The Law Offices of David A. Pomeranz is a full service bankruptcy filing law firm. Call us for more details at 619-741-3775.
There are two types of normal, consumer-type bankruptcies: Chapter 7 and Chapter 13. There are some other chapters, but they are for more specialized situations such as farmers, cities or businesses.
Here, we look at Chapter 7, and if we scroll down, we'll look at Chapter 13.
CHAPTER 7 BANKRUPTCY EXPLAINED
LIQUIDATION: The Bankruptcy Code is found in Title 11 of the US Code. It is divided into chapters for easy reference. Chapter 1, for example, is definitions. . Chapter 7 is a Liquidation of your non-exempt assets. An asset is anything you own, or even items you may own in the future (if they are guaranteed to come your way). The days of people standing in a wooden barrel after filing a bankruptcy are long gone. Now, you can exempt, or keep, much, if not all, of your property in a chapter 7.
EXEMPTIONS: In California, we have two exemptions schemes, or tracks. They cannot be mixed and matched. You simply need to select one. An experienced attorney will know which one to select based on the particular factors of your case. These are found in the Code of Civil Procedure, sections 703 and 704. Typically, if someone has a house with equity, the 704 exemptions will be used. If not, then the 703 exemptions are used because they are more liberal. The 703 scheme includes a “catch-all” for miscellaneous items valued up to about $27,000 (total, not each!). Your lawyer will know which scheme or track applies to your situation best.
ASSETS: An asset is anything you own that has a monetary value or its equivalent. Owning an idea or thought doesn't count. Owning a car does. Any items you own or even something you expect to own in the future can be an assets, and all assets must be listed in the bankruptcy petition.
DEBTS: A debt is fairly obvious. Who do you owe money to? You says you owe money to them (even if you disagree)? Who might you owe money to? It is important to list all debts.
THE TRUSTEE: The Chapter 7 Trustee is a person appointed between you and the Court to manage your "estate" and liquidate non-exempt assts for the benefit of your creditors. If you own an old Toyota, it may likely be exempt and the Trustee won't sell it. If you own a new Ferrari, it likely might not be exempt and the Trustee will sell it at auction to pay your debts. The Trustee gets a cut of this money, too. There is a mandatory meeting with the Trustee about 30 days after filing.
DISCHARGE: Once the petition is filed and the Trustee meeting is concluded (and all statutory timelines are observed), you will typically be granted a discharge of your debts. Meaning, you never have to pay them. There are many exceptions to the discharge, such as child support, etc., so be sure to speak with an attorney about these.
SPECIAL NOTE: If you have a credit card in which the balance is zero, you do not list it on your petition. The credit card company may cancel your card anyway once they find out about the bankruptcy from public records, so it is usually pointless to pay off a credit card just before filing in order to keep it!
CHAPTER 13 INFORMATION:
Chapter 13 is different than Chapter 7 in that you pay off your debts over a period of 3 to 5 years using disposable income. That means you take your normal wages, subtract your normal bills (not including credit cards and medical bills, etc.) and whatever remains is what you pay into your "plan." At the end of the plan, you receive a discharge.
The main caveat here is that the creditors must get at least as much as they would receive in Chapter 7 bankruptcy
Generally, the same rules apply to discharging debts in a Chapter 13. There are many benefits of filing under this chapter and it is worth discussing with a qualified lawyer.
LEGAL DISCLAIMER Of course, nothing in this article is meant as legal advice and all situations are differnt. We file in the Southern and Central Districts of California.
Law Offices of David A. Pomeranz
270 E Douglas Ave
El Cajon 92020
Phone: +1 619 7413775 +1 619 7413775
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