File Bankruptcy FAQs
You can find the answers to the most common bankruptcy questions below, to help you decide whether to file bankruptcy or not, but please do call for a free consultation if you’re still unsure, or have more questions. We’ll be happy to help.
What is bankruptcy?
Bankruptcy is a legal process that protects individuals and businesses that no longer can meet their financial obligations. There are two common types of bankruptcy: Chapter 7 and Chapter 13.
Will I ever have good credit again after I file bankruptcy?
Absolutely. At Westgate Law, we are not done working with you until your credit improves. We believe that life after filing bankruptcy is just as important as the filing itself. Most everyone knew how to start getting credit, but credit after bankruptcy can be tricky. You need to make sure you build a positive post-filing credit file.
Will I ever be able to buy a house after I file bankruptcy?
Absolutely. We receive phone calls all the time from clients needing some documents to provide the mortgage lender during the loan application process. In general, lenders want to see that your case has been discharged as least two years ago and that you have established a positive post-filing credit profile. Westgate Law will be there with you to re-establish that excellent credit score.
Will I lose all my personal belongings when I file bankruptcy?
Probably not. The California bankruptcy court system is not set up to take your couch and sell it at an auction. The trustee assigned to your bankruptcy case wants to take valuable assets like homes with considerable amounts of equity, investments accounts like annuities or cash value life insurance policies, proceeds to be received from a pending lawsuit and sometimes large tax refunds. However, Westgate Law is going to provide a detailed plan in order to reduce the number of items you may lose or protect those items altogether.
How long is the entire process?
A typical case will take approximately four to six months from the date of filing to be officially closed. You do not have much to do during that time period other than appear at one meeting with the court-appointed trustee. A Westgate Law attorney will properly prepare you for that meeting and will attend that meeting with you.
If I file bankruptcy, will it affect my credit?
Yes, but in a positive way. The bankruptcy filing will stop the continuous reporting of negative credit information and allow you to begin rebuilding a positive credit history.
Will prospective employers deny my employment application?
If credit matters to a prospective employer, a bankruptcy notation will be better than a credit report full of negative, delinquent accounts. From an employer’s perspective, an employee with bad credit will likely be less focused at work, more likely to take bribes to resolve his or her credit woes and more likely to be called at work from debt collectors. An employer does not need a distracted employee and credit issues definitely distract most people.
Will all my friends and family know that I filed?
A bankruptcy filing is available for the general public to see. However, unless you live in a very small town with a local newspaper that unilaterally looks up bankruptcy filings to see who is filing in the neighborhood, there really is little to no chance that your friends and family will find out… unless you yourself tell them.
Why should I choose an attorney to help me file?
You can legally and competently file bankruptcy without an attorney. However, you are required to know the law as well as an attorney when you do file on your own. the “I did not know” defense will not keep you from getting into trouble. A competent and experienced attorney like those at Westgate Law will more easily be able to navigate you through the process and insure that if you are eligible for bankruptcy protection, that you successfully receive that deserved benefit.
How often can I file for bankruptcy protection?
There is no limit to the number of times you can file bankruptcy, but there is a limit as to the number of times you can successfully eliminate, aka discharge, your debts. You must wait eight (8) years after the filing of a discharged Chapter 7 case to file another Chapter 7 case. The eight year period starts from the date you filed your previous case and not the date that your previous case was closed or discharged. For example, if you filed your previous case on June 1, 2006 then you can file another case on June 2, 2014.
You only have to wait four (4) years after the filing of a discharged Chapter 7 to file and be eligible for a discharge in a Chapter 13 case.
Will I lose my house and my car?
No, in the vast majority of cases. Westgate Law will assess your case and determine the likelihood that you could lose any assets at all. California has very liberal bankruptcy exemptions that allow you to protect large amounts of personal assets. The vast majority of people filing for bankruptcy protection do not lose any assets at all, only their debt.
I don’t want to include my house or my car, so why do I have to list it as an asset?
You have to list any and all assets in your case. Your watch, clothes and even your couch are assets and must be listed. Whether or not you can keep the house or car will depend on the value of the assets and the totality of the cumulative value of all your assets.
If I file, does my spouse have to file, too?
No. One spouse can file without the other. This is done all the time. The most common time to file one spouse only is when you have just gotten married and one spouse is burdened with unmanageable amounts of debt.
Even when you have been married for a while, it can still make sense to file one spouse only. Maybe one spouse has all the debt in his or her name only. You can file as an individual so long as the entire household qualifies for bankruptcy. The income and assets of both spouses must be reviewed prior to filing a case for one spouse only.
Am I a bad person for filing?
We believe this is the most important question of them all. I say this with all sincerity, we need you to spend money. Our society needs you as a consumer, not as a debtor. Having you burdened by insurmountable debt does not help you, does not help our small businesses and does not help business owners. If you find that bankruptcy is a viable option for you, embrace it. Own that you made some mistakes. Work not to repeat those mistakes and move on. There is life after filing bankruptcy. The sooner you get there, the sooner you can become a valuable consumer.
How long does a bankruptcy filing remain on my credit?
The bankruptcy filing stays on your credit ten years from the date of filing. It is important to note that no matter whether you complete the case or let it get dismissed, it will remain on your credit for ten years.
Can creditors object to my right to claim bankruptcy?
It is fair to say that creditors do not object in the vast majority of cases. The most common reasons a creditor objects are for excessive credit card use in the months leading up to the filing or other forms of fraud. Even in those cases, you will likely still eliminate the vast majority of your debt and only be responsible to pay back a portion of the debt included in your bankruptcy petition.
Do I need a certain amount of debt to file?
Usually, you will want at least $7,000 or more of unsecured debt. Anything less may still be a reason to file, but you should also explore other alternatives. Every case is different. So you may have $20,000 or more in debt, but may have the ability to pay back the debt on a monthly basis. This could be an alternative to filing.
Can my divorce decree protect me from my ex-spouse’s debt?
Creditors were not involved in your marital settlement agreement, “MSA” (aka divorce decree). Therefore, creditors do not really care who makes the payments. Your MSA may state that your ex-spouse has agreed to pay all debts held jointly. If a creditor sues you to pay the debt, you will have to bring your ex-spouse into the lawsuit or force him or her to pay after a judgment has been entered against you.
If you cosigned on a loan with your ex, agreed in the MSA to be responsible to pay that debt and then you file bankruptcy, you could not eliminate your responsibility to pay on that debt unless your ex also filed bankruptcy.
Will I lose my retirement accounts if I file?
No, as long as the funds are still held in the retirement account at the time of filing. Do not take out the money prior to filing the case. The conversion of the funds from a retirement account into a personal savings or checking account removes the protections initially given to the retirement funds.
How is an inheritance treated in bankruptcy?
You definitely need to disclose any pending inheritance you may be receiving. The possibility that one day your family may leave you some money is not of concern. But the fact that a family member has recently passed away and you know or have reason to know that you will be receiving an inheritance is essential information to disclose to your attorney or in your bankruptcy paperwork.
Do I have to say whether someone owes me money?
Absolutely. You do need to disclose whether you are in the process, likely to begin the process or considering whether to begin the process of suing someone for money. Whether it is from a business dispute or personal injury claim, this is an asset of your bankruptcy estate and must be listed. Failure to list the potential claim could result in an inability for you to pursue the claim after your case is over or could result in the loss of the claim entirely.
Do I have to say whether I have a pending or active worker’s compensation claim?
Absolutely. This is the same as having a claim against an individual or business. In a WC case, you have this claim against your current or former employer. This is important information and must be included as an asset in your case.