Isn't filing a bankruptcy just a matter of doing the paperwork?

For some reason, many people believe anyone can prepare a bankruptcy petition at any time and get rid of debt.  Nothing can be further from the truth.  While it is true that anyone can file a chapter 7 or 13 bankruptcy, the trustee and the bankruptcy court will look at many factors (including your assets, income, nature of debt, etc.) in your case before allowing you to obtain a discharge.   For this reason, it is important for every potential Debtor to do the research whether on their own or through competent counsel before filing.

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If I file for bankruptcy will I lose my property?

The vast majority of people are able to keep all of their possessions after filing bankruptcy.   How?  Federal and state laws have been created to allow you to exempt your assets and protect them from being taken by the Bankruptcy trustee.  The fact is most people do not have enough valuable assets to exceed the exemption amounts provided under the law.


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If I file for bankruptcy what will happen to my home?

This is a very common concern for potential bankruptcy filers.  Under state law, bankruptcy filers may take a homestead exemption of $50,000 to $150,000 depending on their marital status, age, and physical health.  If the equity in the home exceeds the appropriate homestead exemption, the bankruptcy trustee may elect to sell the property and administer the excess equity for the benefit of the creditors.  Thus, it is very important for homeowners to know the market value of their homes before electing to pursue bankruptcy.


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Question 4

How long does Bankruptcy stay on my credit report?

All negative information such as late payments, collection accounts, legal actions, repossessions, defaults, and the like stay on your record for 7 years. Similarly, a bankruptcy filing will stay on your credit report 7 to 10 years. However, many people interpret this as being unable to obtain credit for the next 7 to 10 years following a bankruptcy filing. Nothing could be further from the truth. In fact, there are many steps Debtors can take post-bankruptcy to rebuild credit and purchase property (see question 6) 


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Question 5


If I file for bankruptcy, will I ever be able to obtain credit again?

Many people are surprised when they are told they can obtain credit cards and purchase a car upon receiving a discharge in their bankruptcy.  Yes it may sound incredible, but it is true.  Why?  Many filers suffer years of poor credit rating and high debt to income ratio before finally deciding to file bankruptcy.  For such filers, bankruptcy lowers the debt to income ratio and it permanently stops the creditors from reporting late charges, defaults, and other negative remarks to the credit bureaus.  As a result, many Debtors find that once they receive a discharge they can obtain car loans and credit cards without much hassle.  These loans, however, usually come at a greater cost to the Debtor with high interest rates.   

With regard to purchasing an automobile, many Debtors qualify for an auto loan immediately upon receiving their discharge despite the recent bankruptcy and negative credit.  The cost to the Debtor will be in the form of higher interest rates.  With timely payments over an extended period of time (1 to 2 years) many lenders are willing to refinance the vehicle for a better interest rate.  

As for home purchases, many lenders will grant financing, provided the Debtor maintained perfect credit for at least two years after receiving the bankruptcy discharge, and saved a significant down payment to go towards the purchase price.  In some cases, a Debtor may qualify for a home loan prior to this two year period and with little or no down payment.  Whether you qualify for a home purchase will depend on many other factors in addition to your credit and down payment.  The point here is that it is not impossible to purchase your dream home with a bankruptcy on your record.

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Will anyone find out about my bankruptcy filing?

Although it is a matter of public record, unless you are a famous person or a major corporation and the filing is picked up by the media, it is very unlikely that your friends, family, or co-workers will ever find out about your bankruptcy filing.  In most cases no one other than the debtor, creditors, attorneys, and court officials will ever know about your bankruptcy filing.


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Will the bankruptcy affect my spouse?

It depends.  If the debt you are seeking to discharge was acquired prior to your marriage and all other criteria are met to file a bankruptcy, your spouse should not be affected in any way.  In a community property state like California, however, debts of one spouse are considered the debts of the other spouse (community debt) if such they were acquired during the course of the marriage (absent a prenuptial agreement).  If most of the debts you are seeking to discharge were acquired during your marriage, it may be in the best interest of both you and your spouse to file together.  In either event, you should seek the advice of competent legal counsel before filing.


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Will I have to go to Court?

Anyone who decides to file bankruptcy must attend a hearing(s), also known as the §341(a) meeting of creditors.  The hearing usually takes place 30 to 45 days after the bankruptcy petition is filed and is presided over by the Trustee assigned to the case.  Those who decide to use a paralegal service or prepare the bankruptcy petition on their own must represent themselves at this hearing.  All testimony at this hearing will be given under oath and penalty of perjury.



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What is the fee for representing someone in Chapter 7 or Chapter 13?

In chapter 7 cases, the fees charged vary case to case based on the complexity of issues and the amount of time we anticipate spending on your case.  After discussing your case in detail over the first initial free consultation, we will be able to quote you a flat fee.  In most chapter 13 cases, we may agree to have some of the attorney fees be deferred and paid through your Chapter 13 Plan.  In either case, most clients can retain our office and refer creditor calls to us by signing a retainer agreement and leaving a deposit. And since many clients are in financial distress, we work hard to accommodate the needs of every client by making reasonable payment arrangements.



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Why do I need an attorney vs. a paralegal or myself?

Many people do not know the distinction between licensed attorneys and paralegals / legal document service providers and often choose the latter to save money.  For one, paralegals cannot give any legal advice.  This means, they can only prepare and type the petition based on the information you give them (in other words, you will be your own attorney throughout your bankruptcy).  As such, you will be responsible for doing the legal research to exempt your assets, answering the questions in the petition, preparing your schedules, and representing yourself at the §341(a) hearing.  Unless you have the time, knowledge, and experience to do this on your own, you will be better served to leave your worries with an experienced attorney who can do all of these things and advise you throughout your bankruptcy.  Filing a bankruptcy is not as simple as it may seem.  Even simple mistakes can be extremely costly, especially if you have valuable assets (including your home).


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Still have questions? Contact us today for a free consultation.