What is bankruptcy?

Bankruptcy is a way for people who cannot repay their debts to get a fresh financial start through the federal courts. Once bankruptcy has been filed, creditors are no longer permitted to contact you in an attempt to collect the debts you owe them, and existing debt can be wiped out or have the payments rescheduled.

What types of debts can bankruptcy eliminate?

In California, it is possible for nearly all legal requirements to repay your debts to be discharged or eliminated so you can get a fresh start. While bankruptcy does not automatically eliminate a mortgage, it can stop foreclosure proceedings and give you a chance to make the loan current. Bankruptcy will prevent repossession of your car or other property, can restore utilities or prevent them from being turned off, stop garnishment of your wages, and stop creditors from harassing you with attempts to collect.

Which financial obligations aren't discharged in a bankruptcy?

Certain secured obligations aren't usually covered in a bankruptcy. Basically, creditors who have a lien or title to property such as real estate and cars don't lose the right to collect on their debts, although they can be forced to accept payments during the bankruptcy process. As long as you make the payments, you can keep the property, but if it is taken, additional payments don't have to be made.

Other types of debts are exempt from bankruptcy, including alimony payments, child support payments, and particular other debts arising from a divorce. Some taxes, criminal fines, restitution payments, and student loans are also non-dischargeable and payments need to be continued on those. When a loan that had a co-signer such as a friend or family member is discharged during bankruptcy, the co-signer may still be required to to make the payments, and any debt you take on after filing for bankruptcy will need to be repaid as agreed.

How often can I file bankruptcy?

Chapter 7 bankruptcy can be filed after six years have passed since the last bankruptcy filing. Chapter 13 bankruptcy has no time limits or considerations.

What are the different types of bankruptcy?

The law provides four varieties of bankruptcy, although one is reserved for family farmers and another is used only by businesses or those whose debts are extremely large. Most individuals file either Chapter 7 bankruptcy or Chapter 13 bankruptcy.

Chapter 7, or straight bankruptcy, can discharge most unsecured debt and requires that property over a certain amount is given up so it can be sold and the proceeds given to the lender. Chapter 13 bankruptcy is a restructuring of existing debt and requires you to use your current income to repay the debts through a filed plan.

Any form of bankruptcy can be filed either individually or jointly with a marriage partner.

What is the cost to file for bankruptcy?

The current court fee for filing Chapter 7 bankruptcy is $299, and Chapter 13 costs $274, whether individual or joint. The court may permit these fees this to be paid in installments. These fees are required by the court and do not include any attorney fees.

What property can I keep in California?

Under Chapter 13, you can keep all of your property as long as your plan meets the legal requirements. Chapter 7 bankruptcy is more complex and follows a list of exemptions a bankruptcy attorney with Moses A. Cohen & Associates can discuss with you, but generally as long as you continue to make payments on your home and car, you can retain them. Since Chapter 7 discharges payments on unsecured debt, it is often easier to make the payments that remain.

What can I own after bankruptcy?

Exempt property can be kept after bankruptcy, as can anything purchased after filing.

Which of my debts won't be discharged in bankruptcy?

Payments or past-due amounts for alimony, child support, fines, and some taxes will not be discharged and you must continue to pay them. Also, mortgage debt or those secured by lien will normally remain, and tax debt is exempt from bankruptcy, as are criminal fines, loans judged to have been received through fraud, and certain other exempt debts.

How will filing for bankruptcy affect my credit?

Your filing will appear on your credit record for ten years. If you're filing for bankruptcy, your credit rating may already be poor because of missed payments, so the bankruptcy probably won't make things worse. In fact, bankruptcy will usually raise the debtors credit score by eliminating outstanding debts. Since your old debts are wiped out, however, you may find it easier to make your payments and pay your current bills.

Are utility services affected?

Public utilities cannot cut off or refuse to give you service simply because you filed for bankruptcy, but they can require a deposit for future service. You may also have to repay any bills for service you receive after the date of filing.

What about co-signers?

The co-signer may have to pay the debt even though you have the debt discharged or file for bankruptcy.

I'm married, can I individually file for bankruptcy?

You can file individually, but your spouse would then be liable for any joint debt, and your bankruptcy may appear on your spouse's credit report.

Will filing bankruptcy stop the calls from bill collectors?

Yes. Once you file for bankruptcy, bill collectors are prevented from attempting to collect on your debts once they are aware of the filing. Although it may take them a few weeks to receive the notice, if you inform them and provide your case number, the calls will stop.

Can I erase my student loans by filing bankruptcy?

With two exceptions, student loans are not discharged during a bankruptcy. If the loan is not insured or guaranteed, it may be discharged. It may also be discharged if you can prove that repaying it will "impose an undue hardship on the debtor and the debtor's dependents."

If you have other questions, or are considering bankruptcy, a bankruptcy attorney with Moses A. Cohen, Attorney at Law can answer all your questions and provide valuable assistance in filing. Please contact us at 310-746-3733 or 760-595-8883 to arrange a free private consultation today!