Bankruptcy questions

General Bankruptcy Questions

Does Bankruptcy get rid of all debts?

This is one of the most common bankruptcy questions, and the short answer is not necessarily. Some examples are alimony, child support, certain property settlement agreements in divorce, certain income tax liabilities, Department of Equalization sales tax liability, Internal Revenue Service pay roll tax liability or trust fund liability, and most student loans. Also, many debts created by fraud, embezzlement, or conversion can not be discharged. (An example of this would getting a large cash advance just before filing. That could be considered fraud.)

You say “Most student loans”. Does that mean some can be discharged?

Issues regarding Federal Student Loans seem to be a moving target currently. If you click here Does Bankruptcy get rid of all debts I have tried to explain how it has been the last few years. But that seems to be changing. You can read more about that by clicking here. Student Loan Bankruptcy Discharge May Now Be Possible

If I like a particular credit card, can I not list that company and keep the card?

You must list ALL debts that have a balance, because all creditors must be treated equally.

What if I pay a card off? Will they let me keep it?

We cannot speak for the creditors policies. However, our experience is if you pay off one thinking you will be able to keep it, the likelihood is the creditor will still cancel your account. Also, because creditors have to be treated equally, if you pay more than $600 within 90 days of filing the Trustee can and may make them give it back and disperse it to all creditors who file claims in your case.

Will I Be Able to Save my Home by Filing for Personal Bankruptcy?

One of the big benefits of declaring personal bankruptcy is this: from the moment your Chapter 7 or Chapter 13 bankruptcy is filed with the court, foreclosure actions against you must stop. The foreclosure can be held off while you catch up the payments in a Chapter 13. However, you must be able to show the court that you CAN make the regular payments from now on, plus an amount to catch up what you are behind to make it work. If you can not make the payments the lender will get relief from the bankruptcy fairly quickly.

Can I transfer my car, boat, collectibles, home, tools, etc. to another person to keep those items out of bankruptcy?

This is one of the most common bankruptcy questions and is NEVER a good idea. Transferring property to keep it away from creditors, and out of the Bankruptcy can be considered fraud. The transfer can be reversed for 2 years under Bankruptcy Law, and 4 years under California’s Fraudulent Transfer Act. It could also be considered a crime, and/or you could lose your discharge of the debt.

Are bounced checks dischargeable in bankruptcy?

Usually the DEBT is discharged. However, bouncing checks is a crime and bankruptcy does not keep you from being prosecuted if a criminal complaint is filed by the District Attorney.

Is there a difference between Chapter 7 and Chapter 13 as to what debts can be discharged?

Yes. (Example: It is sometimes possible to get rid of a second mortgage in Chapter 13, but not Chapter 7, depending on the facts) The details as to what can and cannot be discharged, and in which chapters are more than can be easily listed here, and are specific to your case. If you want to know specifics call for a free consultation and we can further answer your bankruptcy questions.

Will my credit union or bank close my bank accounts if I file bankruptcy?

If a credit union loses money because of the Bankruptcy, they will likely cancel your membership. With some banks there is a risk, if you owe them money, they will clean out, or freeze your account when they find out you filed. The short answer is if you owe a bank money you should open an account somewhere else.

Will my bankruptcy affect a co-signer on the debt?

When the person co-signed they were guaranteeing the debt would be paid by them in the event you do not pay. If they do not file their own Bankruptcy the creditor can and likely will go after them. Sometimes, in Chapter 13 it is possible to protect them. Call for more information on these bankruptcy questions.

May my employer fire me for filing bankruptcy?

No. Federal law has an anti-discrimination section in the Bankruptcy Code (11 U.S.C. § 525) that precludes a public or private employer from discriminating against any employee solely because he or she filed for bankruptcy. Employers almost always honor this section and there are normally remedies if they try to violate it.

How long does bankruptcy remain on my credit report?

A bankruptcy can be listed on your credit report for up to 10 years.

Can I obtain credit before it falls off my credit report?

How quickly you recover will be up to you. You have to rebuild your credit score. The average debtor is usually back on track in 3 to 5 years. There are creditors that want to give you credit, because they make money giving you credit.

What is credit counseling and must I take it?

The new Bankruptcy law requires you to do 2 counseling sessions on debtor education. One session before you file, and one after. (Your ticket in and your ticket out) Both are done on the internet, and not difficult. They can be completed at our office if you do not have internet access. Our office will help you get through them, and it is part of your total fee.

Do your fees include ALL THE FEES I will have to pay?

Yes. We charge one fee and it includes the attorney’s fees, the filing fee for the court, the counseling, and credit reports.

Chapter 7 Bankruptcy Questions

How do I qualify for Chapter 7?

Your income is a factor that must be looked at. If you make too much money, (based upon a formula congress created in 2005) then you are not allowed to do Chapter 7. It is simply a fairness argument. If you can afford to pay SOMETHING (Based upon that formula mentioned) then they will not let you simply walk away from your debts. However that does not necessarily mean you have to pay ALL of it back. You pay back based upon the formula. Contact us for an appointment and we will help you go over the bankruptcy questions to find out exactly what YOUR situation is, and what you qualify for.

What is a discharge?

Chapter 7 discharge is an order signed by the bankruptcy judge which wipes out most unsecured debt. This keeps those creditors from attempting to collect the debt from you. You will normally receive your Discharge about 4 months after the Chapter 7 case is filed. There are some exceptions to discharge, (like most student loans). If you are not sure, ask us.

What is a Chapter 7 trustee?

The Trustee is the one who administers your case. It is their duty to look for things of yours to sell and pay the creditors. However, most Chapter 7 cases do not have any property that can be taken and sold.

What is a meeting of creditors?

The meeting of creditors is a hearing with the Chapter 7 trustee. Debtor(s) are examined under oath concerning their assets, debts, and other bankruptcy questions. It is also your creditor’s “opportunity” to question you while you are there and under oath. Creditors who choose to attend the meeting, either in person or through their attorney, can ask questions about the case. Normally creditors do not come. The average meeting of creditors lasts about six minutes and is held approximately 30 days after the Chapter 7 bankruptcy is filed. You MUST appear at the meeting of creditors. Your attorney will appear with you at the meeting.

Can creditors ask to have their debt held non-dischargeable?

Yes, but it is not easy. “non-dischargable” means you cannot get rid of that debt. Creditors have a right to complain if they believe there is a good reason. (Example: getting a large cash advance on a credit card the day before filing would likely be deemed non-dischargeable, and maybe even fraud)

What is a Reaffirmation Agreement?

To avoid debt discharge in a bankruptcy action, mortgage companies and car, furniture, and appliance creditors typically want the debtor to sign a document known as a Reaffirmation Agreement. Signing this agreement results in the debtor waiving his Chapter 7 discharge and agreeing to continue to make payments as called for by the original loan documents.
You should consult your attorney before making any decisions regarding reaffirmation.

What are exemptions?

The word exempt means: “released from, or not subject to, an obligation, liability, etc.” (Ref: When you file Chapter 7 you are giving permission to the Trustee to sell things that you can NOT exempt. (Examples are: the new Jaguar that is paid for, the Lear jet, or the $10,000.00 antique hutch you inherited from grandma). For most debtors in California the exemptions cover everything, so there is nothing left for the Trustee to take and sell.
If you are concerned about your assets, and what CAN be exempted, call for an appointment with one of our attorneys to determine your rights and what may be at risk.

What is redemption?

In Chapter 7, if an asset is exempt, it can be purchased from the creditor by paying what it is worth NOW in a lump sum (not payments). The balance of the debt will be discharged. An example would be a computer that has gone down in value at the time of bankruptcy to $700 and the balance of the debt owed on the computer is $2,000. The computer can be redeemed for $700 and the $1,300 difference is discharged. The process requires filing a motion with the court, and should be discussed with your attorney.

Can the trustee or a creditor object to my Chapter 7 discharge?

Objection to discharge comes under federal law. If someone with standing objects and the court sustains the objection, all of the debts owed by the debtor can never be discharged in bankruptcy. An example of how this can come about is where the debtor has transferred an asset within two years (or 4 years under California Law) of filing bankruptcy with the intent to hinder, delay or defraud creditors or hide it from the Chapter 7 trustee. (like selling your car that is paid for to your brother for five dollars.) This can also happen if the debtor is unable to explain a reduction in assets just prior to bankruptcy. An example of this would be you bank statement shows a $10,000 withdrawal the day before you file and you cannot explain where it went.

If you are concerned about something like this you should discuss your bankruptcy questions with a competent Bankruptcy Attorney, local to Fresno, prior to filing.

If the Trustee does take something, is it possible to buy it back?

The Trustee’s job is to turn non-exempt property into cash, which is then distributed to the creditors that file claims. Remember, when you file you are giving them permission to do that. Normally a value will be placed upon the property, or can be negotiated with the Trustee. If you can come up with an amount that is reasonable it may be possible to buy the item back from the Trustee.

Can one spouse file for Chapter 7 bankruptcy without the other spouse filing?

Yes. Sometimes it is a good idea because one spouse can then maintain their good credit score. All of these possibilities can be explored in the initial consultation. When your ready, or have other bankruptcy questions make an appointment.

What happens if I come into a lot of money after filing for a Chapter 7 bankruptcy?

A windfall of income, (you win the lottery, or your rich uncle dies and leaves you his fortune) within 180 days of filing your case you MUST inform the Trustee and it may be made available to creditors. Do you anticipate an inheritance in the near future? You should discuss the situation with your attorney.

If I filed a Chapter 7 in the past, how long before I am eligible to file another Chapter 7?

You can not file again and receive a Chapter 7 discharge for 8 years and a day from the other filing date.

Chapter 13 Questions

What is Chapter 13?

Chapter 13 is a repayment plan. However, it is based upon what you can afford, NOT what you owe in unsecured debt. Putting together a workable Plan can be very difficult, and you definitely want an attorney who is experienced building Chapter 13 Plans. Our office has built hundreds of plans over the years, and we can walk you through the process safely. Because the process of Chapter 13 is complex it is best to explain YOUR possibilities in person. Call today and we can schedule an appointment for a free consultation to see if Chapter 13 is right for you.

Why would I file Chapter 13 instead of Chapter 7?

If you qualify for Chapter 7 that would normally be the first choice. However, there can be some advantages to filing a Chapter 13. An example would be if you are behind on mortgage or car payments a Chapter 13 can give you time to catch up. Chapter 7 does not do that.

Why would I not qualify for Chapter 7?

As explained above, if you make too much money you may not be able to do Chapter 7. However Chapter 13 may still be a possibility, and even a better idea. Call for an appointment, and we will help you figure it out which is best for you.

When is the first Chapter 13 plan payment due?

The first payment is due on the 25th of the month following the month when the plan is filed. (Example: if you file between July 1 and July 31, your 1st payment will be due August 25, and all payments after that will be on the 25th of the following months.)

Who is the Chapter 13 payment made to?

When you file a Chapter 13 Trustee will be appointed to your case. The payment is made by cashiers check or money order, (No personal checks) payable to the Chapter 13 trustee. You will receive instructions on how and where to send it.

Is it possible to set up automatic payments with the Chapter 13 Trustee?

The Trustee is not set up for automatic payments. However, there is a service you can set it up several ways with. For more information on those options click here:

Is it possible to obtain credit while I am making payments on my Chapter 13 plan?

You must obtain permission from the Chapter 13 trustee and the court to incur new debt while you are in a Chapter 13 bankruptcy. It requires a Motion to get the trustee and the court to approve new credit until the plan is confirmed, which normally occurs two to three months after the case is filed. To get this Motion approved you will need a really good reason, (Like your car broke down, and you need a new one.) The counter argument is “If you have extra money to make an extra payment with, why are you not giving that to your creditors already?”

Can the trustee or a creditor object to confirmation of a Chapter 13 Plan?

Yes. It is the trustee’s responsibility to object to Chapter 13 plans that are in their view deficient. A creditor may also object, but generally most objections will come from the Chapter 13 trustee. Most objections can usually be  worked out or resolved prior to the confirmation hearing but occasionally the judge will have to decide.

Can just one spouse file a Chapter 13 and stop foreclosure on a house owned by both spouses?

Yes. This occurs, but is not often recommended. If one spouse does not need to be in bankruptcy other than for the foreclosure, then that particular spouse can be left out of the bankruptcy.

What effect will a Chapter 13 have on a co-debtor/ co-signer who does not file bankruptcy?

The Chapter 13 may show-up on the non-filing co-debtors credit bureau report alongside of that particular debt. It won’t show in the public records section, because they did not file. The creditor may still be able to proceed against the co-signer, but not while the Chapter 13 is pending because of the co-debtor stay.

What is the co-debtor stay?

If the joint debt is a consumer debt and the plan proposes to pay the debt in full, the creditor is blocked by the Chapter 13 filing from taking collection action against the non-filing co-debtor.

What happens if I inherit something during the three to five years that I am paying creditors under my Chapter 13 plan?

The inheritance must be turned over to the Chapter 13 trustee to be distributed to the unsecured creditors, depending upon claims filed. If there is a possibility of this happening, you need to discuss the matter with a competent, local, bankruptcy attorney. Some or all of it may be exemptible. If so you would not have to give it up.

If my Chapter 13 does not work, can I convert the case to a Chapter 7?

Possibly. A Chapter 13 plan can be amended if changes in your financial affairs occur. However, sometimes it is possible to simply convert it to a Chapter 7. You should talk to a competent bankruptcy attorney to explore this and any other bankruptcy questions you may heve.

What if I previously filed a Chapter 13 but my case was dismissed? May I file another Chapter 13?

Possibly, but it has many pitfalls, and should not be done lightly. Several technical things need to be done to keep the new one alive, and hold off the creditors. If you need to file a new case, call us and we will go over it with you.


Law Office of Timothy C. Springer
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