Frequently Asked Questions

Will I have to give up all my property if I file for bankruptcy?

No. The law will not permit leaving the debtor destitute. The law allows debtors keep certain assets such as household items, clothes, vehicles and cash up to a certain value. We will review your assest and help you keep as much as possible under the laws.

Can I keep any credit cards?

Under some circumstances you may be able to keep some credit cards if the creditor agrees. There are many factors that must be considered, including the credit card balance at the time of the bankruptcy, what terms the credit card company is willing to offer and your ability to pay the present and future credit card debt. Frankly, it is usually not advisable to keep credit that would otherwise be discharged.

How will bankruptcy affect my credit?

Foreclosure is a public record and will be on your credit report, which will lower your FICO score. A Chapter 7 or 13 will also be on your credit report. For many people completing their Chapter 13 or Chapter 7 and receiving a discharge increases their FICO score. Taking care of your existing debt is the first step in improving your future credit. Chapter 7 can stay on your credit file for up to ten years from the day you file your papers. Chapter 13 is reported for seven years. Late payments can be on your credit for 7 years. As soon as your case is completed, you can take steps to improve your credit.

Do I have to have a certain amount of debt to file for bankruptcy?

No, however, bankruptcy is not the solution to everyone’s financial situation. If your financial hardship is temporary or minimal, you may consider other options such as our Debt Negotiation Alternative.

Do I have to file bankruptcy on all accounts I owe, or can I keep some?

All of your debts must be included in the bankruptcy case.

Does the spouse of a married person also have to file bankruptcy?

No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, it might be advisable to have only one spouse file.

Can I discharge my student loans through bankruptcy in California?

Student loans are no longer dischargeable under any chapter of bankruptcy in California unless you can prove that repaying the loan creates an undue hardship on you or your family. Proving hardship usually requires showing that you cannot provide a minimum standard of living for yourself and your dependents. Some courts will discharge part of the loan on a showing that repaying it all would be a hardship. However, this is an extremely difficult showing to make in court. A Chapter 13 bankruptcy in California can get the debtor out of default by paying the delinquent amount over three to five years.

What is lien stripping?

Under recent law and with Court approval, 2nd and 3rd mortgages and Home Equity Line of Credit can be legally eliminated from the property. This means that the payment of 2nd and 3rd mortgages can be completely eliminated or paid a reduced amount depending on your situation. This also means that the arrears on these mortgages do not have to be paid back.

Lien stripping refers to this powerful tool for homeowner that eliminates junior mortgages. In order to do so the value of your home must be less than the amount you owe on your first mortgage. We can help you with this procedure.

The Chapter 13 Repayment Program gives you up to five (5) years to get caught up on back mortgage payments and other debts by repaying creditors what you can afford. “Lien stripping” (elimination of mortgages) means that upon the completion of your Chapter 13 plan and discharge, the mortgage company will have to remove the junior mortgage(s) from your property. This can be a big help in keeping your house.

What happens if I do nothing?

We generally do not recommend this option even if the payments are high and there is little or no equity in the property. It may be a relief to get out of the mortgage debt. However, there may be income tax consequences or personal liability on junior mortgages. We recommend getting legal advice and having your mortgage(s) reviewed before allowing your property to go to foreclosure sale. At our office, we will review your mortgage(s) and your possible personal liability on them.

Do I need an attorney to file bankruptcy?

Individuals may file a bankruptcy case without an attorney. This is called appearing "pro-per." The bankruptcy code is very complex and filing a bankruptcy petition requires a thorough knowledge of the bankruptcy code, laws and the Bankruptcy process including Bankruptcy hearings and dealing with creditors