Q. What is bankruptcy?
Bankruptcy is a right authorized under the United States Constitution ( Article I, section 8 ) and implemented by Congress to eliminate debts an honest person is unable to pay OR to lower the monthly debt repayment to an amount a person can reasonably pay over a period of time.
Q. Isn’t it wrong not pay your debts
That depends. If a person has the ability to repay his or her debts he or she should certainly do so. And under bankruptcy law a person who goes out and runs up his debts with the intent to file bankruptcy will not be permitted to discharge those debts in bankruptcy. However, sometimes things happen in honest peoples’ lives, such as lay offs, economic downturns, sickness, medical bills, divorce, death of a spouse, failure of a business venture, retirements, law suits, taxes, resets on adjustable mortgages, foreclosure, increasing credit card interest, among others, that hinder or prevent paying back debts when they come due. In that case, bankruptcy law gives them a safety net. In fact, early historical reference to the concept of bankruptcy may be found in the Bible, Deuteronomy 15:1-3, where every 7 years persons who owed debts received the “Lord’s release” or cancellation of their debt.
Q. Will people think badly of me if I file bankruptcy?
Certainly not people who genuinely care about you. Many good people have found the need to use bankruptcy to resolve a financial problem. For example, three American presidents have had to file a bankruptcy sometime during their lives, Abraham Lincoln, Ulysses S. Grant, and William Henry Harrison. Other people you may have heard of who have filed bankruptcy: Walt Disney, cartoon creator, Larry King, TV host, Tony Gwynn, baseball player, Samuel L. Clemens (Mark Twain), Henry Ford, founder of Ford Motors, Kim Basinger, actress, Johnny Unitas, Hall of Fame football quarterback, Donald Trump, businessman, Wayne Newton, entertainer, Jerry Lewis, comedian, Burt Reynolds, movie actor, Milton Hershey, founder of Hershey’s chocolate, and Henry John Heinz, condiment manufacturer, among many other honorable famous and not so famous people. The point is that sometimes bad things happen to good people. And lastly, although it is a matter of public record, most people will never know you filed bankruptcy unless you tell them.
Q. Will filing bankruptcy affect my job?
No. Federal law prohibits any public or private employer from discriminating against an employee for filing bankruptcy, which after all is a right permitted under the U.S. Constitution.
Q. Is it possible that I might lose my car, house, or other possessions?
Absolutely. However, if you select an experienced attorney you will not likely lose anything. Here’s why: in theory Chapter 7 is a liquidation of a person’s assets with the Chapter 7 trustee reducing then to cash and distributing the cash among creditors. However, the trustee can only liquidate “non exempt” assets. Exemptions are a group of federal and state laws that protect certain items and certain dollar amounts from creditors. When you file a bankruptcy with our offfice I will take your list of all your property and search among the exemption laws to find the right one to protect each item of your property. In most normal consumer cases I am able to exempt or protect all my clients property so you do not end up losing anything in Chapter 7, you just discharge your debts.
Q. Do I have to pay my car loan after a bankruptcy discharge?
Yes, the bankruptcy discharge discharges the personal liability on the loan, but the creditor is still on the title and you may not get clear title until you pay off the loan. Also most car creditors insist that you “reaffirm” the loan (that is, sign a new contract approved by the bankruptcy court) as personal obligation if you intend to keep the vehicle.
Q. Can I give my property away to a friend or relative shortly before I file bankruptcy?
No. You will lose it that way. I can show you the legal ways to keep and protect your property under bankruptcy laws.
Q. Can I pay a debt I owe a friend or relative before I file a bankruptcy so it won’t be discharged?
No. You may not give a priority payment to a friend or relative or the trustee will take it back and distribute it among all your creditors. You can voluntarily pay back the friend of relative after the bankruptcy although you will have no legal obligation to do so.
Q. Do I have to have an attorney to file bankruptcy or can I do it myself?
People are entitled to represent themselves in bankruptcy court, although most people chose to have a lawyer. The reason is that bankruptcy law is quite complex and if you make a mistake or omission you may lose valuable property, end up not discharging your debts, or making a serious mistake or omission that could result in civil or criminal charges against you. The FBI investigates bankruptcy offenses.
Q. Will I have to go to a Court hearing?
Yes, there is one required hearing although it is not in Court but in a business office of the United States Trustee in San Diego. At that hearing the person filing bankruptcy is examined under oath by the court trustee regarding their assets and the documentation the person filed with the court to support their petition. In our office we fully prepare you for your hearing before the hearing date and I will be sitting right beside you during your hearing.