Frequent Bankruptcy Questions from Debtors in California

Manuel Alzamora Juarez

Written by  Pro

Bankruptcy Attorney

Contributor Level 20

Posted over 3 years ago. 3 helpful votes

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What is bankruptcy?

It is a legal way to get a new start in life when your debts overburden you and you cannot make ends meet. It is a serious undertaking and you must consider it very carefully; hopefully, with the aid of an attorney familiar with the Court rules and procedures.

When Can I go bankrupt?

You can go bankrupt when you are insolvent, i.e., your expenses exceed your income. This occurs often times after the loss of a job, illness, death in the family, divorce etc.

What is Chapter 7?

Chapter 7 is a legal process that allows the Trustee to liquidate your unexempt assets, distribute any excess recovery proceeds among your secured creditors, if any, and discharge all your unsecured debts. This process gives you the opportunity to start life anew. There are some limits of secured and unsecured debts and a means test to find out your availability to qualify for Chapter 7.

What is Chapter 11?

Is a chapter 13 for businesses. It allows the business to go on producing income but keeping the debts current and must be paid in advance or in cash. There must be a Plan accepted by a committee of creditors and it is a more involved process than a consumer bankruptcy.

What is Chapter 13?

Chapter 13 is a legal process that allows you time to negotiate with your secured creditors such as banks, savings and loans,I.R.S. etc. and lets you keep your valuable assets, i.e. a home, as long as you are able to make the monthly payments. The advantage of Chapter 13 is that it allows you to work out the arrears on a residence or an investment rental or make monthly payments to the IRS.

There are some limits of secured and unsecured debts and a means test to find out your availability to qualify for Chapter 13.

If your Chapter 13 Plan is accepted, the Trustee will discharge all your unsecured debts after a period of 3 or 5 years and you get the opportunity to start life anew and keep your valuable assets.

Can I keep my house if I file for bankruptcy?

Yes, bankruptcy lets you keep your home, as long as you are able to make the monthly payments.

Can I keep my car if I file for bankruptcy?

Yes, bankruptcy lets you keep your car, as long as you are able to make the monthly payments. Also, under Chapter 13, if your car is worth less now than your actual debt, you may be able to reduce that debt. However, if you own the car and your car is worth more than your allowed exemption, you may have to buy it from the Trustee to the extent the equity in your car exceeds your exemption.

Can I go bankrupt if I do not have a government issued identification?

You must show a governmental issued ID. Also, in California, the Trustees in the Northern District check Driver licenses and or Social Security cards routinely, prior to the start of the 341 meeting of creditors.

Can I prevent foreclosure with a bankruptcy?

Yes, but only temporarily. You must take the time to aggressively negotiate with your financial institution to modify your loan. If you are successful, then you can present a Chapter 13 plan that will be accepted by the Court. However, it is very important to remember that you must make the Chapter 13 Plan payments and continue paying the mortgage. An anomaly that is hurting consumers lately is the bad advice that debtors are receiving by deceptive modificators, who advice debtors not to pay their mortgages. This is wrong because the excessive arrears could forestall your Chapter 13 Plan.

Can I negotiate with the bank for a modification while I am in bankruptcy?

Yes. Your attorney should write a letter authorizing you or your designee to negotiate with your financial institution while you are in bankruptcy.

How long will it take before I get a credit card again?

Hopefully a couple of years but some debtors have been offered credit cards faster than that. It all depends on your previous credit experience.

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Additional Resources

Nolo Press Bankruptcy Guide

Manuel A. Juarez, Esq.

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