Most people qualify to file bankruptcy under either chapter 7 or 13. If your annual gross family income (including your spouse’s income, unless separated) is not more than the median family income for your state and family size, then you probably qualify to file under chapter 7. You will almost always qualify to file under chapter 13, regardless of your income.
Am I required to obtain credit counseling prior to filing bankruptcy?
While you are not required to participate in a debt management or repayment program, you are required to consult with an approved nonprofit budget and credit counseling agency as to your available options before you file bankruptcy. The consultation can be done by phone, over the Internet or in person. The law offices of Paul M. Allen works closely with an approved credit counseling agency and can make the necessary arrangements for you.
Am I required to complete a personal financial management training course prior to filing bankruptcy?
No. However, prior to obtaining a final discharge in a bankruptcy case you will have to complete an approved instructional course in personal financial management from an approved non-profit credit counseling agency. The instructional course typically takes less than an hour and can be completed over the Internet or through the mail.
In a Chapter 7 case, the instructional course should be done as soon as possible after filing bankruptcy. However, you do have about 6 weeks after your appearance before the bankruptcy trustee to complete the course, which is required as a condition of discharge of debt. In a chapter 13 case, which typically consist of a 60 month full or partial repayment plan, the instructional course will not be needed until the end of that term.
Should I file jointly with my spouse?
Since California is a community property state, a joint filing will provide better protection for both spouses, and it’s cheaper to file one bankruptcy than two. Of course, you have the option to file individually or jointly as husband and wife. You may file jointly even if you are currently separated or have filed for divorce, as long as the divorce is not yet final.
Will I have to appear in court?
It is very unlikely that you will ever appear in court or in front of a bankruptcy judge on a
chapter 7 bankruptcy. However, about 4 to 6 weeks after filing bankruptcy you will have
a hearing with a bankruptcy trustee assigned to your case. The trustee is usually a private
practicing attorney appointed by the US Trustee’s office. In some instances, the trustee
may be a non-attorney, possibly a licensed accounting professional instead.
A typical trustee meeting lasts about 5 minutes and is usually held in a meeting room
at the bankruptcy court or federal building in your area. The bankruptcy trustee will ask
you whether everything in your bankruptcy petition is true and correct, whether you
would like to add or change anything in your bankruptcy petition and may ask a few
questions about your financial situation.
This hearing is also referred to as the “Meeting of Creditors”. However, creditors rarely
attend in Chapter 7 cases. Approximately 60 days after your meeting with the
trustee you should receive your final discharge order in the mail. Your debts will be
formally discharged and the bankruptcy proceeding closed.
In a chapter 13 case, you will also attend a “Meeting of Creditors” as described above.
Sometimes, if there are some issues still to be resolved, you may have to attend a second
hearing with the trustee to have your payment plan approved, otherwise, your attorney
will handle this appearance for you.
Where will my bankruptcy be filed?
A bankruptcy petition must be filed in the federal bankruptcy court district where you have resided for the majority of the past 180 days. Los Angeles is within the Central District of the Federal court. Bankruptcy Trustee meetings as well as bankruptcy court hearings are held in down town Los Angeles, or for those living in the San Fernando Valley, at the Federal building in Woodland Hills.
Will filing bankruptcy affect my ability to obtain credit?
If you already have bad credit, filing bankruptcy will probably not make your credit any worse than it already is. Your FICO® credit score may initially decrease after your bankruptcy filing but will gradually start to improve after your bankruptcy discharge. This is because the amount of outstanding debt, including current and delinquent accounts, presently appearing on your credit reports will be eliminated or substantially reduced in the FICO algorithm. One reason is because about 30% of your FICO® credit score is based on the amount you owe on outstanding debt. Bankruptcy wipes the slate clean. FICO score goes up. So remember, debt owed on revolving lines of credit, such as credit cards, negatively impacts your FICO® credit score more than other type of debt.
In order to obtain future credit you will need to re-establish some new, positive credit history. This can be done by obtaining one or more secured credit cards, using them wisely and establishing an excellent payment history. If you reaffirm any existing debts, such as a mortgage or an automobile loan, making your payments on time will also help to re-establish your credit. It is possible to rebuild your FICO score up into the 600 range within 1 to 2 years.
Your ability to obtain credit also depends on various other factors, such as your income, employment history, etc. Some creditors may actually consider you to be a better credit risk after bankruptcy than before because you will essentially be “debt free” and will likely have more disposable income to pay future debts.
How long can a bankruptcy filing appear on my credit report?
A bankruptcy filing can appear on your credit report for up to 10 years. However, this does not mean that you will have bad credit for 10 years. You can start re-establishing your credit immediately after filing bankruptcy. Even without filing bankruptcy, most negative items will be erased after 7 years from the time of the last transaction.
Are there any negative consequences to filing bankruptcy?
Federal bankruptcy laws were established by United States Congress to provide individuals and organizations with a “fresh start” by allowing them to legally eliminate all or a portion of their debts and to start anew. Federal bankruptcy laws were designed to help those in financial distress — not to further burden or hinder them.
Despite the many rumors propagated for years by creditors, debt collectors, debt counseling organizations and the like for their own self-interest, there are virtually no negative consequences to filing bankruptcy. To the contrary, various bankruptcy laws have been enacted to ensure that no person is discriminated against because of a bankruptcy filing.
By Federal law, no person can be denied employment, a student loan or grant, or a license or permit by reason of a bankruptcy filing. If you have good credit and file bankruptcy your credit will, of course, be negatively impacted. But if your credit is already bad, filing bankruptcy can only improve it, and your ability to re-establish a good credit history.
If you are suffering from financial problems and are considering filing bankruptcy, you should also consider the consequences of not filing. That could be a lot worse! So If you are experiencing financial problems and want to know your options, call the law offices of Paul M. Allen for a free consultation. We are here to help you. There are two offices to serve you. Glendale: 818-552-4500 / 818-334-5445 and Cerritos: 562-865-1646 /562-372-4037 Don’t lose any more sleep. Call today.
(This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice.)