General Bankruptcy Questions

+Is the Law Office of Asaph Abrams the Right Fit for me?

Yes (natch). While we help make it easy for the client, it’s important to remember that bankruptcy is a serious proposition. Bankruptcy dramatically affects your personal finances and welfare. Through that process it’s vital to have an advocate you’re comfortable with: counsel who is down to earth, responsive and a good listener. We look out for you and your family’s future: we take care of our clients.

+Do I need a Bankruptcy Attorney?

Yes. Even if an attorney were to file bankruptcy, she would hire a bankruptcy expert.  Bankruptcy is one of the most specialized fields in law; it’s a mistake to retain counsel who moonlights and does this on the side. The bankruptcy practitioner must appreciate the red flags in a constantly-evolving field. One should seek out a San Diego Bankruptcy Attorney with the experience of hundreds upon hundreds of successful local cases. And it’s the bankruptcy attorney’s mandate not only to get results, but to keep the client informed and worry-free throughout the process.

+Is bankruptcy a right or a privilege?

Persons cite the corporations that received a government bailout and argue the individual deserves the same.  That’s a false analogy.  While some fat cats profited, the big bailout was motivated (whether we believe it or not) by national economic recovery; in Chapter 7 and Chapter 13 Bankruptcy we address personal recovery.  We put resentment and entitlement out the window: bankruptcy is a privilege and not an entitlement.  There are bankruptcy rules: good faith, honesty, willingness to repay debt IF funds are available, and due diligence of attorney and client.  As long as the debtor complies with bankruptcy law, they may be privileged with a powerful remedy: freedom from debt.

+What can go wrong in bankruptcy?

When I accompany my clients to the mandatory Meeting of Creditors (for Chapter 7 or Chapter 13 Bankruptcy), we observe together many a bankruptcy train wreck in the cases called before ours.  I don’t dig on schadenfreude, but it’s interesting to watch, so bring popcorn. Things that go wrong are basically loss of property in chapter 7 bankruptcy or failure to cancel debt in either chapter 7 or chapter 13 bankruptcy.  Things go wrong when 1) The bankruptcy client doesn’t “tell all;” and/or 2) the bankruptcy attorney doesn’t ASK all.  Here’s what I mean: 1) You must report to your San Diego Bankruptcy Attorney ALL of your income, all your assets, and other financial affairs. Why?  Because debt relief in bankruptcy is a function of what you can afford to repay.  That affordability is based on how much you have acquired and how much you’ve earned or earn. If you lie or conceal assets in bankruptcy, the penalties are severe. There are also “exceptions to discharge” (meaning cancellation of debt may be denied). These (fortunately rare) bankruptcy exceptions include fraudulent circumstances. Fraud does NOT mean merely getting into debt (e.g. due to hardship or even poor financial management). An example of fraud is acquiring debt without any intention to repay it. So, if you’ve ever gone… crazy with credit cards, it’s something to chew over. Luckily, those cases are far and few between in bankruptcy. 2) You must select counsel who will properly “sweep” your financial affairs to uncover any mines. Your experienced San Diego Bankruptcy Attorney is a mine sweeper. We fulfill our affirmative duty to inquire into your financial affairs, so we may uncover any loose rock and pitfall. That is the difference between Yours Truly–being diligent bankruptcy counsel–and the alternative. The alternative in San Diego bankruptcy includes bloated run-of-the-mill firms and disgraced dilettantes who cut corners, pawn off work on clerks, and dabble in this specialized field.

+Can I take new loans after bankruptcy?

Yes.  After bankruptcy, you are an attractive loan candidate.  After all, you can’t file bankruptcy again for several years….  Bankruptcy is a strong foundation for improving income to debt ratio, rebuilding credit over time, and being better able to assume future debt.

+How does bankruptcy affect my credit?

Bankruptcy IMPROVES credit scores. Generally, our bankruptcy clients’ credit is already shot and their scores can only go UP. If the credit’s still good, it’s by virtue of making minimum payments that 1) cause undue hardship; and 2) won’t pay off debt in a lifetime.   Consider: who can better assume new debt?  One stretched thin with existing liabilities, or one who’s zeroed out debt in bankruptcy?  Bankruptcy can turn the income- debt ratio to All Income–No Debt.

+Can I get rid of my second mortgage in bankruptcy?

Yes. If your second mortgage is completely unsecured (that’s the case if you owe more on your 1st mortgage than your home is currently worth) you can have the second mortgage eliminated (stripped) in a Chapter 13 Bankruptcy (but not in a Chapter 7 Bankruptcy).

+Can I get rid of my child support debt in bankruptcy?

Fuhgettaboutit.  The public-policy rationale for excluding child support from discharge in bankruptcy is embodied by the simple mandate: kids come first.  The legislature and Family Court are charged with enactment and enforcement of equitable provisions for child support: presumably, conflicting factors of avarice and hardship can be considered in the course of modifying child support provisions; but determination of one’s domestic-support obligations aren’t within the purview of the bankruptcy court.  On a tangent: within chapter 13 bankruptcy, the bankruptcy debtor must pay child support as a requirement for confirmation (approval) of their chapter 13 payment plan; there isn’t a reprieve from payment of child support for the duration of one’s bankruptcy (’cause a child’s need for support isn’t subject to suspension).  Yet, chapter 13 bankruptcy does provide (by way of a curious statutory omission) for discharge of certain debts arising from divorce (if they are not characterized as child or spousal support.

+Can I cancel income taxes in bankruptcy?

Yes, IF the corresponding tax returns were last due 3+ years before filing bankruptcy, filed 2+ years before filing the bankruptcy, and not assessed within 240 days before filing the bankruptcy. The 3-year period commences from the later of the original due-date or the extension due-date, if applicable. The 240 days after assessment may be longer due to intervening events. Caveat: without careful examination of transcripts and other conditions, cancellation of income taxes in bankruptcy may not happen. So it ain’t necessarily till death… sometimes it’s just till bankruptcy that taxes survive.

+Can I cancel (discharge) student loans in bankruptcy?

No–with very rare exception. The exception for student-loan discharge in bankruptcy is “undue hardship.” However, it’s an illusory term of art.  Forgiveness of student loan debt in bankruptcy is contingent upon showing 1) past failure to repay it, despite great effort; 2)  present inability to possibly repay it; and 3) future inability to repay it.  This implies the answer is NO absent disability precluding ANY level of earning now or in the future.  We’ve had septuagenarian bankruptcy clients with outstanding student loans, and ones with nigh half-a-million in such debt.

+Are there debts that Bankruptcy will not cancel (discharge)?

Yes. Student loan debt (except in very rare circumstances) is not dischargeable (cannot be canceled) in bankruptcy.  Income taxes can sometimes be canceled in bankruptcy, but very-strict criteria must be satisfied; ask for details.  Government debt, child support, spousal support and obligations, and DUI-related debts get denied discharge.  There are gray areas; our bankruptcy attorney will advise you regarding discharge of  your specific type of debt. Of course, bankruptcy (Chapter 7 or Chapter 13) cancels most types of debt.

+Will bankruptcy save my home?

Where there’s a will there’s a way.  If you’re behind on your mortgage, we can file a Chapter 13 Bankruptcy that gives you up to 60 months to repay the past dues. You must concurrently maintain ongoing dues, yet second mortgage payments are often eliminated in chapter 13 bankruptcy.

+Can I keep my home in bankruptcy?

Absolument.  Er, yes.  If you have no equity (i.e. the home’s “underwater” and you owe more than it’s worth), then all you need to do is maintain your mortgage payments, just like you’d do outside of bankruptcy.  If it has no equity, it can’t be sold to pay off your creditors. If the home DOES have equity (value after mortgage and other lien payoffs), you can still protect (exempt) a huge chunk of it in bankruptcy–  generally between $75,000 to $175,000 in San Diego; there is less protection for personal property if you’re exempting high home equity.

+Can I keep my car in bankruptcy?

The answer is almost always yes.  A car is only subject to loss in chapter 7 bankruptcy if it has a whole lot of equity (the value less any loan payoff).  Most people in bankruptcy have little equity in their vehicles.  Yet, there are generous allowances in bankruptcy, which let you protect a significant amount of equity in a vehicle.

+Will I lose all my stuff in bankruptcy?

No.  Generous allowances (exemptions) allow bankruptcy debtors to almost always keep all their property.  Obviously, if you have excessive assets, you may need to turn over a small amount of assets in exchange for cancelling a much-larger amount of debt.   Your San Diego Bankruptcy attorney will advise you in advance if there’s any danger whatsoever to any of your property.

+Will bankruptcy stop a repossession?

Yes. Chapter 7 bankruptcy gives you an important breather and opportunity to refinance an “underwater” car, or possibly work things out with the lender. Ultimately, you have to bring your payments current.  Chapter 13 bankruptcy can give you a framework to catch up on late payments AND Chapter 13 bankruptcy can lower your loan balance.

+Will bankruptcy stop a foreclosure?

Yes.  Chapter 7 buys you time. If you file Chapter 13 bankruptcy, then you’re given up to 60 months to catch up on your mortgage arrears (overdue balance).  Ultimately, you need to bring your payments current in order to retain the home.

+Will bankruptcy stop a lawsuit or garnishment?

Yes.  Filing chapter 7 or chapter 13 bankruptcy instantly stops lawsuits and collections.  Some debts (like domestic support, certain taxes, and student loans–with painfully rare exception) cannot ultimately be canceled in bankruptcy.  Therefore, collection of such excepted debts would either continue or be temporarily suspended by the bankruptcy.

+Can I file bankruptcy a second time (after a prior dismissal)?

If your prior case was dismissed (thrown out or rejected), then the several-year wait-periods that apply to refilling bankruptcy (after a prior case that culminated in discharge) do not apply.  However, depending upon the circumstances of the dismissal, restrictions may apply. If you file bankruptcy within one year after dismissal of a prior bankruptcy, then limitations apply to the automatic stay (the protection from creditors which is in effect between the time of filing and the time of discharge).  Certain limitations can be overcome by your San Diego Bankruptcy Attorney.  We may file motions to extend or instate the automatic stay, so that you have the protection you need. Under certain circumstances, 180-day bars (as in wait period– not open-just-half-the-year watering-holes) may apply and compel you to wait that number of days before refiling.  A particular dismissal order may also prescribe particular restrictions.  Lesson learned?  File with a trusted San Diego bankruptcy attorney to avoid permanent damage.

+Can I file bankruptcy a second time (after a prior discharge)?

Yes, you can do a repeat bankruptcy filing.  The following waiting periods apply IF you received a discharge (successfully finished) your prior bankruptcy, and they apply to the period between (first) filing date to (second) filing date:

  • You can file a chapter 7 bankruptcy eight (8) years after the filing date of a prior chapter 7 that ended in discharge.   You can file a chapter 7 six (6) years after the filing date of a chapter 13 that ended in discharge (or less if a high amount of debt was paid in the chapter 13 bankruptcy).
  • You can file a chapter 13 bankruptcy (in order to get a discharge or cancellation of unpaid-for debt) four (4) years after the filing date of a chapter 7 that ended in discharge.
  • You can file a chapter 13 bankruptcy (in order to get a discharge or cancellation of unpaid-for debt) two (2) years after the filing date of a prior chapter 13 that had concluded with discharge.
  • You can file chapter 13 bankruptcy prior to the expirations of the above  periods, however you wouldn’t be entitled to discharge (cancel) any debt through that second chapter 13 bankruptcy.  Some reasons to nonetheless file the repeat chapter 13 bankruptcy (notwithstanding denial of discharge) would be to cure arrears (e.g. delinquent mortgage payments) or to extend payments on secured or non-dischargeable debt (like vehicle or student loans, respectively).
Confusing?  You betcha.  Contact your San Diego bankruptcy attorney to get the answer for your specific case.

+What is the Financial Management Course or Debtor Education in Bankruptcy?

This is a wee online class you must complete AFTER your bankruptcy case is filed.  Takes 1-2 hours, it’s cheap, no biggie. It’s a mandatory hoop, but it’s helpful in terms of future budgeting.  No worries: we’ll instruct you and remind you how and when to do it.  As with all stages of the bankruptcy process, your San Diego bankruptcy attorney keeps you on task and takes lead: there’s no guesswork.  (Just read your emails and answer your phone, please!)

+What is the Automatic Stay in Bankruptcy?

Once your bankruptcy case is filed, it effects an Automatic Stay (“stay” as in stop!). The whole “stay” verbiage is possibly offensive to creditors insofar as it invokes a caninedirective.  The automatic stay is a Bankruptcy Court Order, which prohibits collections.  This means that lawsuits, garnishments, levies, repossessions and foreclosures must stop.  And this bankruptcy stay stops the calls and harassment.  Certain limitations apply (e.g. to family court matters), and there are limits to the automatic stay if you’re a serial debtor (you know–one who’s filed multiple cases within the last year, as opposed to a healthful-breakfast eater).

+What happens after I file Bankruptcy?

An “Automatic Stay” is issued right away.  You have instant relief from garnishments, levies and other bad things.  You’ll need to attend a Bankruptcy Meeting of Creditors (whether you file chapter 7 or chapter 13 bankruptcy) about a month after filing. A Chapter 7 Bankruptcy will generally end after 3 months. A Chapter 13 Bankruptcy will take 36- to 60-months (of monthly payments), but once your chapter 13 payment is filed and your San Diego bankruptcy attorney finalizes its terms (i.e. obtains court approval), you simply maintain (generally small) monthly payments. When a chapter 13 bankruptcy case ends, that means your debts (the full balance beyond the generally small sum you paid) is discharged (canceled).

+What is Credit Counseling or Debtor Education for bankruptcy?

Before you’re permitted to file bankruptcy, you must complete a little educational “course”(about 1- to 2-hours online) in which you itemize income, expenses and debts.  Upon its completion, you’re able to file bankruptcy.  Fees are very low; it’s no biggie.  As with all requirements, we’ll instruct you how to get the course done.

+What documents do I need to file bankruptcy?

The evidentiary requirements in bankruptcy are localized.  They vary between Chapter 7 and Chapter 13 Bankruptcy, vary by case, and are subject to change.  Your San Diego Bankruptcy Attorney will instruct you in advance on exactly what’s needed and what’s not.  If you’re organized, you’ll be fine.  If you’re disorganized (i.e. your records are like Paul Le Mat’s glovebox in American Graffiti or Vince Vaughn’s closet in Dodgeball), well… you’ll still be fine, because we show you how to get the info we need.  (As you know, a bankruptcy attorney only watches VERY SERIOUS movies.)

+How soon can I file for Bankruptcy?

The ball is in your court.  The debtor in bankruptcy is obliged to provide a lot of personal information and documentation.  We take it from there and carefully, but quickly prepare your case to ensure your bankruptcy is timely filed successfully.  We know you want comfort and closure and time is of the essenceWe do not sacrifice quality for haste, yet we will rush your filing when your assets are at stake.  While your bankruptcy case is being prepared, we are happy to take your creditors’ calls, so you don’t have to.

+Do I have to file with my spouse?

No. If you are married, you can choose whether to file jointly or singly, meaning with or without your spouse. However: the non-filing spouse IS affected by (or included, in a sense) in the bankruptcy. The non-filing spouse’s income generally factors into the filing spouse’s eligibility (for chapter 7) or payment amount (in chapter 13 bankruptcy). California is a community property state: earnings and acquisitions during marriage presumptively belong to both spouses (with possible exceptions; e.g. inheritance by one spouse). Thus, in bankruptcy, the non-filing spouse’s property IS the filing spouse’s property, except if there’s irrefutable proof it’s “separate property” (e.g., assets owned prior to marriage). Gay married spouses may arguably file bankruptcy jointly.

+What’s the difference between Chapter 7 and Chapter 13 Bankruptcy?

These two are commonly confused.

  • Chapter 7 Bankruptcy is a quick (usually 3 month) process; you walk away from your debt without making any payments. If you have way too much stuff, then some things may be sold for repayment of (some) debt. That is rare; California bankruptcy law protects the property (assets) of almost all persons who file chapter 7 bankruptcy. You may also be able to settle (pay an equivalent amount) instead of giving up an asset.
  • Both low-income AND high-income debtors qualify for chapter 7 bankruptcy, though very-high income may compel you to file Chapter 13 Bankruptcy.
  • Chapter 13 bankruptcy is a debt repayment plan. You make monthly payments for 36- to 60-mos. Usually, you end up paying pennies on the dollar; the unpaid-for balance gets canceled (discharged).
Chapter 13 bankruptcy also lets you lower car payments and–get this… remove your second mortgage or equity line. Payments are suited to your budget and designed to be affordable.

+What IS Bankruptcy?

Bankruptcy is a complex but powerful legal mechanism (provided for in the United States Code Title 11) to get rid of debt AND keep your property.  Bankruptcy is forgiveness of debt, release from hardship and a fresh start.  Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are the primary avenues for the consumer and small-business person to obtain comprehensive freedom from back-breaking debt.

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