What is Bankruptcy?
Bankruptcy laws were recently modified by U.S. Congress in recognition of America's current precarious economic situation. The intent of bankruptcy law is to allow a "fresh start" to Americans in pursuit of the American Dream (Title 11, U.S. Bankruptcy Code, pursuant to the U.S. Constitution, Article 1, Section 8).
What Can Bankruptcy Do for Me?
In pursuit of Congress' intent of giving debtors a "fresh start," the Bankruptcy laws were drafted so that debtors can STOP HOME FORECLOSURES, KEEP PERSONAL PROPERTY, and REMOVE ALL CREDIT CARD DEBT. Knowing whether you will be able to keep your real estate or personal property depends on your individual circumstances, which mandates a comprehensive review of your financial situation by a qualified Bankruptcy Attorney. Many people with a regular income will be able to retain their homes and cars with reasonable payment plans done through the bankruptcy court.
What is a Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is a "liquidation" bankruptcy -- it cancels most type of debt, but the debtor must let the bankruptcy trustee liquidate (or sell) their nonexempt property for the benefit of the debtor's creditors. 99.9% of Chapter 7 cases are classified as "no asset" cases because there are no nonexempt assets for the trustee to liquidate after all the proper exemptions have been applied to the debtor's Bankruptcy petition. This means that most Chapter 7 filers get to keep all of their property. Generally, people file for Chapter 7 Bankruptcy if they have a large amount of unsecured debt, such as credit card debt or medical expenses, that they are no longer able to pay. Unemployment, unexpected medical expenses, and/or divorce are common causes for debtors that file for Chapter 7 Bankruptcy.
What is a Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is a wage earners plan, or "repayment plan" bankruptcy. Chapter 13 enables individuals with regular income to develop a plan to repay all or a portion of their debts over time, under the supervision of the bankruptcy court. Chapter 13 Bankruptcy allows the debtor to keep their property, while using their income to repay some or all of their debts over the course of a 3-5 year plan. A Chapter 13 can be a good solution for people who need time to pay off certain debts and who have enough income to meet the Chapter 13 requirements. In Chapter 13, the debtor keeps all their property regardless of value. However, the Chapter 13 debtor will have to pay their unsecured creditors (credit card debts, medical debts, and most court judgments, etc.) the value of the property the debtor would lose if they filed for Chapter 7 Bankruptcy.
What is a Chapter 11 Bankruptcy?
A Chapter 11 Bankruptcy case is frequently referred to as a "reorganization" bankruptcy. Chapter 11 Bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. When a business is unable to service its debt or pay its creditors, the business or its creditors can file for protection with a federal bankruptcy court under Chapter 7 or Chapter 11. In a Chapter 7, the business ceases operations, a trustee sells all of the business' assets, and the proceeds are then distributed to its creditors. Any residual amount is returned to the owners of the company. In a Chapter 11, the debtor remains in control of its business operations as a "debtor in possession" and is subject to oversight and jurisdiction of the court. Chapter 11 affords the debtor in possession a number of mechanisms to restructure its business. (Cont. on website...)
Property You Can Keep After Filing for Chapter 7 Bankruptcy
In a Chapter 7 Case, debtors can keep all the property that is exempt from claims of creditors. In determining whether property is exempt, debtors must keep a few things in mind. The value of the property is not what you paid for it, but what the fair market value of it is now. The Trustee is interested in the resale value of the debtor's property, so for most personal effects, this is the "garage sale" value of the property. Debtors need to look at the equity in the property. The Attorney for the debtor will count their exemptions against the full value of the property, minus any money that the debtor owes on mortgages or liens.
What Debts are "Discharged" in a Chapter 7 Bankruptcy?
A Chapter 7 Bankruptcy not only allows the debtor to keep exempt property, but it also discharges (or releases the debtor from personal liability) for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communication with the debtor, such as telephone calls, letters, and other personal contact. Som of the main dischargeable debts include, credit card debts, medical bills, civil lawsuit judgments, personal loans/promissory notes, etc..
What Debts are NOT Discharged in a Chapter 7 Bankruptcy?
There are certain debts that Bankruptcy does not affect at all -- a debtor will continue to owe them just as if they never filed for Bankruptcy. Some non-dischargeable debts include domestic support obligations, certain tax debts, court fines and fees, DUI debts, HOA fees, etc..
Will the Debtor have to go to Court?
In most Bankruptcy cases, the debtor only has to go to a proceeding called the "Meeting of Creditors" or a "341(a) Meeting" to meet with the Bankruptcy Trustee and any creditor who chooses to come. This meeting will take place about 30-40 days after the bankruptcy filing. The Trustee is not a judge, but an individual appointed by the U.S. Trustee to oversee the debtor's case. Most of the time, the 341 Meeting is a short and simple procedure where the debtor is asked a few questions about the Bankruptcy forms and the debtor's financial situation. Occasionally, if a creditor or the Trustee files a motion or an adversary action or if the debtor chooses to dispute a debt, the debtor may have to appear before a judge at a hearing (very rare circumstances). If the debtor needs to go to court, the debtor will receive notice of the court date and time from the court and/or from the Attorney representing the debtor.
How Does Filing For Bankruptcy Affect my Credit?
There is no clear-cut answer to this question. Unfortunately, if the debtor is behind on bills, the debtor's credit has likely already been negatively impacted. Filing for bankruptcy is a one-time event that many times is less damaging to a debtor's credit than having a history of unpaid accounts. What is a surety is that filing for Bankruptcy can be reported on a debtor's credit report for 10 years after the date of filing; however, if the debtor has income, they should be more credit worthy after filling for bankruptcy since their old creditors no longer have a claim on their future income and the debtor will be in a better position to pay their current bills. Once a bankruptcy case is complete, the balance of all the debtor's discharged debts will be reported as "0." The history of delinquencies may be reported; however, the balance of these debts will be zero.
Can a Debtor Repair Their Credit After Bankruptcy?
Negative credit history is just that...HISTORY. Banks and other financial institutions are more aware than ever of the status of the economy. Filing for bankruptcy is not uncommon and doing so in no way dooms the debtor to perpetual credit rejection. Countless Americans that recently filed for Bankruptcy have earned the highest credit ratings possible after strengthening their financial presence by saving and using credit carefully. The best way for a debtor to restore their credit and obtain new credit is to make payments on new debts on time. Filing for Bankruptcy allows debtors to take financial management courses, which helps debtors learn how to repair their credit and ensure they will never have to file for bankruptcy again. Debtors should review their credit report after completing their bankruptcy to ensure that their old debts are noted as "discharged" on their credit report, since it is proof the old discharged debts are no longer legally enforceable.
Can a Debtor get a Credit Card After Filing for Bankruptcy?
YES!!! There are several options available to debtors. While technically not a credit card, debtors can use a bank or debit card to perform activities for which the debtor would normally use a credit card. The debtor may also be able to keep the credit card they already have if the creditor grants approval. If these options do not work, the debtor can get a secured credit card, which is backed by the debtors own bank account. Debtors must be careful. Most debtors are inundated with credit card company offers post-bankruptcy discharge. Credit card companies view debtors whose debts have been discharged in Bankruptcy as perfect clients as their debts after discharge are "0" and debtors cannot file for Bankruptcy for another 8 years. BE CAREFUL!!! Debtors should not overextend themselves and sign-up for a bunch of new credit cards simply because they qualify. Debtors don't want to be in another financial catastrophe without the fallback potential of fi
Will my utilities be affected after bankruptcy?
Public utilities, such as electric company, cannot refuse or cut-off service because a debtor filed for bankruptcy. However, utility companies can require a deposit for future service and debtors have to continue making payments on bills that arise after the bankruptcy petition is filed.
Can I be discriminated against for filing for bankruptcy?
Bankruptcy law strictly prohibits discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case. The law prohibits the following forms of governmental discrimination: terminating an employee, discriminating with respect to hiring, or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely on the bankruptcy filing.
How does bankruptcy affect loan co-signers?
If someone has co-signed a loan with the debtor and the debtor files for bankruptcy, the co-signer will still have to pay the debt. The debtor should list the co-signer as a creditor in the bankruptcy petition since the co-signer may have a contingent claim against the debtor
Can a married person file bankruptcy without a spouse?
Yes, but the spouse of the debtor will still be liable for any joint debts. In California, married couples are not allowed to double their exemptions. In some cases, where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file. There are numerous variables that impact a married person's decision to file individually.
Do I need an attorney to file for bankruptcy?
It is not a court requirement to hire an attorney to file a bankruptcy, however, the legal system is a maze of complex laws, rules, and regulations that takes many years for the most competent attorneys to master. In other words, it is very easy to make mistakes and mistakes are time consuming and costly. In addition to dealing with the stress of guiding yourself through the complex maze of the legal system, banks and credit card companies typically hire teams of aggressive attorneys to fight bankruptcy cases. An experienced bankruptcy attorney is in a much better position to not only help you maximize the bankruptcy laws to discharge as much debt as possible and ultimately save you money, but also to save you the time, stress, and aggravation of transacting with harassing creditors while figuring out how to weave yourself through the complex bankruptcy laws.
Will filing for bankruptcy stop harassment?
Yes! Once you hire the Law Offices of Sean S. Hanley to represent you, you can forward the harassing calls you receive from creditors to us. We will work expeditiously to utilize the benefits of the bankruptcy laws, which, if successful, will "discharge" (release) you from personal liability for many types of debts. In other words, you will no longer be legally required to pay any debts that are discharged. For millions of Americans, this translates into not having to pay thousands of dollars of outstanding credit card debt, medical bills, and many other bills and debts that a bankruptcy attorney can detail for you. Once a debtor receives a discharge, creditors are prohibited from taking any form of collection action against them, including filing lawsuits, making harassing phone calls, reporting their debt to credit reporting bureaus, threatening them with letters and/or calls from attorneys, and other similar actions.
Can I negotiate with my creditors?
Debtors can always negotiate with their creditors, however, many creditors make it extremely difficult by refusing to negotiate with individual debtors, unless the debtor has legal representation and/or demanding settlement money "up front" with no payment plans. Additionally, creditors typically will not negotiate with debtors, unless the accounts are very delinquent and, worse yet, after the debtor pays the money due, their credit will not be restored.
Can a paralegal or other service/agency represent me?
Paralegals and other legal document preparers cannot represent a debtor in any way, including giving you legal advice or representing you in court (only attorneys can legally represent you). People often hire paralegals or other legal document preparers because it is cheaper. The problem - You Pay For What You Get. Bankruptcy cases are very complicated and it takes the full attention of an experienced bankruptcy attorney to get the very best outcome for you. Hiring a non-professional will risk your case being done incorrectly and hence the protections and benefits of bankruptcy not being fully utilized, which will ultimately cost you much more than simply hiring a bankruptcy attorney. Get it done once... Get it done right!
Is using a debt consolidation company a viable option?
It depends on your situation and on the consolidation company. You must be extremely careful when dealing with consolidation companies as many debt consolidation company plans consist of phony deals that enrich the company at your expense. Common End Result for Debtors that Utilize Debt Consolidation Company Services: The debtor's credit will be just as bad as, or worse than, if they filed for bankruptcy. Worse yet, the debtor will still be in debt, have to pay their debts in the future (debts aren't discharged) and the debtor will be out the money owed to the Debt Consolidation Company.
Should I feel remorse for "taking the easy way out?"
Bankruptcy is a law enacted by the U.S. Congress, called Title 11, U.S. Bankruptcy Code, pursuant to the Constitution, Article 1, Section 8, which was enacted to ensure that Americans, who are suffering difficult financial times, can get a "fresh start". It is not a gimmick or a loophole. According to recent statistics, bankruptcy filings in California have steadily increased over the last few years. Bankruptcy filings from 2007 to 2010 in California are as follows: (2007 - 70,653); (2008 - 130,503); (2009 - 205,705); (2010 - 255,041) Bankruptcies filed in San Jose, CA, hit an all-time high in 2010 -- 13,366 people and businesses filed for bankruptcy in 2010, which was a rise of 16% from 2009. Evidence suggests that the trend of bankruptcy filings will continue to rise in the the San Jose Division of the U.S. Northern California District Bankruptcy Court in the near future. These statistics show that if you need to file for Bankruptcy, you are not alone.
How much does Bankruptcy cost?
Attorney fees vary depending on your particular circumstance. We have payment plans available for most cases and we will work with you to come up with a fee and payment plan that you are comfortable with.