Bankruptcy

What are My Rights?

When an individual files a petition with the bankruptcy court to get relief from the collection efforts of their creditors, it’s called personal bankruptcy. Bankruptcy may be a good option if your debts are straining your income and assets. Bankruptcy eliminates most kinds of debts.  It also stops wage garnishments, bank levies, property seizures, and foreclosures.

 

For most people, there are two bankruptcy options: Chapter 7 or Chapter 13. A Chapter 7 bankruptcy will allow the cancellation of most unsecured debt and protects most personal assets and money. Money or property values above certain limits (exemptions) can be used to pay creditors.  In California, only a small fraction of Chapter 7 filers lose money or property to creditors.

 

The other common personal bankruptcy is Chapter 13. This is a debt payment plan in which all or a portion of debts are paid back. The plan ordinarily lasts three to five years and must be approved by the court. The debtor makes payments to a bankruptcy trustee, who then disburses money to creditors. 

 

Individuals can also file Chapter 11 bankruptcy, though usually it is businesses that file Chapter 11.  Chapter 11 personal (individual) bankruptcies are much less common than Chapter 7 or Chapter 13 filings.  Personal Chapter 11 bankruptcies usually involve much larger amounts of debts and/or assets than Chapter 13 or personal Chapter 7 cases.  Chapter 11 is typically a restructuring of debt.

Will My Creditors Stop Harassing Me?

Yes. By law, all actions against you must stop once you file your bankruptcy papers. This includes the initiation or continuing of lawsuits, garnishments, and telephone collection calls. Foreclosures and repossessions will also be at least temporarily.

How Long Does a Bankruptcy Take?

Generally, a bankruptcy case is in court three to five months for a Chapter 7 and three to five years for a Chapter 13.

Do I Have to Go to Court?

For the vast majority of bankruptcy filers there is only one meeting to attend, the Meeting of Creditors. The Meeting of Creditors, also called a 341 Meeting, is a required meeting.  Failure to appear at even one hearing can result in dismissal of your case. If you do not receive notice of your hearing, or in case of emergency, notify your attorney or the court as early as possible.

Do I Have to Use a Lawyer?

No. You can file a Chapter 7 or Chapter 13 on your own. However, bankruptcy law is a complex field, and the money spent on an experienced bankruptcy attorney will likely save you money in the long run.

Can My Boss Fire Me Because I Declared Bankruptcy?

No. Although a bankruptcy is a matter of public record, the court will not notify your boss or any other party who is not directly related to the proceedings. Section 525 of the U.S. Bankruptcy Code  prohibits employers from discriminating against you because you filed bankruptcy.

Can I File for Bankruptcy More Than Once?

Yes. But you can get a discharge from your debts only so often—and that depends on the kinds of bankruptcy you file. For example, you can file a Chapter 7 once every eight years and get a discharge. Waiting periods are shorter when a Chapter 13 is involved. It can be confusing, so be sure to consult a bankruptcy attorney

Does Bankruptcy Get Rid of Taxes?

Yes in some cases, no in other cases. Personal income taxes can be eliminated by a bankruptcy, but the tax debt in question has to meet a number of requirements, including several mandatory waiting periods.  Determining whether a tax debt has met those requirements and waiting periods may seem simple at first blush.  But it can get complicated in a hurry—an experienced attorney is an absolute must for getting a good answer to this question.