BANKRUPTCY F.A.Q.

How do I qualify for a Chapter 7 Bankruptcy?

It basically comes down to two things: Income and household size. Once you qualify to file bankruptcy, it really doesn’t matter if you just barely meet the income requirements, or you have no income at all. Both debtors would be treated the same by the bankruptcy courts. Keep in mind that household size is not limited to your kids. If you are providing for over half the support for people in your home, then you can use them to help you qualify for bankruptcy. The courts look at your past 6 months of income and take an average. So, if you make $50k a year, but you didn’t work 3 of the past 6 months, then for purposes of the chapter 7 bankruptcy, you make $25k a year.

Why would anyone pick a chapter 13 over a chapter 7 bankruptcy?

The first reason is qualification. If you make too much money then you can’t file a chapter 7 bankruptcy so you are forced into a 13. The second reason is stripping off your second mortgage. If the value of your home is worth less than you first mortgage, then you can strip off and discharge a second mortgage in a chapter 13 bankruptcy. You can’t do that in a chapter 7. The third reason why people file chapter 13 is to save their home when they are behind in payments. If you are current on your mortgage at the time you file your chapter 7, you don’t have to worry about losing your home. However, if you are late, your lender can ask the court for permission to foreclose the property, and the judge will probably allow them. In a chapter 13, your attorney can take your arrearages and put them in your repayment plan so you don’t lose your home.

Are both spouses required to file for Bankruptcy?

No. If one spouse wants to file bankruptcy, then he or she may do so and the other spouse’s credit will not be affected. You will need to report the non filing spouse’s income information for qualification purposes. Most of the time, it is better for both spouses to file because giving all the property and credit to one spouse, while having the other spouse accumulate all the debt with no benefit appears suspicious and potentially fraudulent. In California, all community property is subject to creditor attachment even though one spouse did not file. It rarely makes sense for only one spouse to file.

How do I rebuild credit after Bankruptcy?

You should try to apply for credit immediately after filing your chapter 7 bankruptcy and receiving a discharge. If you have a car that you are making payments on, then it would be wise to keep it throughout the bankruptcy because it is ongoing credit. You also want to get other credit right after filing like a secured credit card. These credit lines will help you rebuild your credit right away.

How am I going to buy a car after Bankruptcy?

Many people who can’t purchase cars because of bad credit file bankruptcy, and then buy a car after their discharge. Most car dealerships have investor resources which can help finance a fresh bankruptcy. The reason is that the car is security for the debt and they know they can easily repossess the car. Also, the dealers know you can’t file bankruptcy again for awhile.

How long does the Bankruptcy process take?

Chapter 7 cases usually about 4 to 6 months. However, once your petition is filed, all you have to do is show up to your trustee hearing and answer all questions. Then be sure to take the second online class. After that, it is just waiting for your Order of discharge.

Can I keep my home and my car if I file a chapter 7 Bankruptcy?

Yes, so long as you are current and so long as your exempt amounts are not higher than allowed under exempt property limits.

How do I get started?

We have an experienced bankruptcy attorney in Modesto to help you get the relief you deserve.

Have Debt Problems?

(209) 522-7500

BANKRUPTCY MYTHS

There are plenty of myths out there regarding bankruptcy that lead to irrational fears. So let’s clarify some.

Myth #1

I have to pay money back to my creditors

This is absolutely untrue for Chapter 7 filers. When you file for a chapter 7 bankruptcy you get a complete discharge. That means the debt that you discharge in your bankruptcy is gone forever. Certain debts are nondischargeable such as alimony, child support, student loans (unless you can show hardship), most taxes, debts of fraud, etc.

Chapter 13 allows repayment of certain debts in a court-approved plan.

Myth #2

Bankruptcy is hard

It is plenty of paperwork, that is true. However, if you retain an attorney, all you have to do is gather your information and we will take care of the rest. Our bankruptcy office in Modesto is ready to help you.

Myth #3

I can't buy a house or a car forever

Believe it or not, if you file a chapter 7 bankruptcy you may be able to buy a car immediately after your discharge. That is because car dealers have investors willing to take the risk, but probably at a higher interest rate. Also, the debt is secured by the car, so they know they can repossess it if you stop making payments.

A house may take longer to reestablish adequate credit to purchase, depending on your lender.

Myth #4

I will lose my retirement, vehicle and home

So long as you are current on your secured property you can almost always keep it. In fact, we encourage debtors to keep their cars because it’s instant credit after your discharge. Some exceptions exist. Feel free to ask us about it during a consultation.

Your pension and retirement accounts also protected as exempt, so you won’t lose those.

Myth #5

Everyone will find out about my bankruptcy

Only your creditors are notified when you file for bankruptcy. It’s not published anywhere so no one will find out, including your employer.

Myth #6

My employer will fire me

Federal law strictly prohibits an employer taking any negative action toward an employee because of a bankruptcy filing. If an employer demotes you or takes any action whatsoever against you solely because of your bankruptcy, they are potentially violating federal and possibly state laws.

Myth #7

The judge may not like me because...

It is rare that a debtor ever sees a bankruptcy judge. Debtors usually have one meeting with the United States Trustee and that’s it. Their job is to examine your paperwork for possible fraud and unusual financial matters, and can take property from your estate, but we do everything we can to protect your assets.