SFV Bankruptcy Attorneys

Retainer - Chapter 7                                Retainer - Chapter 13

Bankruptcy Questions and Answers

Q.       Are bankruptcy attorneys required to make any mandatory disclosures to people considering bankruptcy?  What is your response? 

A.        Yes. Please see the Mandatory Disclosures and Notices on this website. Federal law requires that the disclosures and notices be provided by all attorneys providing bankruptcy legal services.

Q.        How often can I file for bankruptcy?

A.        A debtor cannot obtain a discharge in a Chapter 7 case if the debtor obtained a discharge in a Chapter 7 case filed within the past 8 years, or a Chapter 13 case filed within the past 6 years. The time periods are measured from the filing date. The dates of discharge are not relevant. A debtor cannot obtain a discharge in a Chapter 13 case if the debtor obtained a discharge in a Chapter 7 case filed within the past 4 years, or a Chapter 13 case filed within the past 2 years. The time periods are measured from the filing dates. The dates of discharge are not relevant.

Q.        Do I really need an attorney to file for bankruptcy?

A.        Attorneys do much more than complete and file a bankruptcy petition. Attorneys attend the 341(a) Meeting of Creditors which is presided over by the Bankruptcy Trustee, negotiate with creditors, and provide legal advice.  Paralegals can only complete the forms based upon the information provided by the petitioner.  Paralegals cannot provide legal advice and certainly cannot represent the petitioner in the Bankruptcy Court.

            If you are confident that you need no legal advice and can represent yourself in dealing with the Bankruptcy Trustee and creditors, you can represent yourself without an attorney.  We do not recommend it.  Bankruptcy law is complex. If you make a mistake, it can cost you money.

Q.        Will I be required to go to court?

A.        You will always be required to attend a 341(a) Meeting of Creditors.  With a Chapter 13 Bankruptcy, you will be required to attend a Confirmation Hearing.  In addition, if not all questions are answered to the full satisfaction of the Bankruptcy Trustee, or he or she requests additional documentation or information, you may be required to attend one or more additional hearings.

Q.        What happens if my Bankruptcy Petition is not accurate?

A.        If it is discovered that an inaccurate Petition has been filed with the Bankruptcy Court, it must be amended immediately.

           The FBI investigates bankruptcy fraud.  You do not want the Bankruptcy Court or FBI to bring any inaccuracies to your attention.

Q.        Can I keep a credit card?

A.        It cannot be guaranteed.  However, sometimes it is possible to negotiate the retention of one or more credit cards.

Q.        Can I get a credit card after bankruptcy?

A.        Yes. It is not unusual for credit card companies to solicit business from people who have recently had their debts discharged through bankruptcy because people with no debt are perceived to be good credit risks. Notwithstanding, you can always obtain a secured credit card which is a card backed up with security you have deposited with the financial institution issuing the card. For example, you deposit $1,000 and receive a card with a $1,000 limit. Over time, the limit will be increased and the security released as you build your credit history.

Using a secured credit card is a fast way to rebuild credit after bankruptcy because the credit card company will report your payment history to the credit bureaus every month. As you make timely payments, your history improves every month.

Q.        Will you be able to stop creditors from calling my home and business?

A.        Absolutely.

Q.        Is it really possible for a creditor to seize up to 25% of my take home pay?

A.        Yes.  That is why debtors should investigate the option of bankruptcy.

Q.       Will my spouse be affected by my bankruptcy?

A.        Your spouse will be affected if he or she signed a contract for one or more of your debts or if you contracted on behalf of the community.  This is a complex area of the law.

Q.       Can my employment be terminated because I filed for bankruptcy?

A.        No.  Federal law makes it unlawful to terminate the employment of an employee or to discriminate in hiring a person because a person has sought protection under the Federal Bankruptcy Act. 

Q.       Can I keep my bankruptcy confidential?

A.       Bankruptcy filings are public records and all creditors will be notified of the filing.  Notwithstanding, most people will not be aware of a filing unless they do a public record search which is unlikely.  Credit bureaus will record the information for ten years.  Petitioners will also receive some mail with a return address indicating it is from the U.S. Bankruptcy Court or Bankruptcy Trustee.

Q.       How do I know whether I should file for bankruptcy?

A.        A consultation with a bankruptcy attorney is the best way to determine if you have other alternatives.  However, if your credit card debt exceeds 30% of your gross annual income, you are probably a candidate for bankruptcy.

Q.       Will using a credit counselor save me money and avoid a bankruptcy filing? 

A.        Most people are not aware of the fact that most credit counselors are owned or backed by the credit card and banking industries.  They exist to discourage people who should extinguish their debts in bankruptcy from doing so.  The result is that credit card companies and banks end up getting paid more than they would otherwise receive and the debtor is delayed in getting a fresh start.  A bankruptcy attorney can advise you on whether a credit counselor can assist you or whether you are better off extinguishing your debts in bankruptcy.

Q.        Does bankruptcy eliminate all debts?

A.        There are some debts that are not dischargeable through bankruptcy.  These include back child support, back spousal support, most taxes and court judgments resulting from fraud.  Contact us to discuss this subject as it is complex.  Most importantly, credit card debts, medical debts, installment debts, real estate loans and most court judgments are dischargeable with few exceptions. 

Q.       What is an emergency bankruptcy filing? 

A.        An emergency bankruptcy filing is a filing with limited documents, commonly referred to as a "Skeletal Petition".  With an emergency filing, all required remaining documents must be filed within 15 days from the filing of the petition or the case will be subject to dismissal.  Contact us immediately for a no cost consultation if you are facing an emergency situation.

Q.       What is the Means Test?

A.        As of October 17, 2005, individual debtors must overcome a presumption of abuse in order to be eligible for relief under Chapter 7 Bankruptcy.  Debtors seeking to file Chapter 7 Bankruptcy are required to complete a form entitled Statement of Current Monthly Income and Means Test Calculation.  If the Chapter 7 Bankruptcy filing is determined to be presumptively abusive by the Bankruptcy Trustee, the debtor may try to rebut the presumption by showing special circumstances.  Unless the debtor overcomes the presumption of abuse, the Court may convert the case to Chapter 13 Bankruptcy or dismiss the case. 

           Current bankruptcy law provides two definitions of abuse.  Abuse may be found when there is an unrebutted presumption of abuse arising out of the means test or through a finding of bad faith determined by the totality of the circumstances.

Q.        I feel very uncomfortable with the idea of filing for bankruptcy because I don't think its right not to pay my debts.  What is your response? 

A.        While your feelings are commendable, you must think first of your family and your own future.  Your creditors are looking out for their own interests and you must do the same.  Most creditors (such as banks and credit card companies) are commercial enterprises that have taken a risk with the thought of earning a profit.  Sometimes risk takers earn a large profit and sometimes they don't.  Most don't hesitate to charge late fees, penalties and even attorney's fees when they file lawsuits to collect money.   Our opinion is that you should do what is legally allowable to protect your interest and the interest of your family.  Your creditors are not looking out for your future.

The founding fathers of the United States recognized the need to permit individuals to file for bankruptcy in order to obtain a fresh start in life if excessive debt could not be paid. Consequently, the Constitution of the United States authorized (Article 1, Section 8, Clause 4) Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States". The founders understood that absent the ability to file for bankruptcy, people could become slaves to their debt and this was not in the best interest of the debtors or the country. We are warned in the Bible (Proverbs 22:7) that it is possible to become a slave to debt and be severely exploited. Bankruptcy is intended to free you so that you can have a new start.  

Q.       Can I obtain a free credit report? 

A.        Yes. AnnualCreditReport.com is a website jointly operated by the three major credit reporting agencies. Under the Fair Credit Reporting Act (FCRA), the credit reporting agencies must provide, upon request, a free credit report every twelve months. Credit scores are provided for an additional cost. Using the service does not lower a consumer's credit score.

AnnualCreditReport.com is the only federally mandated and authorized source for receiving a free credit report. There are many websites with similar services that charge a fee or require a paid membership. Do not be misled.

Consumers can actually obtain a free credit report every four months by rotating among the three credit reporting agencies. 

Q.       Should I obtain a free credit report before filing for bankruptcy? 

A.        Yes. Unless you are 100% certain that you have a comprehensive list of creditors, it makes sense to obtain a free credit report before filing for bankruptcy.

Q.       Will a bankruptcy filing stop the foreclosure of my home?

A.        If it is filed on time, it will stop the foreclosure for a period of time.

Q.       Will a bankruptcy filing stop a wage garnishment?

A.        Absolutely.

Q.       My wages are being garnished due to a judgment against me. I understand that the garnishment will stop when a bankruptcy is filed. Is there anything else I should know?

A.        Yes. An emergency bankruptcy filing may make sense. An emergency filing may stop the sheriff from seizing money that you will need for you and your family.

Q.       Can I save my pension if I file for bankruptcy?

A.       Yes. Nearly all pension and 401K plans that are qualified under ERISA, the Federal Pension Savings Act, are protected because they do not become property of the bankruptcy estate.

IRA's and some other retirement savings plans may be property of the estate but are usually fully exempt.

Q.       Can I include my corporation bankruptcy with my personal bankruptcy?

A.        No. A corporation is a separate legal entity. It must file a separate corporate bankruptcy petition.

Q.       How long must I have lived in California to qualify for the California exemptions?

A.        You must live in a state for two years to use the exemptions of that state. If you don't meet the two-year test, generally the exemptions of the state in which you previously lived will apply. You should always consult an experienced bankruptcy attorney regarding the application of exemptions. Remember, only an attorney can provide you with such advice.

Q.        If I utilize a credit counseling service to consolidate and reduce my debts, will I be able to rebuild my credit faster than if I file for bankruptcy?

A.        Almost never. Bankruptcy will always result in a drop in your credit standing, but once you receive a discharge, your credit standing will almost always improve each month since you will probably be starting out free of all debt. With a consolidation and reduction, it is likely to take many years to eliminate all of your debts and build back your credit. Be very cautious if you use a credit counseling company that wants to negotiate for a consolidation and reduction of your debts. They may be owned or backed by your creditors! This is not unusual.

Q.       I recently hired an attorney to represent me in an auto accident case because I was injured and my car was severely damaged. How does this affect my bankruptcy?

A.        You must provide your bankruptcy attorney with copies of the complaint so that it can be evaluated. Depending upon the circumstances, it may have an impact on your case. Only an experienced bankruptcy attorney can provide you with advice after all of the facts are evaluated.

Q.       My home is listed with a real estate broker and is currently in escrow. How will this affect a bankruptcy filing?

A.        You must make an absolutely accurate disclosure on your bankruptcy petition regarding the status of the sale. Only an experienced bankruptcy attorney can help you with this important disclosure. Failure to make a proper disclosure could cause your case to be dismissed or worse. Start by providing your bankruptcy attorney with the listing agreement, purchase - sale agreement, and escrow instructions.

Q.       What are Bankruptcy Exemptions?

A.        Exempt property is certain property (free of liens) owned by a bankruptcy petitioner that the law permits the petitioner to keep. Non-exempt property will be sold for cash and distributed to the creditors. California residents must decide which of two systems of exemptions to use. An experienced bankruptcy attorney will select the system of exemptions that will maximize the amount of property the petitioner may retain. Only an attorney can provide advice regarding the selection of exemptions.

Q.      One of my credit cards was issued by the bank where I have my checking account. I am behind on my credit card payments and will probably file for Chapter 7 Bankruptcy. Do I have to be concerned about my bank?

A.        Absolutely. You should immediately move your checking account to a financial institution that is not one of your creditors. I you don't move your account, your bank (credit card company) may seize your funds based upon the small print in your credit card agreement.

Q.       I recently requested a loan modification from my lender. They immediately requested that I complete a new loan application and provide them with income and expense information as well as information on all of our assets. Is there any danger in providing this information to my lender?

A.        Possibly. If your loan is in default and you are unsuccessful in getting your loan modification after providing all of your financial information, and the loan is a full recourse loan, the lender may file suit against you to collect any amounts owing. Sometimes a new loan application encourages a lender, with a full recourse loan, to file suit, obtain a judgment, and then seize available assets. Before submitting financial information to an existing lender, you should obtain legal advice from an experienced attorney.

Q.       We are in such poor financial shape that we cannot even afford to pay the fee for filing a bankruptcy. Will your firm consider barter?

A.        Yes. Our firm will consider accepting the following types of property in exchange for legal service: Advertising, California Land or other Real Property, Trust Deeds, Antiques, Political or Historical Memorabilia, Classic Cars, LLC Interests, LP Interests, Stock in Small Corporations, High Quality Jewelry, or Restaurant Gift Certificates. Since our need for services will vary over time, please call to discuss the barter of your goods and / or services for legal services.

When goods or services are accepted in exchange for legal services, both parties exchange their services based upon the fair market value of the service provided. The IRS requires that the fair market value of goods and services traded must be included in the income of both parties.

Q.       What is defalcation?

A.        Defalcation is a term used in the United States Bankruptcy Code to describe a category of bad acts that taint certain debts such that they cannot be discharged in bankruptcy. Defalcation applies when a debtor in bankruptcy is acting as a fiduciary. It requires a degree of culpability greater than negligence but not as high as fraud. Defalcation requires a showing of extreme recklessness or conscious behavior.

Q.       If I pass the Means Test, can I still be prohibited from filing a Chapter 7 Bankruptcy?

A.        Yes. Passing the Means Test simply means you are not presumed to be abusing the bankruptcy system. Even after passing the Means Test a bankruptcy judge can rule that a petitioner does not qualify because he or she is abusing the bankruptcy system based on other facts.

Q.        If I fail the Means Test, can I still file a Chapter 7 Bankruptcy?

A.        Possibly. Even if you fail the Means Test, a bankruptcy judge can permit you to file a Chapter 7 Bankruptcy if it can be demonstrated that special circumstances exist.

Q.       I am concerned that my mortgage lender will be starting a non-judicial foreclosure of my home very soon. Will I receive certified mail from my lender before the foreclosure process is started?

A.        As part of the foreclosure process, you will receive a document entitled "Notice of Default and Election to Sell" from a trustee. The trustee is not the lender so the name of the sender on any certified mail notice may be from a company whose name you do not recognize. Consequently, it is important that you pick-up any certified mail sent you being held by the post office.

Q.       What is an Adversary Proceeding in Bankruptcy?

A.       An adversary proceeding in bankruptcy is a lawsuit filed by a plaintiff against a defendant within a bankruptcy proceeding. It can be filed by the bankruptcy trustee or by other parties. A common example is when a creditor files an adversary proceeding to object to a debtor's discharge based on fraud.

Q.       How can we easily determine the value of our home?

A.        There are a number of online services that provide an estimate of the fair market value of residential properties. We generally use Zillow.com. While it is not perfect, for our purposes, it provides sufficient accuracy. If you would like to save time, obtain a print-out of your property and bring it to your no cost initial consultation.

Q.       Are bankruptcy payment plans available?

A.        Yes. We can accept 50% of the fee at the time we are retained and the remaining 50% five days prior to the bankruptcy court hearing.

Q.       After filing for bankruptcy, what tax returns must be filed?

A.        Debtors filing under Chapters 7 and 13 of the Bankruptcy Code must file all applicable federal and state tax returns that become due after a case commences. Failure to file tax returns timely or obtain an extension can cause a bankruptcy petition to be converted to another chapter or dismissed. In Chapter 13 cases, the debtor must file all required tax returns for the tax periods ending within four years of the filing of the bankruptcy petition. In the case of an individual filing a Chapter 7 Bankruptcy Petition, the bankruptcy trustee will file a Form 1041 for the bankruptcy estate. This is in addition to the requirement of the debtor to file his or her tax returns.

Q.        Is it true that most credit card counseling services and debt consolidation services work for the credit card companies?

A.        Yes. The credit card companies don’t want people to discharge debts owing to them. If they know you qualify for a bankruptcy discharge, they will attempt to delay any bankruptcy filing and will collect as much of your money as possible, as fast as they can. Many credit counseling companies and debt consolidation companies are non-profit corporations created by the credit card companies precisely for this purpose.

Q.        We are behind in paying the IRS both payroll and income taxes. The interest and penalties have been so severe that we can’t possibly get caught up. Their collection actions have nearly destroyed our small business. Will a bankruptcy help? We don’t have much time before we lose our business which is our only source of income. We also have five employees at risk of losing their jobs.

A.        The IRS and Franchise Tax Board (FTB) have been the “final straw” that has closed thousands of businesses causing hundreds of thousands of job losses. A bankruptcy may help. Since some, but not all taxes are dischargeable, it is necessary for an experienced business bankruptcy attorney to evaluate your individual situation.

Q.       Does your law firm represent businesses in filing for bankruptcy protection?

A.        Yes.

Q.       Does your firm represent creditors who are objecting to a bankruptcy discharge?

A.       Yes. We represent both individuals and businesses who are objecting to a debtor’s bankruptcy filing and discharge of debts.

Q.       We are strongly considering personal and business bankruptcies because of large unsecured debts and a lawsuit where we have been named as defendants. Our home loan is about equal to our home's value. We are current on our loan payments and want to keep our home even though we have no equity. If we file for bankruptcy, will our real estate lender still be required to accept our monthly loan payments?

A.       Absolutely. However, please be aware that many mortgage lenders stop sending monthly invoices to you after your personal bankruptcy is filed because it is unlawful for them to attempt to collect a debt after the filing. Billing should resume after you either reaffirm the debt during the bankruptcy process, or receive a discharge. Therefore, you should continue to make the payments even though you do not receive a monthly billing statement.

Q.       We own a business that is incorporated and employs six people. Due to the economy, we got behind in paying our payroll, sales, and income taxes, but just got them paid. After paying the taxes, penalties, and interest, we are out of cash and must now file a business bankruptcy. How will the filing affect us personally?

A.       Setting aside the fact that you and your six employees will be out of a job, the filing of a corporate bankruptcy will not directly affect you. All of the effects will be indirect resulting from the loss of your income. Hopefully, you can replace your income and avoid a personal bankruptcy. While it doesn't help, your situation is quite common.

Bankruptcy Questions and Answers Continued

For Debtors Without an Attorney

Although individuals may represent themselves and file for bankruptcy without an attorney, the bankruptcy process is complex and confusing.  Court staff, judges, trustees, petition or document preparers and paralegals are not permitted to provide legal advice.  Only an attorney can provide legal advice.  Individuals representing themselves are responsible for knowing the requirements the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local Rules for the District.  Missing a deadline, failing to perform a required task, or failing to respond properly to a pleading or court order could result in the dismissal of the bankruptcy case, denial of a discharge, or the loss of property.

Beware of bankruptcy petition preparers who do not comply with all legal requirements.  The role of non-attorney petition preparers is solely to type information on bankruptcy forms.  Petition preparers are barred by law from providing legal advice - they cannot explain how to answer legal questions or assist in bankruptcy court.  Petition preparers must sign all documents they prepare; print their name, address, and social security number on such documents; and furnish copies to the debtor.  They cannot sign a document on the debtor's behalf or receive payment from the debtor for court fees. 

The following constitute legal advice:

Bankruptcy Abuse Prevention

The purpose of the Bankruptcy Abuse Protection and Consumer Protection Act of 2005 was to make it more difficult for consumers to file for bankruptcy under Chapter 7 of the Bankruptcy Act where debts are forgiven or discharged.  It was intended to force debtors to file under Chapter 13 of the Bankruptcy Act where debtors are forced to repay some of their debts. 

Under the new law, debtors seeking to file Chapter 7 Bankruptcy are required to complete a form entitled Statement of Current Monthly Income and Means Test Calculation.  If the Chapter 7 Bankruptcy filing is determined to be presumptively abusive by the Bankruptcy Trustee, the debtor may try to rebut the presumption of abuse by showing special circumstances.  Unless the debtor overcomes the presumption of abuse, the Court may convert the case to a Chapter 13 Bankruptcy or dismiss the case. 

The BAPCPA provides two definitions of abuse.  Abuse may be found when there is an unrebutted presumption of abuse arising out of the means test or through a finding of bad faith determined by the totality of the circumstances.

Credit Counseling Briefing - Debtor Education for
Chapter 7 and Chapter 13 Bankruptcies

The Credit Counseling Briefing and the Debtor Education Course are both requirements for bankruptcy, but are completely separate.  Each requires completion of a different program and a separate certificate for proof of completion.  The proof of completion for the Credit Counseling Briefing must be obtained before a bankruptcy petition is filed with the court with some very limited exceptions.  The Debtor Education Course must be taken after the bankruptcy petition is filed, but before a discharge can be obtained. 

Both the Credit Counseling Briefing and Debtor Education Course are available online for a small fee.  Contact us for further information about these requirements.

Once the decision has been made to file for bankruptcy, it is important that the petitioner avoid making any serious mistakes. Following is a list of mistakes to be avoided. Bankruptcy Mistakes.

You Are Not Alone

Over the course of history, many people have found it necessary to exercise their right under federal law to file for protection from their creditors including many famous people. In addition, many formerly large United States business enterprises are now defunct businesses.

If you are like most people, you are not happy about having to consider the filing of a bankruptcy petition in order to become free of your debts.  Following are statistics released from the Administrative Office of the Bankruptcy Court for non-business and business bankruptcy filings:

* Approximately one-third of the non-business bankruptcy filings included a husband and wife, substantially increasing the total number of people filing.  For example, increasing the 1,538,033 bankruptcy filings by one-third, means that approximately 2,050,198 people filed for protection under the federal bankruptcy laws.

Approximately 80% of the people forced to file for bankruptcy protection have either lost a job or have had their business or other income reduced due to economic conditions. Many small businesses have been destroyed by a combination of economic conditions, extremely high taxes, and aggressive IRS/FTB collection actions.

Bankruptcy Crime - Fraud

Bankruptcy fraud includes filing a bankruptcy petition or other document in a bankruptcy case for the purpose of committing fraud. Bankruptcy fraud also includes making a false representation, claim or promise in connection with a bankruptcy case, either before or after commencement of the case, for the purpose of committing fraud. Bankruptcy fraud is punishable by a fine, or by up to five years in prison, or both.

Knowingly and fraudulently concealing property of the estate from a custodian, trustee, marshal, or other court officer is a separate criminal offense, and may be punishable by a fine, or by up to five years in prison, or both. The same penalty may be imposed for knowingly and fraudulently concealing, destroying, mutilating, falsifying, or making a false entry in any books, documents, records, papers, or other recorded information relating to the property or financial affairs of the debtor after a case has been filed.

Bankruptcy crimes are prosecuted by the United States Attorney, usually after a reference from the United States Trustee, the case trustee, or a bankruptcy judge.

Bankruptcy and Foreclosure Statistics

The website USDebtClock.org displays real time statistics for bankruptcy filings, foreclosures, employment, unemployment, the national debt, the national deficit, the national debt per citizen, and much more. It is a wealth of information. It will shock you.