chapter 13

Bankruptcy FAQ

Though it is not an easy decision, filing for bankruptcy is sometimes the best solution for getting a fresh start. The attorneys at Cabanillas & Associates have decades of experience helping people to get through their financial hardships.

Below, we have included some of the most frequently asked questions people have about the bankruptcy process - We encourage you to read through those and jot down any other questions you may have. We’ve also included the link for you to book your free consultation so that you may speak to an attorney about the details of your situation.

What are the main purposes of bankruptcy?

Bankruptcy laws serve two main purposes. The two main policies of bankruptcy are the fresh start for the honest but unfortunate Debtor (you) and equal treatment of Creditors (the people you owe). If you file for bankruptcy and follow the Bankruptcy Code rules, bankruptcy law gives you a fresh start by canceling many of your debts through a court order known as the Discharge..

What is the difference between chapter 7 and chapter 13?

Whether a Chapter 7 or Chapter 13 bankruptcy is the right choice for you depends on your income, assets, debts, and your financial goals. Chapter 7 is a liquidation of all assets. Chapter 13 is a reorganization bankruptcy designed for debtors with regular income who can pay back at least a portion of their debts through a repayment plan.

How does bankruptcy help me?

The moment you file for bankruptcy, you are protected from your creditors. The Automatic Stay stops all collection efforts against you and against your property. Creditors must stop calling you and sending letters to you. If a creditor has already sued you, that lawsuit must stop. The automatic stay also prevents creditors from repossessing your property and from foreclosing on your home.

Can I obtain bankruptcy protection again if I have filed a bankruptcy in the past and am now falling behind in payments again?

Yes is the short answer.  Depending on how your prior case was treated will determine when you can file again.  We can go over the details of your case during your free consultation.

What does the court charge to file bankruptcy?

The current court filing fee for a chapter 7 case is $335 and for a chapter 13 case is $310. Some courts also impose an additional administrative fee. You may pay the filing fee in installments. The court may waive the filing fee in a chapter 7 case if your income is below specified levels and the court finds that you cannot pay the filing fee in installments.

Do I have to "qualify" for bankruptcy? How will I know if I am eligible?

If you are an individual with primarily Consumer Debts and you want to file a case under chapter 7, your lawyer will examine your finances to determine if you qualify based on your income.

If your income is at or below the median income for your state, the means test will not apply and you will be permitted to file for chapter 7. If your income is above the median income for your state, the means test compares your monthly income, minus your permitted living expenses, to the amount of your unsecured Debt to determine how much you could repay to creditors if you were in a chapter 13.

Because this calculation is hypothetical and does not necessarily reflect your true financial condition, you may appear to be able to repay the minimum portion of your debts but you, in reality, cannot. In that situation, the court may permit you to stay in chapter 7. The means test is very complicated and you should talk to a lawyer who can help you decide the chapter under which to file.

How much property can I keep after filing?

Every state has exemption laws that allow you to keep some necessities, even if you do not pay your creditors. The idea is that it would do little good to take all of your assets because you would not have a place to live, clothes to wear or a way to get to work. Most exemption laws allow you to keep clothes, household goods, a car of some limited value, tools of trade, as well as other property. Some exemptions allow you to keep some equity in a house. You should talk to a lawyer who can help you keep as many assets as possible.

What are the long-term effects of bankruptcy? Will I ever be able to get a loan again?

Your credit report will state that you filed for bankruptcy. A bankruptcy will stay on your credit report for seven years if you filed for Chapter 13 and ten years if you filed for Chapter 7. Lenders use credit reports in deciding whether to make loans. A bankruptcy does not mean you will never be able to borrow money again, but at first, it may be harder to get a loan at a good interest rate.

Do all debts get discharged?

No, not all debts will be discharged through the bankruptcy, even if you have followed all of the Bankruptcy Code’s rules during your case. First, a bankruptcy case only discharges debts that you owed and listed at the time you filed the case, not those you incurred after filing the case. In addition, even after bankruptcy, you will have to pay debts that are not discharged.

Non-dischargeable debts include:

  • debts for income and property taxes

  • debts to creditors you did not list in your bankruptcy paperwork

  • domestic support obligations such as alimony and child support debts

  • fines payable to any governmental unit, such as a city or state

  • restitution imposed on you as part of a criminal sentence

  • student loans

What documents do I need to file in a chapter 7 case? What is required in the chapter 13 plan?

If you are coming in for a bankruptcy free consultation, please bring the following (if you have them):

- Paycheck stubs

- Any proof of income

- Tax returns for the last two (2) years

- Two (2) or three (3) bank statements

- Driver's license or State Identification card

- Any letters you may have received in the mail from Cabanillas & Associates, P.C.