
No. Assuming that it is a dischargeable debt, you can still file bankruptcy and discharge the debt, even though a creditor has filed a lawsuit or has obtained a judgment against you. Certain debts are not dischargeable, i.e. debts incurred through fraud, restitution fines, personal injury judgments caused by driving under the influence, domestic support obligations etc.
Will my Credit be Ruined if I File for Bankruptcy?
While your credit will not be completely ruined if you file for bankruptcy, it will remain on your credit report for up to ten years. If you have a regular, decent income you will typically find that you can receive credit even after filing for bankruptcy. Most people find they can still purchase an automobile after filing for bankruptcy and can then begin rebuilding their credit from there.
When will creditors and bill collectors stop calling me?
As soon as you have retained our services, all calls from creditors and collectors will be directed to us. Once you file either Chapter 7 or Chapter 13, the “automatic stay” goes into effect. The automatic stay prohibits all creditors from taking any action to collect unless the Bankruptcy Court gives them permission to do so.
Can I Keep My Paychecks and Earnings?
Yes. Any garnishment of your check due to a judgment by a creditor must stop immediately after the bankruptcy has been filed.
Do I have to go to court?
Approximately 30 to 40 days after your filing there is a Meeting of Creditors known as a 341a. Creditors seldom appear at these meetings since they often have little or no recourse, at this point. This hearing will generally take a few minutes, where the appointed Trustee asks the Debtor(s) questions pertaining to the petition.
How often can I file bankruptcy?
You may file a Chapter 7, eight years after a prior Chapter 7 discharge and four years after the discharge of a Chapter 13. A Chapter 13 may be filed 4 years after a prior Chapter 7 discharge and 2 years after a prior Chapter 13 discharge.
Will my spouse be affected?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt. However, In community property states, like California, either spouse can contract for a debt without the other spouse’s signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouse’s signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed.