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Bankruptcy FAQ

Benefits of Bankruptcy

If you are in a tough financial situation, drowning in debt, or need a way to stop borrowing from Peter to pay Paul, then bankruptcy is a solution for you.  In a large number of cases, bankruptcy can eliminate most, if not all of your debt.  In other cases, bankruptcy can balance your finances through reorganization of your debt.

Additional benefits of bankruptcy include:

  • stopping harassment from creditors.

  • stopping lawsuits or other creditor legal actions against you.

  • stopping foreclosure on your home to allow you more time to catch up on mortgage payments or work out a loan modification.

  • preventing repossessions on vehicles or property.

What is a Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy is commonly referred to as liquidation.  However, this term is somewhat misleading.  In most cases, people who file bankruptcy do not lose anything at all.  At Chen & Tran, we will make sure we do everything we can to completely discharge your debt without you losing any of your property.  Those that qualify for Chapter 7 will receive a discharge of their unsecured debt without making any other payments to the courts or creditors.

What is a Chapter 13 Bankruptcy?

Many people refer to Chapter 13 Bankruptcy as a reorganization or restructuring of debt.  To put it more accurately, a Chapter 13 is a 3 to 5 year payment plan.  The payment amount is determined by the amount you can afford each month.  Basically, the payment plan is your gross monthly income subtracted by your necessary expenses (e.g. taxes, mortgage, health insurance, food, clothing, cell phone bill).  The Law Offices of Chen & Tran have experience creating financially feasible payment plans.  We will work with you and the bankruptcy process to obtain a payment plan that is affordable and works.

What is the “means test?”

The means test refers to a calculation to determine your financial circumstances, or financial “means.”  It is calculated by using your income for the past six months.  The test helps determine whether you qualify for a Chapter 7 or Chapter 13 bankruptcy.  It also helps to figure out whether you have any disposable income each month to make plan payments under a Chapter 13.

What is “disposable monthly income?”

Disposable monthly income, also referred to as DMI, is the amount of money you have left over after paying all of your necessary expenses.  It is calculated using the “means test.”  Your monthly necessary expenses include taxes, health insurance, mortgage or rent, car payments, food and clothing, etc.

What costs are associated with filing bankruptcy?

The court filing fee for Chapter 7 is $306, and $281 for Chapter 13.  Additional costs may include pulling your credit report, and enrollment in courses required by the bankruptcy court.

Attorney’s fees are determined by the type of bankruptcy being filed and the complexity of each case.  Fees are different for each bankruptcy because each situation is different.  Please call (888) 938-5393 to make an appointment for a free consultation.  The Law Offices of Chen & Tran are committed to keeping our fees competitive.  Our main goal is to work with you to get your financial life moving forward.

Will I lose my home, car, or property in bankruptcy?

Most people call Chapter 7 bankruptcy liquidation.  However, this is a mischaracterization.  In most cases, clients do not lose any property at all.  There are exemptions which allow you to keep your home, car, and personal belongings.  Although the exemptions limit the amount of assets or equity you can retain, the Law Offices of Chen & Tran will review your property in detail to ensure that you keep whatever you are entitled to under the law.

Can I own anything after bankruptcy?

Yes.  Many people believe that they cannot own anything for a period of time after filing bankruptcy.  This is not true.  You can keep you exempt property and anything you obtain after the bankruptcy is filed.  However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may become the property of the bankruptcy estate if it is not exempted.  You can also keep any property covered by California bankruptcy exemptions.

Will Chapter 7 bankruptcy eliminate all of my debts?

Yes, with some exceptions.  Bankruptcy will not normally wipe out:

  • money owed for child support or alimony, fines, and some taxes.

  • debts not listed on your bankruptcy petition.

  • loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan.

  • debts resulting from “willful and malicious” harm.

  • student loans owed to a school or government body (except if the court decides that payment would be an undue hardship).

  • mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

  • taxes, with certain exceptions.

Will I have to go to court?

In most cases, you will have to attend a “341a meeting of creditors.”  Here, the bankruptcy trustee will verify the information you provided in your bankruptcy petition.  The creditors may show up at this hearing to voice any complaints they have against your bankruptcy, although it is extremely rare that they do.  In any case, we will be there with you at the 341a meeting of creditors.  Our job is to determine if any issues exist, explain them to you, and provide you with solutions to move your case forward.

Can I get a credit card after bankruptcy?

Yes.  There are several options available.  While technically not a credit card, you could use a bank or debit card to perform activities for which you normally would use a credit card.  You may also be able to keep the credit card you already have if the creditor grants approval.  If these options do not work, you can get secured credit cards backed by your own bank account.

Can I be discriminated against for filing bankruptcy?

No.  11 U.S.C. 525 prohibits governmental units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.

What about co-signers?

If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

I’m married.  Can I file by myself?

Yes, but your spouse will still be liable for any joint debts.  If you file together, you will be able to double your exemptions.  In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file.  If the spouses have joint debts, the fact that one spouse discharged the debt may show on the other spouse’s credit report.