Bankruptcy - Chapter 7 and Chapter 13

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FREE MULTI-BUREAU CREDIT REPORT WITH
CURRENT & ESTIMATED 12-MONTH POST BANKRUPTCY CREDIT SCORE
INCLUDED WITH CHAPTER 7 BANKRUPTCIES*
Chapter 7 Bankruptcy: $125.00 to 200.00 (set by jurisdiction)**
Chapter 13 Reorganization: $200.00**
*Free Credit Report not included for proceedings in jurisdictions with mandated fees less than $200
**Fees are for Document Preparation only and do not include any court filing fee or other Costs
All services include a free, comprehensive, attorney-authored legal guide specific to your particular matter

THIS OFFICE IS CONSIDERED A DEBT RELIEF AGENCY UNDER THE NEW 2005 BANKRUPTCY LAW BECAUSE WE HELP PEOPLE FILE FOR BANKRUPTCY. IT IS ALWAYS RECOMMENDED THAT YOU SEEK LEGAL ADVICE FROM AN ATTORNEY
BEFORE FILING ANY LEGAL PROCEEDING. MANY ATTORNEYS OFFER FREE CONSULTATIONS.

Information provided through this site has been taken from self-help informational publications provided by the Court or other legal sources believed to be reliable. This information is general, published, factual information and should not be cited on or relied on as legal authority nor should it be considered legal advice. Booklets published by the Bankruptcy Court can be downloaded from this page or from our Bankruptcy Law Library.

NEW BANKRUPTCY LAWS EFFECTIVE OCTOBER 17, 2005!! YOU CAN STILL FILE!
For a summary of the 2005 bankruptcy reform act click here

Bankruptcy is the court method of eliminating debt and provides a way for people to obtain a "new beginning". The bankruptcy process eliminates the debtor’s responsibility from claims that may arise from his or her dischargeable debt. Bankruptcy relief is available to both individuals and corporate debtors. Most bankruptcies are filed under chapter 7, chapter 11, and chapter 13. Despite the major changes to the bankruptcy laws in 2005, many individuals will still be able to obtain relief under Chapter 7, with a few extra steps along the way. Some of the changes to the law involve:

Debt Relief Agencies: Based upon the new law, both Lawyers and Bankruptcy Petition Preparers have been defined as "Debt Relief Agencies". Unlike attorneys, services rendered by Bankruptcy Petition Preparer are limited to the preparation of your bankruptcy documents. Our office will provide you with a comprehensive booklet regarding your bankruptcy proceeding that will be an invaluable tool throughout your proceeding and answer many legal questions you may have. In addition. If necessary, we can direct you to a multitude of bankruptcy legal resources or a bankruptcy attorney to obtain answers to legal questions beyond our scope of service.

Income Means Test: Under the new rules, the first step is determining which chapter under the Bankruptcy Code the debtor is able or desires to file. Debtors with higher incomes (measured against the median family income for their state) may not be allowed to file for Chapter 7 at all. Some debtors may have to pay back some or all of their debts over a 3 to 5 year period under a Chapter 13 repayment program. A new process known as the “Means Test”, measures a debtor’s "current monthly income" against the median income for the same size of family in the state in which the debtor lives. Be aware, however, that "Current monthly income" is not a debtor’s income at the time they file the bankruptcy. It is a debtor’s average income over the last six months before they file. For people who are filing for bankruptcy because they recently lost a job, their "current monthly income" according to these rules most likely will be much more than they take in each month by the time they file for bankruptcy. Once a debtor has calculated their income, they need to compare it to the median income for their state. You can access more detailed information regarding the income requirements of the Median Income for California and other individual states under the Chapter 7 Section of our web site below.

Financial Counseling: Debtors are also now required to participate in two classes - pre and post bankruptcy counseling - and provide more detailed financial documentation to the court. These classes can be completed on line, on the telephone or in person with specific agencies approved by the U.S. Trustee’s Office. Our office will provide you a listing of approved agencies that offer these classes.

Types of Bankruptcy Proceedings

Congress has devised two kinds of bankruptcy: liquidation and reorganization. In a liquidation bankruptcy, your unprotected property may be sold to pay down your debt. In a reorganization bankruptcy, you devote part of your income to pay down your debt.

Chapter 7 - This is "regular" Bankruptcy case where an individual or business (called the Debtor) can file a bankruptcy petition to eliminate their debt obligations. Debtors can file for Chapter 7 bankruptcy no matter how small or how large their debt obligations are. I

New Laws Regarding Chapter 7: The major important changes are as follows:

Determine if a debtor’s family income is within the allowable median gross income for their state. Debtors must take a Means Test to determine if they qualify to file a Chapter 7 bankruptcy or must participate a Chapter 13 repayment program. If a debtor’s income is below the Median Gross income, they are eligible to file a chapter 7 bankruptcy. To access more specific information regarding the income requirements and Median Income for California and other individual states, click here.

If the debtor’s family income is higher than the median income shown above, they would be required to file Chapter 13 if they could pay $100 or more per month to their creditors. There is a formula that is used to determine a debtor’s excess income which is based upon use of allowed standard expenses set by the IRS and actual expenses for certain categories such as child expenses and secured debt. This "Means" test is on a form adopted by rules committee based upon the new law.

Debtors must participate in pre-petition counseling before filing bankruptcy and a financial management class after filing bankruptcy.

New Chapter 7 cases cannot obtain a discharge again under Chapter 7 for eight years.

Redemption of vehicles are now limited to replacement value.

New requirements to file proof of income. Debtors must provide the court with copies of their pay stubs for the previous six months and a copy of their last filed tax return. Failure to file these documents will cause the case to be dismissed.

The protection in Bankruptcy on secured debts is more limited especially where debtor does not perform stated intentions such as reaffirmation or redemption.

Protecting Debtor Property: As outlined in the Court’s informational book entitled “Bankruptcy Basics”, the individual debtor is permitted to select specific laws to protect property they own. These laws are called exemptions and normally protect basic living and work-related necessities including a house, car, retirement investments, clothing and other personal property up to a certain limit. Remaining, unprotected assets are subject to being sold by a trustee. The money from the sale is then used to pay creditors. California offers two different sets of laws for people filing bankruptcy, the state law exemptions found in CCP §704 and a set of bankruptcy-only exemptions in CCP §703.140. To view a general comparison of these two sets of exemptions, click here. These laws allow most debtors to retain their “paid for” household furniture, clothing, jewelry, tools of the trade and homes; however the value that can be retained is limited to a certain dollar amount. Statistically, most consumer debtors are able to keep all of their personal property.

Maintaining Payments on Cars or Furniture: If a person filing wants to keep the car, home or furniture and hey can afford the payments then an agreement can be negotiated with that creditor which will allow debtors to keep cars, home or furniture. This is known as a “Reaffirmation” of the debt. A debtor will have to keep the contractual payments current to reaffirm and keep these items and the court will have to approve the agreement. If the debtor defaults, then they will lose the car, home or furniture and, if the debt was reaffirmed, the debtor will be liable for a deficiency. Another good alternative to keeping furniture and cars in Chapter 7 where they have secured loans is called Redemption. In order to "redeem" the property and keep the item, a debtor can pay the creditor a lump sum during the case based on the replacement value (rather than the loan balance) of the furniture and car. With some exceptions, household goods that a debtor has pledged can be retained and the liens avoided without any payment.

Discharge: In most instances, the court will grant the debtor a discharge, however there are some exceptions. (See 11 USC Section 727(a)(1).) Individuals will obtain a formal "discharge" of debt in about three to four months. Corporations, partnerships or LLCs do not receive a discharge. Debts that individuals cannot discharge include child support, alimony, student loans, debts from intentional injury, drunken driving and some taxes. Other debts may not be discharged if the Debtor committed fraud, embezzlement or obtained credit with a false written statement. Although a few other miscellaneous types also are not discharged, most common debts such as credit card, medical, personal loans, check cashing are discharged normally in Chapter 7 cases. You should seek legal advice if you have any questions about whether or not you debts are dischargeable. To access our online bankruptcy law library, click here.

Bankruptcy Paperwork: The bankruptcy documentation required to be filed by a debtor is extensive. Our office can prepare all of the required documentation for a very low fee. Our flat fee of $200.00 includes document preparation and a FREE multi-bureau credit report with creditor addresses. Individuals can elect to meet with a legal document assistant in person or use our on-line service from the convenience of their own home or office. Currently the Bankruptcy Court filing fee for Chapter 7 cases is $299.00 which is payable directly to the Court at the time your bankruptcy papers are filed. To find out how to get your bankruptcy documents started immediately, click here.

Choosing our office to prepare your bankruptcy documents is a simple way to have your bankruptcy documentation prepared. Keep in mind, however, that our office is a Self-Help Service, which makes yourself responsible for the outcome of your legal paperwork and most importantly, we cannot provide legal advice. Please refer to the Guidelines for Bankruptcy Petition Preparers to understand the types of services we can and cannot provide. It is equally important that you, as a debtor, understand the bankruptcy process. To assist you, we offer a very informative booklet written and published by an attorney that reviews the entire bankruptcy process and will answer many questions you may have. You will be provided a free copy of this booklet at the time you retain our services. There are several other sources to obtain legal information. To access our online bankruptcy law library, click here. We also offer for sale a variety of other self-help tools including the latest self-help publications by Nolo Press.

Chapter 13 - Chapter 13 is frequently referred to as a “wage earner" chapter, although it actually applies to individuals with regular income from any source, not just wages. It is designed for individuals who desire to pay their debts but are currently unable to do so. The purpose of Chapter 13 is to enable financially distressed individual debtors, under court supervision and protection, to propose and carry out a repayment plan under which creditors are paid over an extended period of time. Under this chapter, debtors are permitted to repay creditors, in full or in part, in installments over a three to five year period, during which time creditors are prohibited from starting or continuing collection efforts. A plan providing for payment over more than three years must be for cause and approved by the court. In no case may a plan provide for payments over a period that is more than five years. 11 USC Section 1322(d). Any individual, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as the individual’s unsecured debts are less than $336,900 and secured debts are less than $1,010,650 (effective 4/1/07). (Note: these amounts are adjusted periodically to reflect changes in the consumer price index.) 11 USC Section 109(e). A corporation or partnership may not be a Chapter 13 debtor. A husband and wife may file a joint petition or individual petition. 11 USC Section 302(a). To access our online bankruptcy law library, click here.

New Laws Regarding Chapter 13: The major new changes will still allow you to file but with new rules:

Car loans must be paid the full debt over the Plan if the loan was made to purchase in the past 30 months. Personal property loans obtained within one year must also be paid in full;

No automatic protection for cases refiled if two prior cases were dismissed and only 30 days if the debtor had one prior dismissal within one year;

New priority for domestic support obligations;

Plans can now repay retirement loans such as 401k and not pay unsecured creditors in full; and

Payments are set at a minimum based upon the "Means test" and some plans may require 60 months rather the basic 36 month repayment plan if a debtor can pay more than $167 per month.

Our office can prepare your Chapter 13 documentation for $200.00, however by law, we cannot calculate your Chapter 13 Plan. You have several options available to assist you in the calculation of your Chapter 13 Plan. Our office offers for sale a Chapter 13 manual published by Nolo Press which provides all the plain-English information and instructions to aid you in preparing a Chapter 13 Plan. Alternatively, Plan Calculating Software formulated by a bankruptcy attorney can be purchased to assist you in calculating your Chapter 13 Plan. Finally, you can seek the personal guidance and assistance of a bankruptcy attorney to aid you in the calculation of your Chapter 13 Plan. Our flat fee for typing the Chapter 13 documents required by the Central District of California is $200.00. The Bankruptcy Court filing fee for Chapter 13 cases is $274.00 which is payable directly to the Court at the time your papers are filed.

Chapter 11- Chapter 11 is one of four sections of the Federal Bankruptcy Code. Chapter 11 was designed to help businesses in financial trouble restructure their organization and finances so they may continue to operate, rather than be liquidated. It also provides for the adoption of extended time payment plans (beyond five years) for individual debtors who otherwise would qualify to file a Chapter 13 reorganization and have unsecured debts of less than $307,675 and secured debts of less than $922,975. Individuals, partnerships, and corporations may be reorganized, rather than have their assets liquidated. In a Chapter 11 proceeding, a reorganization plan is filed, either by the debtor, the creditors, or both. After the plan is submitted, it must be approved, or "confirmed" by the court. Once that occurs, the debtor and creditors must go by the terms spelled out in the plan. During the bankruptcy proceedings, the individual or business may continue doing business as usual, as long as regular operating reports are provided. For more information about filing Chapter 11 for a business or an individual, call us for a referral to an experienced bankruptcy attorney. To access our online bankruptcy law library, click here.