What is the differences between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7, is what is called a traditional liquidation bankruptcy – In regular terms, it’s a one time, not ongoing (like chapter 13), event. During this event you keep what the law allows in terms of property (which is probably significantly more than you think) and get rid of the rest to the bankruptcy trustee. The trustee basically sells any of this property you give up and the debts that can be erased are. Most debts are erased in a bankruptcy that are not secured (guaranteed) by property, except for, generally, spousal support (alimony), child support, family support, taxes and a few others (just FYI, sometimes you can get rid of the taxes too). For most people the main debts that are erased are credit card debts, medical debts, and most other unsecured debts – they get the “fresh start” promised by bankruptcy. Chapter 13 bankruptcy is an ongoing situation. It is a bankruptcy where you set up a payment plan to pay back a percentage of your unsecured debts over a 3-5 year period (generally), along with providing for your secured debts as well.

Is A Credit Counselor Worth the Money?

This is a question I get regularly. Lately I’ve been getting a lot more horror stories about people that have gone to these people to restructure their debt and it turns into a nightmare. I suggest you at least talk to an attorney during a free consultation first to make sure it’s in your best interest!

10 Things To Ask Your Bankruptcy Attorney BEFORE Hiring!

  1. Have they practiced law for at least 10 years?
  2. Have they ever quit practicing law in California for any reason?
  3. Do they have real litigation experience, just in case something unexpectedly goes wrong during your bankruptcy?
  4. Do other attorneys pay them to teach them how to do bankruptcy – if so, when was the last time they taught for money?
  5. Do they limit their bankruptcy cases to Monterey and Santa Cruz in order to give personal service?
  6. Do they personally go with you to the creditors meeting? Or do they hand you off to someone you’ve never met?
  7. Do they have both a real law office and a real law library (go see it!)?
  8. Do they only represent debtors?
  9. Do they have written instruction to give you if you hire them to help you rebuild your credit after the bankruptcy?
  10. How many people have they helped with bankruptcy?

Top 5 Mistakes People Make When Filing Bankruptcy!

  1. They wait too long and waste assets they could have kept.
  2. They go with a non-attorney to do their bankruptcy and end up losing property they could have kept.
  3. They don’t list all their debts.
  4. They try to hide assets.
  5. They get pushed into a bankruptcy when they may not have to, or the wrong type of bankruptcy.

If I Am Married, Does My Spouse Have To File Bankruptcy?

Each case is different and the decision on whether a husband and wife should file bankruptcy separately or together, is based on their particular circumstances. However, it is not required that a husband and wife file bankruptcy together, just like it is not required that a husband and wife file their taxes together (I know many who do not for financial reasons).

However, the spouse that does not file bankruptcy will not receive the benefits of bankruptcy. In other words, if the non-filing spouse is jointly liable on certain debts, he or she will remain liable for those debts if the filing spouse filed for a Chapter 7 bankruptcy. He or she will also remain liable for any amount not paid for in the filing spouse’s Chapter 13 plan. On the other hand, the non-filing spouse will not have bankruptcy noted on his or her credit report.

Additionally, if one debtor is married but living separately from their legal spouse, a joint bankruptcy petition can still be drafted indicating two separate living expenses for each person at two separate addresses.

Also, for residents of California (a community property state), most of the property is equally owned by both the husband and wife regardless of the name of the person on the title or mortgage – but this is a general rule and you should talk over your specific situation with an attorney, such as the trained ones in our office at (831) 657-0100.

Will Bankruptcy Stop A Wage Garnishment?

Yes, some of the money garnished from a debtor(s) paycheck may even be returned to them if the wage garnishment is deducted after the bankruptcy petition has been filed. Of course this all depends on how much was garnished and when it was garnished.

If this is the case with you, please call and set up an appointment immediately to discuss your situation.

Stopping a wage garnishment occurs because whoever is garnishing the debtor(s) paycheck is now being paid (or their debt is being discharged) through the bankruptcy petition they file. As soon as the clerk file-stamps the bankruptcy petition, the debtor(s) will have immediate protection under the United States Bankruptcy Court.

How Much Does It Cost To File Bankruptcy?

The court currently charges a $299.00 filing fee to file a Chapter 7 bankruptcy petition and $274.00 to file a Chapter 13.

The attorneys fees are dependant on the facts of your case, such as married or individual, # and types of debts, which Chapter (7 or 13), etc. At the Law Offices of Matthew Williamson, we do everything we can to keep your fees low and normally are able to quote you a flat, reasonable fee and we always present it in writing so you know what it does and does not cover.

Steps to Take to File Chapter 7 and Chapter 13 Bankruptcy in Salinas, Monterey, Watsonville, Seaside, or Santa Cruz

1st – Call an attorney. Next, get the information together that your attorney tells you they need ASAP!

What Should You Bring to Your Bankruptcy Attorney

Whatever documents they tell you for your individual situation. It’s important to bring all of the documents if you want to start your bankruptcy and get your creditors to quit calling.

What Debts Are Erased in Bankruptcy

It depends on the type of bankruptcy, but generally most unsecured debt and secured debt if you are willing to get rid of the underlying property. Alimony, child support, and taxes are generally not erased as well as student loans (there are exceptions).

When Does A Bankruptcy Take Effect?

When the court receives the bankruptcy petition and assigns a case number, the bankruptcy stay is immediately in effect.
The court will normally send a notice of the debtor(s) bankruptcy filing to all of the creditors listed on the Creditor’s Matrix
generally within five days after filing of the petition. That is why it is so vitally important to obtain complete addresses and
zip codes of all creditors listed in the bankruptcy petition. The court will send a copy of a notice to all creditors which will
allow them the opportunity to file an Objection, Proof of Claim or Motion for Relief from Stay. If the addresses are inaccurate
or missing, the creditor will not be properly notified and they could file an Objection to the Bankruptcy Discharge based on this
fact alone.

I Feel So Guilty Not Being Able To Pay My Bills. Am I A Bad Person Because I Need To File Bankruptcy?

My clients often need reassurance of the fact that they are not bad people just because they decide to file
for bankruptcy. Before the 20th Century, if a person was bankrupt, creditors stepped in, sold everything the
person owned, split the money between them, put the bankrupt person out in the street and made a public mockery
of them (didn’t matter if it was for medical bills, or other debts outside their control).

If they did not have any property to cover the repayment of their debt, they were sent to debtor’s prison.
These are the reasons why some people feel that bankruptcy is a bad thing to do. But that was the procedure over
200 years ago! The economy has changed (boy has it recently), employers have changed, life is more complicated,
interest rates are higher than they have ever been in history, unemployment is high and people do tend to get
in major debt because of all the tempting offers of no-hassle credit, medical bills, and/or unexpected unemployment.

These factors, as well as others, could cause a good person who was responsible and financially secure to suddenly
consider filing bankruptcy. Not one of us is immune from the world’s problems. So when a client finds it necessary
to file for bankruptcy, I urge them not to look back. I encourage them to meet the problem head on, clean up the
situation and move on with life.

I tell many clients that they should be glad the United States has set up a
governing body to protect people so society as a whole can continue to grow and prosper without the heavy burden
of debt. Most countries do not have the fair bankruptcy laws that we do in the United States.

What About Filing Bankruptcy On Bad Checks I Wrote At Check-Cashing Agencies? Can I Include Them In My Bankruptcy?

First of all, clients need to include all the debts they owe in their bankruptcy petition regardless of whether
they intend to continue paying them or not. However, most clients consider a check that bounced at a check cashing
agency to be treated the same as a bad check written at the corner grocery store or for a utility bill.

When someone walks into the check cashing agency and writes a postdated check in order to receive a cash advance,
the clerk at the check cashing agency is fully aware of the fact that the check they received is postdated.
This is much different from writing a check to someone who accepts the check in good faith that the monies are
available for immediate payment.

However, if someone goes to several check cashing agencies in order to obtain cash advances against the same payroll
check they are committing fraud because all of their postdated checks amount to more than their payroll check
will cover on the date of the postdated check. In a situation like this, the client’s attorney needs to be
alerted at once.

As far as including the debt on the bankruptcy petition, bad checks written to check cashing agencies are listed
as a non-priority unsecure debt with a description of check deficiency on Schedule F.

Also, your attorney should be made aware of whether there are any pending judgments or collection letters
associated with this check deficiency.

Additionally, you should find out if the bank (where the checks were written on) charged them additional
bank fees and/or if any bank accounts were recently closed voluntarily or involuntarily by the debtor(s).
Additional bank fees can be listed and the recent account closing should be listed as well.

Will I Lose Any Of My Personal Belongings Or Household Goods When I File Bankruptcy?

If the debtor(s) are filing a Chapter 13 bankruptcy and paying back their creditors 100% of the debt owed to
them, the trustee at the bankruptcy court will not take any of their personal belongings or household goods and
sell them to pay the outstanding debts.

If the debtor(s) are filing a Chapter 7 bankruptcy, they could lose any personal belongings or household goods
if any of the following are true:

  • The debtor(s) do not totally own their personal belongings or household goods free and clear of any
    liens. (Example: furniture and appliances purchased at a rent-to-own store.) In this case, if the debtor(s)
    want to keep the item(s), they can reaffirm the debt if they have enough money per month to continue
    paying the bill or we may determine at the law office that the market value of the item(s) are much
    less than what is currently owed to the creditor and negotiate a settlement amount.

    Otherwise, the client may want to consider surrendering the item(s), which does not necessarily mean
    it will be repossessed. This is an area that requires specific advice at our office from an attorney.

  • If the personal belongings or household goods are not covered by an exemption (that is the law
    that protects the clients property from being taken in bankruptcy), that item could be sold by the
    trustee and distributed to the creditors.

    However, you will find that most average consumers
    filing a Chapter 7 normally do not have more than one motor vehicle, television set, computer, stove,
    refrigerator and some miscellaneous costume jewelry and these items are all normally exempted in the
    bankruptcy petition.

How Is My Leased Vehicle Treated In Bankruptcy?

A leased vehicle is treated as an executory contract and the monthly payment is included on Schedule J
along with the normal monthly expenses if the client(s) intend to keep the vehicle. A car lease and a
purchase can be compared to the difference between a home rental and mortgage. A purchased vehicle carries
a market value listed in the Kelly Blue Book or NADA.

Some Of The Personal Belongings And Furniture I Have Belong To An Ex-Roommate. Should I List These In My Bankruptcy?

Yes. All items in the debtor(s) possession at the time the bankruptcy petition is filed must be listed
regardless of who the owners of the item(s) are. The main issue here is why the debtor(s) are holding these
items.

Could there be a potential lawsuit because the ex-roommate owes them money? If this is the case, you must tell your attorney
and provide them the information as to how much money this person owes them and if a lawsuit has been or will be
filed in the near future. Any anticipated future monies need to be listed in the bankruptcy petition regardless
if the clients expect to receive any compensation or not.

Why Are Some Collectors So Cruel?

Most collectors are paid on commission which means that their salary is determined by the amount of money
they collect. The majority of collectors could care less if the debtor(s) eat or live in a house without
electricity. Their only concern is scaring the debtor(s) into paying their bill so the collector will receive
a commission check on the amount of money he or she collects. This commission based collection method helps
to fuel an intense, competitive environment which often results in hostile collection methods.

In addition, most debts turned over to a collection agency by a creditor are purchased for a lower amount
than the debt actually is for.

In fact, some debts are purchased for as low as 10¢ on the dollar which results in even more hostile collection
methods to collect the full amount of the debt since the collection agency will make a 90% profit.

For example, suppose Sears sold a debt to a collection agency for $200 but $2,000 was the total amount the
debtor(s) owed. The collection agency would want to use every method available to them to collect the $2,000
because $1,800 of the amount would be pure profit for their collection agency.

Can I Get Rid of Taxes in Bankruptcy?

The Good News and the Bad News. Yes, you can, but only if certain requirements are met. There are 5 basic requirements

  1. The due date for the tax return was at least 3 years ago.
  2. The return was filed at least 2 years ago.
  3. The tax assessment is at least 240 days old.
  4. The tax return was not fraudulent.
  5. The debtor is not guilty of tax evasion.

What If I Owe The IRS Back Taxes? How Will Bankruptcy Help Me?

Under the new 2005 bankruptcy law, unsecured taxes that first became due three years or more before the filing
of a bankruptcy can be discharged. This is providing the tax returns were non-fraudulently filed. For taxes owed
that are less than three years old, relief is still available under the bankruptcy law. However, the measure of
relief is based upon the following factors:

  • the age of the tax
  • whether a tax return was properly filed, and
  • the chapter of bankruptcy debtor(s) filed under.

Questions? Here’s more Helpful Links

We have constructed a list of helpful links to some of your most requested questions.

Please follow the link here to see the list.

Bankruptcy Information in Spanish

We have translated bankruptcy information into Spanish to help you along with the process. Please review the following document and contact us with any questions.

BankruptcyInformation-Spanish.pdf