Frequently Asked Questions

What is Bankruptcy?

Bankruptcy is the legal method for a debtor to “discharge” or relieve himself of the debts that he no longer can pay. While no debtor is guaranteed a total discharge of his debt, most debtors who file for bankruptcy are given such relief. One of the primary purposes of the bankruptcy act is to relieve the honest debtor from the weight of their debts and to provide the debtor with a “fresh start”.

 

Who can file for Bankruptcy?

Any person (if they qualify) can file for bankruptcy protection from creditors. In addition, most businesses and charitable organizations may also qualify for various forms of Bankruptcy protection.

 

What happens to my bills after I file for Bankruptcy?

 

As soon as your case is officially filed with the court, creditors are legally prevented from attempting to collect on any debt owed to them by you. This is known as the Temporary Restraining Order. Every creditor must stop all collection activity, including: telephone calls, harassing letters, repossessions, foreclosures, lawsuits, levies and wage garnishments. Those actions cannot resume without further Orders from the Bankruptcy Court. Once the case is concluded, the court may enter a “discharge”. A discharge is a total release of a debtor from any further personal liability for his or her pre-bankruptcy debts. Typically, discharged debts include credit cards, unsecured notes and loans and secured debts, such as car and house loans if the secured property is returned to the creditor.

 

What is a Chapter 7 Bankruptcy?

A Chapter 7 Bankruptcy is commonly referred to as a “liquidation” bankruptcy. The trustee takes any non-exempt property from the debtor and sells it, and distributes the proceeds to the creditors on a proportionate basis. The court then issues a discharge. It is not uncommon, especially in California for the debtor to not own any non-exempt property, and therefore, the trustee takes nothing.

 

What is a Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy proceeding lets you rearrange your financial affairs, repay all or a portion of your debts and put yourself back on your financial feet. The typical reasons for filing a Chapter 13 bankruptcy include saving a house in which you are in arrears or payment of back taxes. You repay these debts through a Chapter 13 plan. Under a typical plan, you make monthly payments to the bankruptcy trustee, who is appointed by the bankruptcy court, for three to five years. The bankruptcy trustee distributes the money to your creditors.

 

What is an exemption for property?

For individuals filing for bankruptcy protection, certain property is protected from creditors in bankruptcy. This property is known as exempt property.

 

What property is exempt?

Exactly what property is protected depends on the exemption scheme chosen. California has two schedules of exempt property. Determining what property is exempt requires a complete understanding of the laws governing residency and the California exemption laws.

 

What happens to my personal property, real property and other assets?

Generally, all of the property you own at the time of the bankruptcy filing becomes the property of the bankruptcy estate. Certain property is exempt and you will be able to keep that property Often, all of your assets can be protected.

 

Will filing Bankruptcy effect my credit rating?

Unfortunately it will. However, most individuals are able to rebuild their credit within a few years. If you are currently contemplating bankruptcy, then it is likely that your current credit rating has already been effected. A discharge of your current debt may provide the opportunity to rebuild your credit with steady, regular payments on a new account.

 

How long will a Bankruptcy show on my credit reports?

The Fair Credit Reporting Act prohibits the reporting of outdated information about consumers. With a few exceptions, credit-reporting agencies can only disclose a bankruptcy during the first ten years following a filing.

Should I file for Bankruptcy?

There is never a quick answer to this question. Generally, if you can pay off your debts within three to five years then filing for Bankruptcy is not a good idea. If this is not possible, then filing may be a viable solution to eliminate your financial obligations.

At Cristiano & Lillard we strongly believe that finding the right attorney is an important first step in your “Fresh Start”. We offer a free initial consultation and you are always welcome to Contact us before, during and after your case.

What is a reaffirmation agreement?

Many times in Chapter 7 or even in a Chapter 13 Bankruptcy, Automobile finance companies want to repossess your car right away. Maybe you’ve been behind in your payments. Maybe you don’t have insurance. But if you want to keep your car, you will have to reaffirm the loan on your car.

Statement of Intention

When you file your bankruptcy, you will have to state your intention as to whether you want to surrender your car, reaffirm the debt or redeem the vehicle. Simply “riding through” – doing nothing, getting discharged and continuing to pay the car after bankruptcy generally is no longer available as an option. You have to act on your statement of intention promptly – within 45 days.

The reaffirmation agreement

To sign a reaffirmation agreement, you are again contracting with the auto finance company to pay the car loan after bankruptcy just as you owed it before. You won’t get a discharge from this debt. If you don’t pay the debt in the future, you’re still liable personally for it. You have to be up to date with payments to reaffirm. You need to make sure that you will be able to afford the loan.

The reaffirmation hearing

If your lawyer doesn’t sign off on a reaffirmation agreement, (many lawyers are refusing to sign reaffirmation agreements) you will be called to court on a Reaffirmation Hearing. Don’t be afraid of this. The judge will merely ask you if you can afford to pay for the car and make sure that you are aware that you are aging responsible to make the payments. You’ll explain why you need the car, whether it’s the best deal you can get and how you can afford it. If all is in order, you can reaffirm before your discharge.

When to file a reaffirmation agreement

A reaffirmation agreement must be signed before your bankruptcy is discharged and if you don’t sign a reaffirmation agreement, the car lender will get an order removing the automatic stay and then try to repossess your car.

Feel free to Contact Us if you do not find the answers you are looking for among these frequently asked questions.