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What happens to my assets during bankruptcy?


A majority of the clients I work with in my consumer practice as a bankruptcy and debt lawyer in Upland, CA can keep all of their property when they file bankruptcy. This is because California offers exemptions that you can put on property to prevent it from being sold by the Trustee in the bankruptcy to pay creditors.  Be sure to disclose all of your assets to your bankruptcy attorney to ensure that the exemptions available will cover your property.  Generally, with exemptions you can protect about $30,000 in any type of property or if you have equity in a personal residence you can protect anywhere between $75,000 and $175,000. 

What is the difference between Chapter 7 and Chapter 13?

A Chapter 7 is a liquidation bankruptcy.  In a Chapter 7, a trustee is appointed with the primary task of liquidating any non-exempt assets to pay creditors.  Not everyone qualifies for a Chapter 7, which is subject to means testing, which is designed to determine if you have the ability to repay a significant portion of your debt.

A Chapter 13 is an individual reorganization of the financial affairs of the debtor or joint debtors.  In Chapter 13 bankruptcy law in Upland, the debtor(s) propose a plan for the repayment or partial repayment of their creditors over the course of 36-60 months.  Instead of paying the creditors through a liquidation of assets, the debtor(s) tap into their monthly disposable income, which is essentially their monthly take home pay less reasonable and necessary living expenses.  To file a Chapter 13 you need to have a regular income and have some money left over after your reasonable and necessary expenses to pay creditors.  A Chapter 13 is particularly effective in curing delinquencies in mortgages, it allows the debtor to stretch missed payments out over up to 60 months and stays any foreclosure provided the debtor stays current on the regular monthly mortgage payment and the plan payment.

If I’m married, does my spouse have to file for bankruptcy as well?

Your spouse is not required to file.  Certain information about your spouse's income and assets will still need to be disclosed in the filing.  In many cases, it will make sense for a joint case to be filed.  The cost for a joint filing is the same as an individual filing in most cases.  However, if the spouses file separately, there are two filing fees, two meetings with the trustee, and two separate cases.  Filing separately could lead to twice the cost.




I just filed for bankruptcy, can I keep any of my old credit cards?

Not likely.  Even if you left an old card off because there was no balance owed, it is likely that they discover you filed bankruptcy either through a check of your credit report or from another creditor they are affiliated with that you listed.

How do I avoid personal bankruptcy if I am a business owner?

There are several steps you can take to reduce your risk of a personal bankruptcy, this is by no means an exhaustive list.  Consultations from our Upland, CA debt lawyers can help you further. First, maintain adequate levels of insurance to cover your risks.  Second, make sure you have adequate capital to operate your business and sufficient reserves to cover slow months.  Third, avoid factoring your accounts receivable or costly business loans.  I have noticed an uptick in predatory unsecured business lending that will essentially drain your profits.  Fourth, create a business entity separate from yourself, either an LLC or Corporation and keep the finances of both completely separate.

Will I have to go to court if I file for bankruptcy?

You do not usually have to go to court.  You do have to attend a meeting with your appointed trustee that is recorded and under oath.  This is in a designated meeting room, not a court.  The meeting generally lasts about 5 minutes or less but you may need to wait some time before your case is called.  Some trustees have 10-20 matters scheduled in any given hour and it can take time for your case to be called. 

Can I get a credit card after bankruptcy?

Yes, I have heard from most of my past clients that credit card offers come shortly after they receive a discharge.  The interest rates are excessive so use caution.  Remember, you can only file a Chapter 7 every eight years and the creditors are well aware of this.




What state do I file in, if I have only been in the same state or district for six months?

Generally, venue (where to file) is determined by where you resided the majority of the last 180 days.  For example, if you moved to a district six months ago, you resided in that district a majority of the last 180 days, so you would file in that district.

Will filing for bankruptcy erase my student loans?

Simply filing for bankruptcy will not erase your student loans.  In rare circumstances, student loans can be discharged by filing a separate adversary proceeding against the student lender.  The standard for discharging student loans is very strict.  The standard is that failing to discharge a student loan would impose an undue hardship on the debtor and the debtor's dependents.  Typically, if you do not have a debilitating disability that prevents you from earning an income, you cannot discharge student loans.




What is the first step for filing for bankruptcy?

The first step is to meet with competent counsel that is familiar with bankruptcy.  Failure to properly complete your paperwork or exempt assets could lead to the denial of your discharge or the loss of property.  Most bankruptcy counsel and debt lawyers in Upland, including me, offer free initial consultations.  Be wary of any firms that have you meet with a paralegal or any attorneys that refuse to answer your basic questions about the process.




Will I lose my house and car if I file for bankruptcy?

In most cases, you will not.  However, if you have over $100,000 in equity in your house and your car is owned free and clear, there may not be enough of an exemption to cover both pieces of property.




What is the automatic stay?

The automatic stay is generally triggered immediately when you file for bankruptcy.  It is a stay created by federal statute, specifically 11 U.S.C. Section 362.  It generally stays or stops collection activity and attempts to repossess or foreclose on your property.  The automatic stay and the discharge of debts (legal excuse not to repay) are the main reasons for filing and can provide significant relief to those in financial distress.

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