Q: If I’m about to declare bankruptcy, should I spend all my money before I file?
A: No. The bankruptcy trustee often requests and reviews bank statements for the accounts belonging to the person filing bankruptcy. A withdrawal of cash right before filing bankruptcy will at least be called in question by the trustee.
Q: Should I borrow as much as I can before I file bankruptcy since my debts will be discharged anyway?
A: No. If you are currently in financial trouble, borrowing more money or opening more credit accounts will only make the problem worse. More importantly, it may place your ability to receive a discharge of your debts at risk. A creditor may oppose the discharge of debts incurred right before bankruptcy on the grounds of fraud. Creditors have 60 days from the date of the 341 meeting of creditors to oppose a discharge of debt.
Q: What happens if I do not tell the bankruptcy court that I own certain property?
A: It is very important to make full disclosure to the court about all property that you own, even if someone else is holding it for you. If a person attempts to hide assets from the bankruptcy court, they can be denied a discharge. Also, all court documents a person signs during bankruptcy are signed under the penalty of perjury. Like other types of court cases, all testimony in a bankruptcy proceeding is under oath. Bankruptcy fraud can include criminal penalties in some cases.
Q: Can I file bankruptcy if I make a high income?
A: Under current law, called the “Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA),” there is a “means test” where the court must consider how much income a person makes before allowing them to file Chapter 7. The means test is designed to determine whether a person has the “means”, or ability, to repay some portion of their debt. If the answer is yes, the court will not allow the person to file Chapter 7. People who earn a high income may not pass the means test. The only way to know for sure is to have a bankruptcy attorney assess your specific income and expenses. If you do not pass the means test, you may still file bankruptcy under Chapter 13.
Chapter 13 is a wage earner reorganization plan. In effect, it is a composition agreement that is binding on creditors. (See the discussion on composition/settlement agreements below). An attorney will draw up a plan where the person filing bankruptcy agrees to repay a portion of their debt from their future earnings for a period of up to five years. If the court approves the repayment plan, it is binding on creditors. The person filing Chapter 13 will make payments to creditors under the plan. Once the payment plan is completed, any remaining debt will be discharged or wiped out.
Q: How long will a bankruptcy stay on my credit report?
A: Under the federal Fair Credit Reporting Act, a consumer credit reporting agency can keep most accurate, negative information on a person’s credit report for up to 7 years. Bankruptcy information may show on a person’s credit report for up to 10 years.
Q: How often can you file for bankruptcy?
A: A person cannot receive a Chapter 7 discharge if they have:
- Received a Chapter 7 discharge within the past 8 years, or
- Filed a Chapter 13 case within the past 6 years.
A: A person cannot receive a discharge in a Chapter 13 case if they have:
- Received a Chapter 7 discharge within the past 4 years, or
- Received a Chapter 13 discharge within the past 2 years.
(The time periods are measured from the date the case began, not the date of the discharge).
Q: If I file for bankruptcy, will it stall the foreclosure on my home?
A: Foreclosure of your home may be delayed temporarily, but cannot be stopped completely. When a bankruptcy petition is filed, the court will order an automatic stay. This means that creditors must immediately stop all collection activities, including foreclosure actions. Foreclosure will be postponed while your bankruptcy is pending—usually for 3-4 months. However, under some circumstances, the court might allow your lender to move forward with the foreclosure sale if the lender makes a successful motion for relief from automatic stay. In effect, the creditor is asking that the automatic stay not apply to them. If the automatic stay does not apply, the creditor can continue with the foreclosure action. This is not a common situation.
Q: Can I stop paying my bills if I am going to file for bankruptcy?
A: If you have a home or car you would like to keep after bankruptcy, you should continue making your payments. Unsecured credit cards and medical bills are the most common debts that drive people into bankruptcy and are usually discharged once the bankruptcy case is over. Generally, a person can stop making payments on credit cards and medical bills if they are going to file bankruptcy. But, before stopping any payments, it is important to speak with an attorney.
Q: How will filing for bankruptcy affect my spouse?
A: California is a community property state. This means that property acquired during a marriage is community property which belongs equally to both spouses. Even if only one spouse files for bankruptcy, all of the community property will become property of the estate. Property of the estate, if not exempt, is potentially available to repay community creditors and creditors of the filing spouse during bankruptcy. The non-filing spouse’s separate property is generally not included in the estate. Your bankruptcy attorney can assess your specific situation and advise you on whether it is most beneficial to file separately or jointly with your spouse.
Q: Is credit counseling a good alternative to filing for bankruptcy?
A: There are many companies and agencies that offer credit counseling services. Credit counseling can assist people in preparing a budget to help reduce debt and can also attempt to get creditors to agree to a composition or settlement plan. A composition or settlement agreement is where creditors agree to accept partial payment in full satisfaction of the debt. However, the problem with these types of agreements is that they require agreement from all creditors. There is no way of binding a creditor who does not want to agree to the proposed pay-out (creditors can be bound by repayment plans under Chapter 13 bankruptcy). If you would like to contact a credit counseling agency before considering bankruptcy, it is best to use a government approved agency. For a list of court approved credit counseling agencies, contact the Office of the United States Trustee at http://www.justice.gov/ust/.
Beware of companies that selling credit repair services. Some companies claim that for a fee, they can “erase your bad credit” or “remove bankruptcies, judgments, and liens from your credit report.” This is not true, or possible. No company can legally remove accurate negative information from your credit report. To learn how to protect yourself from credit repair scams, please visit the Federal Trade Commission’s website at http://www.ftc.gov/bcp/menus/consumer/credit/reports.shtm.
Q: Will I be able to get credit after bankruptcy?
A: A person who files for bankruptcy usually already has a significant amount of negative information on their credit report. After bankruptcy, there will no additional negative information added to the credit report (although the bankruptcy itself may show for up to 10 years). Many secured creditors, such as car dealers, will continue to sell goods on credit to people that have filed bankruptcy. However, they may require higher down payments and charge higher interest rates. Some credit card companies will issue credit cards if the credit limit is low and money is placed down as a deposit to cover the credit line. Again, the interest on these cards will be high. Utility companies will usually work with people who have filed for bankruptcy if deposits are made to assure the payment of future utility bills.
Call San Diego Law Firm for bankruptcy help
Bankruptcy law is complicated and constantly changing. You’ll need an expert who will guide you through the process to get the best possible outcome. If you have questions about bankruptcy, call our office to schedule a free consultation. We are here to help you.
- We provide quality legal services personalized to meet each client’s needs.
- We are experienced in bankruptcy law and understand the deadlines and rules that must be followed.
- We provide excellent customer service and promptly respond to client phone calls and emails.
- We offer free consultations.