Bankruptcy Frequently Asked Questions
Q- How long with a bankruptcy affect my credit?
A- More than likely, if you have significant debt or are delinquent in payments, your credit has already been affected. A bankruptcy filing can stay on your record for up to 10 years; however, if you take steps to repair your credit, you could be in a position to obtain credit within just a few years of the filing date. We can also provide you with your pre-filing credit score and show you what your credit score could come back up to within 15 months after filing with a clean payment history.
Q- Does the court come in and take my possessions to sell?
A- Only in a chapter 7 liquidation case would possessions possibly be sold. The trustee appointed to your case reviews your list of assets and exemptions to see if there are assets that could be sold and the proceeds paid to creditors. There are varying exemptions that allow certain cars, cash, furniture, clothing, and other personal items to stay yours. In addition to the exemptions, you can also elect to file under chapter 13 wage earners repayment plan to assure you keep possessions.
Q- Can I get rid of all my debts?
A- There are certain types of debts that cannot be discharged in bankruptcy, such as student loans, court fines, and certain back owed taxes. In chapter 7, any debt that is either not-reaffirmed or exempt from discharge is liquidated at the completion of your case. In chapter 11 or 13, any unsecured debt that is not paid out of the repayment plan in the 3 or 5 year period is discharged.
Q- How does a trustee sale/foreclosure of my home affect bankruptcy?
A- In California, if the lender decides to sell your home under a deed of trust, they have generally elected their remedy. This means that they are waiving the right to come after you for what is called a deficiency judgment based upon any difference in what you owe versus the sale price. The sale terminates any other liens recorded against the property, such as 2nd or 3rd mortgages. However, a review of the facts would better determine if you have any personal liability under any other loans. It is possible to still have personal liability on the 2nd or 3rd mortgages after the sale. A bankruptcy filing would terminate any personal liability for any such loans.
Q- What happens to my car and home during the process?
A- If you owe money on any loans for those items, you would still be liable to make payments to the creditor. If you don't make payments and they hold a security interest in the item, they could repossess or foreclose. In chapter 7, you can enter into a reaffirmation agreement stating that you agree to continue making payments in order to keep the property. In chapter 13, those creditors are listed in your repayment plan and you continue making payments under the terms of the plan.
Q- What about loan modifications, can I still pursue that during a bankruptcy?
A- There are some technical legal areas in answering this question. When you file, the court places an order halting collection activities, some courts consider attempts to change the terms of a debt a violation of that order. Most lenders will still review a homeowner for possible modification even during the bankruptcy process. If the lender will not, you can still apply for a modification after your case is over or the court order is lifted.
Q- What does it cost?
A- The court charges a filing fee that varies by location and type of case which typically runs $274 or $299. You can apply to the court for a wavier of that fee during the process. Our firm charges flat fees depending upon the type of case and complexity. A chapter 7 can run from $500 to $3,000 in legal fees. A chapter 13 can run from $1,000 to $4,000. A chapter 11 is quite complex, so it varies by the complexity of the case. In a chapter 7 since you are liquidating all your debt at the time of filing, we have to be paid prior to filing your case. In a chapter 13 or 11, we are flexible in taking part of the retainer prior to filing and getting paid the remainder out of the repayment plan from the court.
Our services are all performed by attorneys and we personally attend your 341a creditors meeting to represent you. We also walk you through the process of reaffirming any debt and applying for loan modifications to assure you are adequately represented during the entire process.
Q- Why can't I do it myself or use a petition preparer?
A- Many of our cases come from people who did their case on their own and now have to pay significant fees for us to correct what was done improperly in the first place. The bankruptcy code is a complex set of laws and procedural rules, many that vary by court location with local rules. Many petition preparers do not have access to the local forms that need to be filed. This is a federal court case that can have impacts on your credit, finances, and life for 10 years or more. Petition preparers or doing it yourself does not give you the proper guidance and legal review of which bankruptcy case is best for you, how to prepare for bankruptcy, how to list assets and debts, how to go through the process, which exemptions to claim, how to save your home or other assets, and how to minimize the long term impacts. Our firm guides you all the way through the process. Bankruptcy is simply not a matter of filling out a few forms to be filed with a court. People pay for health insurance and pay to see a doctor when anything might affect their health long term, yet they fail to seek expert advice when it comes to their financial health.
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