A: A bankruptcy is a legal proceeding in federal court. Its function is to relieve people with debt
of their obligation to pay certain debts and to distribute assets, if any, to their creditors. The
paperwork involved in filing a bankruptcy consists of a petition and schedules. The petition
notifies the court and your creditors of your intention to seek court-ordered protection and relief
from your financial obligations by filing bankruptcy. The accompanying schedules provide the
court with an itemized list of your assets and your debts. Upon the filing of a petition, the court
grants an automatic stay so that creditors cannot attempt collections, repossessions or
foreclosures. The automatic stay acts as an injunction to prevent your creditors from attempting
to collect from you. Once the case is filed, your creditors cannot call you, sue you, garnish your
wages, disconnect your utilities, or harass you in any way. If your driver’s license was suspended
or revoked due to an uninsured automobile accident you will, in most cases, be able to get your
license back upon the bankruptcy filing.
What are the most common forms of consumer bankruptcy?
There are four types of bankruptcy that are available to individuals, depending upon their specific
circumstances. The most common forms of consumer bankruptcy are Chapter 7 bankruptcy
(discharge of debts) and Chapter 13 bankruptcy (payment terms and discharge of some or all
debts). A Chapter 11 bankruptcy is a business reorganization and a Chapter 12 bankruptcy is a
bankruptcy specifically for family farmers.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy operates as a straight discharge of certain types of debt. In certain
circumstances, a person with debt may have the option of keeping certain debts, if they so
choose. Typically, people with debt in a Chapter 7 bankruptcy are looking to discharge unsecured
credit card debt, utility bills, back rent, medical bills, uninsured car accident judgments,
deficiency amounts owed on repossessed or surrendered vehicles, and other similar debts.
Generally, Chapter 7 bankruptcy will not serve to eliminate debts derived from certain types of
tax liability, government fines, forfeitures, restitution, criminal or fraudulent conduct, child and
spousal support, drunk driving, most student loans, and debts resulting from intentional and
A Chapter 7 bankruptcy is available to people with secured debts as well. In the case of a debtor
with a mortgage or a car note, the person with debt may have the option of keeping the collateral
and keeping the debt. The person with debt in a Chapter 7 bankruptcy may also choose to
surrender the collateral and seek a discharge of the debt.
Whether or not a debtor is eligible to file a Chapter 7 is determined by a number of factors which
are best discussed with an attorney.
On average, a Chapter 7 bankruptcy takes approximately 3-4 months from start to finish. Once
the petition is filed with the court, the person with debt is granted immediate relief pending the
outcome of the case. Within approximately 30 days of filing the petition, a hearing (§341(a)
hearing) is held before a United States Trustee. Provided that there are no complications, a
Notice of Discharge is usually sent to the person with debt approximately 60 days after the
hearing. Creditors are given notice of the hearing and may attend the hearing. A person in debt
may only file a Chapter 7 bankruptcy once every eight years.
Will I lose everything if I file bankruptcy?
No. Clients are often worried that by filing bankruptcy they will lose whatever assets they may
have. This is not true. The law is allows for the person with debt to keep certain property deemed
“exempt” in the bankruptcy code. Any assets over and above the allowed exemptions could be
seized by the trustee and distributed to creditors. Most situations are such that the assets of the
person with debt fit within the allowed exemptions and the bankruptcy is deemed a “no-asset”
case. In such cases, the person with debt is allowed to keep all of their property acquired prior to
filing bankruptcy and is allowed to keep post-petition assets as well.
How will filing bankruptcy affect my credit?
A bankruptcy can stay on your credit report for up to 10 years. However, this does not mean that
a person with debt is not eligible for credit for 10 years. People with debt who have filed
bankruptcy are often excellent credit risks. They have few, if any, debts after the bankruptcy is
filed and they are not eligible for another Chapter 7 bankruptcy for eight years. It is important for
all people with debt to remember that bankruptcy addresses only those debts that were incurred
prior to filing. Once the case is filed, any subsequent debt incurred by the person with debt is not
dischargeable in Chapter 7 bankruptcy. A person with debt who gets back into financial trouble
within the eight-year period after filing a Chapter 7 bankruptcy may seek relief by filing a
Chapter 13 bankruptcy consolidation.
It is important to note that a bankruptcy will not wipe a credit report clean. A bankruptcy will
relieve a person with debt of their obligation to repay certain debts. Often people with debt are
mistaken in believing that if they file a bankruptcy they will automatically have perfect credit.
Bankruptcy provides a fresh start, but not a clean credit history.
Will bankruptcy stop my utilities from being disconnected?
Yes. With respect to utilities, the filing of a bankruptcy will generally prevent disconnection.
While a person with debt will be obligated to pay their regular monthly bill in order to retain
service, the back amounts owed may be discharged in bankruptcy. In cases where a utility has
already been disconnected, the filing of a bankruptcy will allow for the immediate reinstatement
of such service.
Can I discharge student loans in bankruptcy?
No. As a general rule, government-backed student loans are no longer dischargeable in
bankruptcy. The Higher Education Reauthorization Act (10-7-98) repealed the seven-year
standard for dischargeability of student loans. Therefore, government- backed student loans are
only dischargeable in cases of undue hardship.
Will bankruptcy allow me to get my driver’s license back if I have an accident judgment against
me? Yes. Upon the filing of your bankruptcy petition, our office will send Notice of your filing
of Bankruptcy to the Department of Motor Vehicles to help you get your license back.
Should my spouse and I file a joint bankruptcy?
Although spouses are not required to join in the filing of a bankruptcy, in some situations it is
advisable for a married couple to file a joint bankruptcy petition such as where debt accounts are
held in the names of both spouses. California marital property laws make a married couple’s
assets and debts their joint property. Therefore, in cases where one spouse files for bankruptcy
and one spouse chooses not to participate, a creditor of the filing spouse may look to assets of the
nonfiling spouse for payment. Additionally, in many cases courts have refused to grant a
discharge to a spouse who files a bankruptcy separately from a spouse who has already filed
within the eight-year period. Therefore, we generally advise that the best protection for married
people with debt is to file jointly.
How much does bankruptcy cost?
Many factors play a role in the cost of filing bankruptcy. Please call for an estimate of the fees
and costs involved. After we have an opportunity to meet with you, we will be able to evaluate
your case completely and quote you an accurate fee.
Will bankruptcy stop a lawsuit against me?
A bankruptcy filing will stop a lawsuit and prevent your creditors from placing a lien against
your house or garnishing your wages.
How often can I file for bankruptcy?
A debtor cannot obtain a discharge in a Chapter 7 case if the debtor obtained a discharge in (a) a
Chapter 7 case filed within the past eight years, or (b) a Chapter 13 case filed within the past six
years. The time periods in either case are measured from the commencement dates of the case.
I’ve filed for bankruptcy. Now what?
As soon as your case is filed with the court, you are granted an automatic stay. Creditors are
legally prevented from attempting to collect on any debt owed to them by you. This means that
creditors must stop collection activity, including telephone calls, harassing letters, repossessions,
foreclosures, lawsuits and wage garnishments. Although the stay is automatic, creditors need to
be advised of the stay and this is why it is important to include all creditors in your Bankruptcy
Schedules. The court issues a notice to all creditors advising them of the bankruptcy filing. The
creditors are informed of the case number, the automatic stay, the date set for the creditor
meeting, the deadlines for filing objections to the discharge of the debtor, and the deadlines for
filing objections to the discharge of specific debts.
How do I make an appointment for my free initial consultation?
Making an appointment is easy. You can call 714-441-0440 today, fill out an online form to
make arrangements for your free initial consultation. We offer Saturday hours by appointment.
We are generally able to see you within one or two days of your call. If your situation requires
immediate attention, we will make every effort to see you the same day that you contact our