FREQUENTLY ASKED QUESTIONS ABOUT BANKRUPTCY
1. IF I FILE BANKRUPTCY, WILL I LOSE MY PROPERTY?
Under the Bankruptcy Laws individuals are entitled to certain exemptions or protections both as to type of property and value. The analysis of your assets is an essential element in the Bankruptcy process. At Comfort Law Office we won’t file a Chapter 7 unless we know you’ll be able to keep your property.
2. CAN I FILE BANKRUPTCY IF A CREDITOR HAS OBTAINED A JUDGMENT?
In most cases a Judgment against you only increases the urgency for action. Unless a Judgment is based on fraud, it is usually dischargeable in Bankruptcy. The filing of a Bankruptcy will put an immediate stop to the enforcement of any Judgment.
3. WILL THE ELIMINATION OF DEBT CREATE NEGATIVE TAX CONSEQUENCES?
Under Federal and State Tax Law “forgiveness” of debt can result in adverse tax consequences. This often occurs where a debt is settled or written off by the creditor. When a debt is Discharged in Bankruptcy, there is technically no “forgiveness”. A Discharge has no negative tax consequences.
4. WHAT IF A CREDITOR DOESN’T WANT TO GO ALONG WITH MY BANKRUPTCY?
Although there are some claims such as Income Tax due within 3 years and Student Loans that are not Dischargeable in Bankruptcy, most debts, such as personal loans, credit cards, and medical bills are Dischargeable. Although creditors have some rights (such as protection against fraud) most debt that a consumer incurs can be eliminated in Bankruptcy whether the creditor agrees or not.
5. WILL MY RETIREMENT BENEFITS BE PROTECTED?
With some very minor exceptions, qualified Pensions and Retirement Benefits, regardless of their value, are exempt or protected in Bankruptcy.
6. WILL I EVER GET CREDIT AGAIN?
Although your good credit will be affected by filing Bankruptcy, in many cases the filing of the Bankruptcy is the first step on the road to learning wise use of credit by giving the consumer a fresh start as a debt free applicant. Also, your Bankruptcy will fall off of your Credit Report after 10 years.
7. WHAT ARE SOME BENEFITS OF FILING BANKRUPTCY?
The immediate effect of every Bankruptcy is to stop all collection action, including collection of taxes, car repossessions, wage garnishments, lawsuits and foreclosures. The objective of every Bankruptcy case is to obtain a Discharge. This means you are relieved of the legal obligation to pay your debts. In the vast majority of consumer cases, this is done while the debtor keeps their assets.
8. WHY WOULD I WANT TO FILE BANKRUPTCY?
In my 34+ years of practice, I never had a client who “wanted” to file Bankruptcy. It is a last resort – usually presenting itself as a difficult but necessary choice after a dramatic change in a client’s personal and financial circumstances. These changes could be a loss of a job, a sudden disability, or a medical emergency not fully covered by insurance – nor not covered at all. Sometimes the change can be related to increased expenses of raising a family such as tuition or child care. It could even be the death of a family member. Frequently, small business owners run out of vital working capital just short of developing a viable cash flow. It is ironic that it is often the severe action of unsympathetic and inflexible creditors that forces you to seek Bankruptcy protection.
9. WHY WOULD I WANT TO FILE A CHAPTER 13 CASE?
A Chapter 13 Reorganization is often the best option where a consumer filed a Bankruptcy within 8 years, where their assets may not be entirely exempt, where they make too much money, or where a substantial portion of their debt is tax or secured debt. It essentially enables a person to substantially reduce their monthly debt service, often eliminating most unsecured debt while keeping their property and being protected from severe enforcement activity by creditors such as levies, repossessions, or home foreclosures. Although there is a cap on the amount of debt a person can have to qualify for Chapter 13, there is no minimum debt requirement.
10. CAN I MODIFY MY MORTGAGE WHILE IN BANKRUPTCY?
Yes, although it is usually preferable to conclude a loan modification before you file for Bankruptcy protection, our office has filed many cases to stop the foreclosure process and allow our clients the opportunity to reach a viable loan modification agreement.
11. CAN I ELIMINATE SECOND MORTGAGES OR LINES OF CREDIT THROUGH BANKRUPTCY?
Again, yes, if the amount due on your first mortgage exceeds the current value of your home, you may be able to ‘strip’ that lien after completion of a Chapter 13 Plan.
12. WHAT ABOUT THE COST FOR THESE LEGAL SERVICES?
At Comfort Law Office we take great pride in the value we deliver to our clients. Our fees are very reasonable – usually a set amount for a bundle of services. In the case of Chapter 13 we request a modest retainer in most cases, with the balance of our Court mandated fees paid through the clients’ monthly Plan payments.
13. HOW DOES YOUR DEBT NEGOTIATION SERVICE WORK?
For those clients who need assistance in dealing with collectors but do not wish to file for Bankruptcy relief, we assist qualified clients by providing protection under Federal and State Debt Collection laws by working out reasonable one time settlements dramatically less than the balance claimed. In most cases, our initial ‘set up’ fee is quite modest, with a ‘settlement’ fee charged only when an agreement has been reached with the creditor (this fee is based on a low percentage of the difference between the original balance due and the settlement amount).
14. WHAT’S THE NEXT STEP IF I NEED HELP?
If you’ve reached a point where you believe you need to take action, then give us a call at (650) 235-1217. We’ll arrange a ‘no cost’ confidential initial conference to answer your questions and determine how we can help you resolve your financial challenges.
15. WHAT’S THE PROCESS IF I DECIDE TO FILE BANKRUPTCY?
a. After your initial consultation we will give you the list of documents we need to prepare your case along with what the fees will be to file.
b. Once you have those documents and fees ready we schedule a ‘follow-up’ appointment with Mike Comfort that takes about 2 hours where he reviews the complete petition with you and gathers all your documents to complete the forms.
c. You will need to take the 1st online course (Credit Counseling course) required by the Court before we can file the case.
d. After we input the draft onto our bankruptcy software program, we schedule a ‘signing’ appointment that takes about 45 minutes for you to review and sign the forms. We usually file the case shortly after you’ve signed.
e. About one month after your case is filed you will need to attend a hearing with the Bankruptcy Trustee.
f. You will need to take the 2nd online course (Financial Management course) before your case can be Discharged by the Court.
g. In a Chapter 7 case, you will obtain your Discharge about 2-3 months after that hearing.
h. In a Chapter 13 case, you will make monthly payments to the Trustee according to your Plan, and will obtain your Discharge in 60 months or less.
16. LIFE AFTER BANKRUPTCY
After you have gone through the bankruptcy process and your debt is discharged, it is important to take certain steps to rebuild your credit. We recommend you obtain a copy of your credit report from the three major reporting agencies: TransUnion, Equifax and Experian. You will want to double check for inaccuracies to avoid creditor harassment down the line. We also urge you to keep a copy of all your bankruptcy documents for at least 10 years in case you need proof that a debt was included and that you received a Discharge.
A bankruptcy may stay on your credit for up to 10 years, but the effect on your credit score will depend on your credit habits. Contrary to popular belief, you will be offered credit after bankruptcy. Getting a secured credit card, paying bills on time, not using too much credit and not applying for a lot of credit at the same time will help you improve your credit score. Making a budget will help you develop good bill paying and credit habits and help you avoid the mistakes that led you to bankruptcy.