1. What is Bankruptcy?
Bankruptcy is your legal right to relieve all or a portion of your debts under federal law.
The Constitution of the United States, Article I, Section 8, Clause 4, provides Congress with the power to establish uniform laws on the subject of Bankruptcies throughout the United States. Bankruptcy was a reaction to "debtor's prisons", where individuals could be physically confined for not being able to pay their debts.
Technically, there are six different types of bankrutpcy proceedings under the law. Chapter 7 is a "fresh start" or liquidation proceeding. Chapters 9 and 12 are seldom used in consumer law and involve municipalities and farmers. A Chapter 13 is a reorganization of debt. Chapter 15 involves foreign proceedings and is usually practiced by a niche lawyer.
2. Do I really need an attorney for Bankruptcy?
Probably, yes.
There is absolutely no legal necessity that someone have an attorney in order to file bankruptcy. But, bankruptcy can be tremendously complex and there is a great deal of paperwork involved. Courts and paralegals are not able to provide legal guidance. It is most likely in your best interest to have an attorney assist you with the process so as to ensure it is done properly.
3. Does Bankruptcy ruin my credit for ten years?
No, not necessarily.
It is true that Bankruptcy stays on your credit for 10 years. However, most people experience an improvement of their credit within 12 to 18 months of the filing of their bankruptcy. How? Creditors realize that after a filing of a Chapter 7 bankruptcy the debtor cannot file again for bankruptcy for another 8 years. Therefore, future creditors see less risk in extending you credit in the near future.
4. Does Bankruptcy stop the phone calls and all immediate collection actions?
Yes.
Filing bankruptcy instantly invokes United States Code Title 11362 the Automatic Stay. The automatic stay stops most debt collectors straight away. If creditors do call you, refer them to your attorney and give them no further information. Do not tell them that you have filed bankruptcy, just simply give them your attorney's name and number.
An important EXCEPTION exists. In some cases, such as an eviction action for unlawful detainer, a landlord may still be able to evict you from your dwelling. Do not ever rely on the automatic stay for purposes of real property eviction.
5. Can Bankruptcy halt a foreclosure?
Yes.
Foreclosures are initially stopped by filing bankruptcy. However, if you filed another bankruptcy case within the last two years and the court lifted the stay in that proceeding and allowed the lender to proceed with the foreclosure, then the stay will not apply. In other words, the law doesn't allow you to prevent a foreclosure by repeatedly filing bankruptcies.
Importantly, even if this is your first bankruptcy, filing won't stop certain time periods associated with foreclosure procedures from "running." In certain cases, once a homeowner receives advance notice of foreclosure, the home may not be sold until the notice period has
ended but filing for bankruptcy won't stop the notice period from elapsing. However, the sale itself can't happen while you are in bankruptcy unless the foreclosing party gets permission from the bankruptcy judge by filing a motion to lift the stay.
Importantly, under no circumstances must an individual file a bad faith bankruptcy proceeding just to stop a foreclosure proceeding. Courts will look disparagingly upon such an abuse of process and perhaps sanction you accordingly.
6. Can I be fired if I file for bankrutpcy?
Absolutely not. No. It is unquestionably illegal under U.S. Bankruptcy Law to specifically discriminate against a person based upon their need to file for protection under bankruptcy laws.
7. Can I keep my assets?
At least some of them, Yes. Depending upon which Chapter you file. A Chapter 13 usually means you keep your assets. Under a Chapter 7 bankruptcy, your non-exempt assets are liquidated.
It is quite likely you will be able to keep some of your assets. Bankruptcy laws allow debtors to necessarily keep a certain amount of property. Moreoever, selling off all assets in Chapter 7 cases is quite rare. This is because if there are any assets to pay creditors, people have already sold these assets to pay debts.
California has two sets of laws the debtor can chose from which determine which property will be "exempt" from liquidation. These exemptions can be found in California Code of Civil Procedure §703 and§704.
For more information on exemptions and what you can keep, click here.
8. What is the minimum amount of debt that is required in order to file for bankruptcy?
None.
Interestingly enough, there is actually no minimum amount of debt that a person must have in order to file for bankruptcy! However, there are a variety of facts which can make filing for bankruptcy worthwhile or not.
Courts look at whether, based on the amount of money you earn, you are able to payback your debts.
9. What would keep me from running up debt and then filing bankruptcy the next day?
Any aggregate debt which exceeds $550.00 for any singlee creditor for non-essential luxury goods, or cash advances totaling over $825.00 on a credit card incurred or taken within 90 days of filing bankruptcy are presumed to be non-dischargeable.
Thus, it is best not to use credits cards at all, or only for essential items before filing bankruptcy. This type of transfer could also apply to balance transfers so consult with an attorney before filing.
10. What are California's exemptions allowing me to keep my property?
California has two sets of exemptions, discussed in detail here.
11. Do I have to give up my 401k or IRA if I file for bankruptcy?
Not likely. Under 11 USC 522(b)(3)(C) tax-exempt retirement accounts (401(k) and SEP and SIMPLE IRAs and defined-benefit plans are exempt (protected) from being part of the bankruptcy estate. More specifically, 11 USC 522(b)(3)(C)(n) provides " retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986" are exempt from bankruptcy proceedings up to $1,000,000.
In order to determine exactly how much of your 401K is exempt, you may wish to check for local state exemptions. Further, there are some particular rules regarding recent deposits into IRAs, etc.
However, generally speaking retirement is exempt in a Bankruptcy filing.
12. If I borrowed from my 401K plan, can I discharge that debt in a bankruptcy?
No. This is because a debt against a 401K is not technically considered a "debt" because you are borrowing from yourself. The 401K plan administrator is not considered your creditor.
13. Can a 401K repayment plan be a budget expense for the means test?
As of the writing of this question (early June 2009) the Ninth Circuit Court of Appeals ruled that 401K loans are not considered a debt in the bankruptcy code and so no amount of loan repayment can be considered in calculating a debtor's budget for the means test.
The reasoning is that since a loan from a 401K is just repaying funds from the 401K plan participant, then these "loans" cannot be considered in calculating a debtor's budget for the means test.
14. Did changes in Bankruptcy law make it more difficult to file for bankruptcy?
Yes. Unquestionably it is now more difficult to file for bankruptcy. Since 2005, there are further reporting, notice, and filing requirements. Please review them here.
Bankruptcy is your legal right to relieve all or a portion of your debts under federal law.
The Constitution of the United States, Article I, Section 8, Clause 4, provides Congress with the power to establish uniform laws on the subject of Bankruptcies throughout the United States. Bankruptcy was a reaction to "debtor's prisons", where individuals could be physically confined for not being able to pay their debts.
Technically, there are six different types of bankrutpcy proceedings under the law. Chapter 7 is a "fresh start" or liquidation proceeding. Chapters 9 and 12 are seldom used in consumer law and involve municipalities and farmers. A Chapter 13 is a reorganization of debt. Chapter 15 involves foreign proceedings and is usually practiced by a niche lawyer.
2. Do I really need an attorney for Bankruptcy?
Probably, yes.
There is absolutely no legal necessity that someone have an attorney in order to file bankruptcy. But, bankruptcy can be tremendously complex and there is a great deal of paperwork involved. Courts and paralegals are not able to provide legal guidance. It is most likely in your best interest to have an attorney assist you with the process so as to ensure it is done properly.
3. Does Bankruptcy ruin my credit for ten years?
No, not necessarily.
It is true that Bankruptcy stays on your credit for 10 years. However, most people experience an improvement of their credit within 12 to 18 months of the filing of their bankruptcy. How? Creditors realize that after a filing of a Chapter 7 bankruptcy the debtor cannot file again for bankruptcy for another 8 years. Therefore, future creditors see less risk in extending you credit in the near future.
4. Does Bankruptcy stop the phone calls and all immediate collection actions?
Yes.
Filing bankruptcy instantly invokes United States Code Title 11362 the Automatic Stay. The automatic stay stops most debt collectors straight away. If creditors do call you, refer them to your attorney and give them no further information. Do not tell them that you have filed bankruptcy, just simply give them your attorney's name and number.
An important EXCEPTION exists. In some cases, such as an eviction action for unlawful detainer, a landlord may still be able to evict you from your dwelling. Do not ever rely on the automatic stay for purposes of real property eviction.
5. Can Bankruptcy halt a foreclosure?
Yes.
Foreclosures are initially stopped by filing bankruptcy. However, if you filed another bankruptcy case within the last two years and the court lifted the stay in that proceeding and allowed the lender to proceed with the foreclosure, then the stay will not apply. In other words, the law doesn't allow you to prevent a foreclosure by repeatedly filing bankruptcies.
Importantly, even if this is your first bankruptcy, filing won't stop certain time periods associated with foreclosure procedures from "running." In certain cases, once a homeowner receives advance notice of foreclosure, the home may not be sold until the notice period has
ended but filing for bankruptcy won't stop the notice period from elapsing. However, the sale itself can't happen while you are in bankruptcy unless the foreclosing party gets permission from the bankruptcy judge by filing a motion to lift the stay.
Importantly, under no circumstances must an individual file a bad faith bankruptcy proceeding just to stop a foreclosure proceeding. Courts will look disparagingly upon such an abuse of process and perhaps sanction you accordingly.
6. Can I be fired if I file for bankrutpcy?
Absolutely not. No. It is unquestionably illegal under U.S. Bankruptcy Law to specifically discriminate against a person based upon their need to file for protection under bankruptcy laws.
7. Can I keep my assets?
At least some of them, Yes. Depending upon which Chapter you file. A Chapter 13 usually means you keep your assets. Under a Chapter 7 bankruptcy, your non-exempt assets are liquidated.
It is quite likely you will be able to keep some of your assets. Bankruptcy laws allow debtors to necessarily keep a certain amount of property. Moreoever, selling off all assets in Chapter 7 cases is quite rare. This is because if there are any assets to pay creditors, people have already sold these assets to pay debts.
California has two sets of laws the debtor can chose from which determine which property will be "exempt" from liquidation. These exemptions can be found in California Code of Civil Procedure §703 and§704.
For more information on exemptions and what you can keep, click here.
8. What is the minimum amount of debt that is required in order to file for bankruptcy?
None.
Interestingly enough, there is actually no minimum amount of debt that a person must have in order to file for bankruptcy! However, there are a variety of facts which can make filing for bankruptcy worthwhile or not.
Courts look at whether, based on the amount of money you earn, you are able to payback your debts.
9. What would keep me from running up debt and then filing bankruptcy the next day?
Any aggregate debt which exceeds $550.00 for any singlee creditor for non-essential luxury goods, or cash advances totaling over $825.00 on a credit card incurred or taken within 90 days of filing bankruptcy are presumed to be non-dischargeable.
Thus, it is best not to use credits cards at all, or only for essential items before filing bankruptcy. This type of transfer could also apply to balance transfers so consult with an attorney before filing.
10. What are California's exemptions allowing me to keep my property?
California has two sets of exemptions, discussed in detail here.
11. Do I have to give up my 401k or IRA if I file for bankruptcy?
Not likely. Under 11 USC 522(b)(3)(C) tax-exempt retirement accounts (401(k) and SEP and SIMPLE IRAs and defined-benefit plans are exempt (protected) from being part of the bankruptcy estate. More specifically, 11 USC 522(b)(3)(C)(n) provides " retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986" are exempt from bankruptcy proceedings up to $1,000,000.
In order to determine exactly how much of your 401K is exempt, you may wish to check for local state exemptions. Further, there are some particular rules regarding recent deposits into IRAs, etc.
However, generally speaking retirement is exempt in a Bankruptcy filing.
12. If I borrowed from my 401K plan, can I discharge that debt in a bankruptcy?
No. This is because a debt against a 401K is not technically considered a "debt" because you are borrowing from yourself. The 401K plan administrator is not considered your creditor.
13. Can a 401K repayment plan be a budget expense for the means test?
As of the writing of this question (early June 2009) the Ninth Circuit Court of Appeals ruled that 401K loans are not considered a debt in the bankruptcy code and so no amount of loan repayment can be considered in calculating a debtor's budget for the means test.
The reasoning is that since a loan from a 401K is just repaying funds from the 401K plan participant, then these "loans" cannot be considered in calculating a debtor's budget for the means test.
14. Did changes in Bankruptcy law make it more difficult to file for bankruptcy?
Yes. Unquestionably it is now more difficult to file for bankruptcy. Since 2005, there are further reporting, notice, and filing requirements. Please review them here.
1. What is bankruptcy?
2. Do I really need an attorney for bankruptcy?
3. Does Bankruptcy ruin my credit for ten years?
4. Does Bankruptcy stop the phone calls and all immediate collection actions?
5. Can Bankruptcy halt a foreclosure?
6. Can I be fired if I file for bankrutpcy?
7. Can I keep my assets?
8. What is the minimum amount of debt that is required in order to file for bankruptcy?
9. What would keep me from running up debt and then filing bankruptcy the next day?
10. What are California's exemptions allowing me to keep my property?
11. Do I have to give up my 401k or IRA if I file for bankruptcy?
12. If I borrowed from my 401K plan, can I discharge that debt in a bankruptcy?
13. Can a 401K repayment plan be a budget expense for the means test?
14. Did changes in Bankruptcy Law make it more difficult to file Bankruptcy?
2. Do I really need an attorney for bankruptcy?
3. Does Bankruptcy ruin my credit for ten years?
4. Does Bankruptcy stop the phone calls and all immediate collection actions?
5. Can Bankruptcy halt a foreclosure?
6. Can I be fired if I file for bankrutpcy?
7. Can I keep my assets?
8. What is the minimum amount of debt that is required in order to file for bankruptcy?
9. What would keep me from running up debt and then filing bankruptcy the next day?
10. What are California's exemptions allowing me to keep my property?
11. Do I have to give up my 401k or IRA if I file for bankruptcy?
12. If I borrowed from my 401K plan, can I discharge that debt in a bankruptcy?
13. Can a 401K repayment plan be a budget expense for the means test?
14. Did changes in Bankruptcy Law make it more difficult to file Bankruptcy?