Morris & Morris :: A Law Corporation

New Laws Are In Effect Now

The new more strict bankruptcy laws went into effect for all petitions filed on or after on October 17, 2005. New requirements must be met both before filing a bankruptcy, and before receiving your discharge. Please contact our office for more information and a free consultation. Please print out the questionnaire from the following website: www.bankruptcyaction.com. Click California on the map of the U.S., then click on the yellow "Reminder" box at the top of the page for a questionnaire to fill out and bring to your appointment.

WE ARE A DEBT RELIEF AGENCY.
WE HELP PEOPLE FILE FOR BANKRUPTCYRELIEF UNDER THE BANKRUPTCY CODE.

What is Bankruptcy?

What most people think of as a bankruptcy is a Chapter 7 bankruptcy. It is a legal proceeding where the debtor=s non-exempt property is sold, any money generated from that sale is used to pay off his or her creditors, and the remaining debts are discharged. A very important purpose of a bankruptcy is to give an honest individual debtor a Afresh start.@ Once granted, a discharge in bankruptcy relieves a debtor of personal liability on dischargeable debts. Not all debts are dischargeable. Another common form of bankruptcy used by consumers is a Chapter 13 bankruptcy, which is discussed in greater detail below.

Will I lose my property?

It may be surprising, but the reality is that in most cases a debtor will not lose any of his or her property. This is because the property that is sold is only the debtor=s non-exempt property. Most states have laws that make certain types of property exempt from collection to enforce a debt. These exemptions also protect the property from the bankruptcy process.

California=s exemption laws are favorable to debtors and will generally allow bankruptcy debtors to keep their property. For example, California=s homestead law allows debtors to have as much as $125,000.00 in equity in their residence.

For guidance in dealing with exemptions, it is important that a qualified attorney be consulted.

How can a bankruptcy help me?

The quick and easy answer to this question is that the usual result of the bankruptcy is that the debtor=s debts are discharged.

So what does it mean to say that Athe debtor=s debts are discharged?@

A discharge is a court order, issued by the bankruptcy court, that releases the debtor from any obligation to repay his or her debts and also prohibits any of the debtor=s creditors from attempting to collect the debt. In other words, the debtor does not have to pay, and the creditor cannot do anything to try to make the debtor pay.

By releasing past debts, the bankruptcy helps to provide the debtor with a fresh start, free from what may have been an overwhelming burden.

What debt can be discharged?

Nearly any type of debt can be discharged. In fact a better question would be AWhat debt cannot be discharged?@ This is because the United States Code, the law that governs bankruptcy, has a list of certain types of debt that are non-dischargeable. If the debt is not specifically indicated to be non-dischargeable, then that debt can be discharged.

It should also be noted that even among those types of debt that are considered non-dischargeable there are exceptions that would allow the debt to be discharged.

The following are some examples of types of debt that cannot be discharged through a Chapter 7 bankruptcy:

most taxes
most support payments, i.e., child support and spousal support
debts incurred through fraud
student loans
debts incurred as a result of intentional injury to another.

For guidance in dealing with the dischargeability of debt it is important to consult with a qualified attorney.

Will a bankruptcy protect me if I am being sued?

In most situations the answer is Ayes.@ In fact, it is often far less expensive to stop the lawsuit by way of a bankruptcy than it would be to try to defend the lawsuit.

Of course, there are exceptions and a qualified attorney should be consulted prior to taking any action.

How long does a bankruptcy take?

Every case is unique, but in general a Chapter 7 bankruptcy should take approximately 3 2 months from the date of filing of the case to the date that the court issues the discharge order.

When will my creditors stop calling?

The instant a bankruptcy case is filed with the court a very special type of order goes into effect. This order is known as the Aautomatic stay.@

What the automatic stay does is prevent any of the debtor=s creditors from taking any action to collect on the debt. This means the creditor cannot call, the creditor cannot send a collection letter, the creditor cannot sell any of the debtor=s property, and the creditor cannot even file a lawsuit to do any of these acts.

Once the automatic stay is in effect, if any creditor wants to do anything regarding any debt owed by the debtor, then the creditor must first obtain permission from the bankruptcy court.

In short, the answer is that as soon as the bankruptcy case is filed the creditors must stop calling. Clearly, some creditors will call after the filing date if they have not been notified that the bankruptcy was filed, but those creditors can be stopped by simply informing them of the bankruptcy case number and filing date.

When should I file for bankruptcy?

This issue is complicated and depends on many variables, including the status of the debts owed, the nature and status of the debtor=s assets, and the actions that are being taken, or are being threatened by the debtor=s creditors.

However, it is usually wise to delay the filing until after all anticipated debts have been incurred. It is also usually wise to delay if the debtor anticipates receiving non-exempt assets, or anticipates acquiring property through inheritance, life insurance, or divorce in the near future. For example, a debtor who has incurred substantial medical expense should delay filing until the illness has been cured and all the medical bills are in, since it would do little good to discharge $50,000 in medical debt now and then incur another $50,000 in debt in the next few months.

How can a bankruptcy hurt me?

In most situations a bankruptcy will worsen the debtor=s credit rating. However, many banks, and financial institutions, actively seek out persons who have recently filed for bankruptcy. These institutions will often offer pre-approved credit cards and sometimes even pre-approved car loans. The loan amounts and interest rates will not be as good as for a person with an unblemished credit rating, but it should be understood that a bankruptcy is not the end of the debtor=s ability to obtain credit.

Will my employer be notified?

Employers are not usually notified when a Chapter 7 case is filed.

Do I lose any of my legal or civil rights by filing for bankruptcy?

No. Filing for bankruptcy is not a criminal proceeding, and a person does not lose any civil or constitutional rights by filing.

How does a Chapter 13 case differ from a Chapter 7 case?

In a Chapter 13 case the debts are not as quickly discharged. Rather the debtor is required to submit a Chapter 13 Plan for the repayment of some, or all of the debtor=s debts. A typical Chapter 13 plan will last for 3 years, during which time the debtor is required to comply with the plan and make regular monthly payments.

Why would I want to file a Chapter 13 bankruptcy
instead of a Chapter 7 bankruptcy?

It is true that a Chapter 13 bankruptcy is generally burdensome and unpleasant. However, circumstances can exist that would make the filing of a Chapter 7 bankruptcy inappropriate. The two most common examples are 1) where the debtor would lose an asset in a Chapter 7 bankruptcy because the asset is insufficiently protected by any applicable exemptions, or 2) where the debtor=s income, in comparison to his debts, makes the debtor ineligible for a Chapter 7 bankruptcy.

For guidance in determining which chapter is most appropriate for your circumstances, it is important to seek the advice of a qualified attorney.

The above is provided for informational purposes only. Any person contemplating filing bankruptcy should seek the assistance and advice of a qualified, licensed attorney.