Questions and Answers About Bankruptcy

Personal bankruptcy is a voluntary act.  The person who is has financial difficulties is the one who decides whether to “Go Bankrupt”.  The Party filing for bankruptcy is the Debtor.

Chapter 7, 11, 13, and 12 reference particular chapters within the United States Bankruptcy Code.  As a rule of thumb most private individuals who seek bankruptcy protection will be evaluating whether they are eligible for a Chapter 7 or 13.

The following is some basic information potential debtors like to know:

Where is a case filed?

A bankruptcy petition  is filed in the office of the clerk of the bankruptcy court in the district where the debtor has lived or maintained a principal place of business for the greatest portion of the last 180 days. The bankruptcy court is a federal court and is a unit of the United States district court. In Marin and Sonoma counties our division of the Northern District of California is located in Santa Rosa.In Napa, Lake and Solano counties the division is the Eastern District of California located in Sacramento.

Are the names of persons who file Bankruptcy published?

When a bankruptcy petition is filed, it becomes a public record and the name of the debtor may be published by some credit reporting agencies. However, newspapers do not usually publish the names of persons who file chapter 13 cases. In Marin County, the IJ does not report filings, but the Marin County Recorder, a legal newspaper does.

How does the bankruptcy filing affect collection proceedings and foreclosures that are filed against the debtor?

The filing of a Bankruptcy petition automatically stays (stops) all lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against the debtor or the debtor’s property. This stay is called the automatic stay. Electronic Case Filing results in the court immediately sending notification to ‘electronically connected’ creditors or mailed shortly after the filing to additional creditors so that all creditors are advised of the automatic stay. Most creditors are prohibited from proceeding against the debtor, and when permitted the creditor must seek approval of the Bankruptcy Court to proceed.   If the debtor has had a prior bankruptcy case dismissed within the past year, he or she may be denied the protection of the automatic stay.

How does filing a affect a person’s credit rating?

It may worsen it, at least temporarily. However, if most of a person’s debts are ultimately paid off under a chapter 13 plan, that fact may be taken into account by credit reporting agencies. If very little is paid on most debts, the effect of a chapter 13 case on a person’s credit rating may be similar to that of a chapter 7 case.

What documents are going to be needed in preparation for a Bankruptcy filing?

1.  Debtors to pay for and obtain a “certificate”  from a debt counseling service PRIOR to filing any bankruptcy petition.

2.  Copies of 6 months of Gross Income or “Pay Advices”, essentially paycheck stubs or Income and Expense Reports which show Gross Receipts and Categories of Expenses per month which usually shows fluctuations.

3.  The Debtor’s last filed Federal tax returns.

When does the debtor have to appear in court?

Most debtors do not have to appear before the judge. Debtors have to appear at least once for a hearing called the meeting of creditors. The Law Office of John A. Vos will appear for you at that hearing.   The meeting of creditors is usually held about a month after the case is filed.

What is the difference between a secured creditor and an unsecured creditor?

A secured creditor is a creditor whose claim against the debtor is secured by a valid mortgage, lien, or other security interest against property that is owned by the debtor. An unsecured creditor is a creditor whose claim against the debtor is not secured by a valid mortgage, lien or security interest against the debtor’s property. In other words, a secured creditor has collateral for its claim and an unsecured creditor does not. The basic difference is that a secured creditor may collect all or a portion of its claim from its collateral, while an unsecured creditor may not. It is common for the amount of a secured creditor’s claim to exceed the value of its collateral. It is important to differentiate between secured and unsecured claims because they are treated quite differently in chapter 13 cases. Secured claims must be paid in full with interest, while only amounts that the debtor can reasonably afford need be paid to the holders of unsecured claims (except priority claims).

Certain debts are non-dischargeable such as:

(1) debts for domestic support obligations, which includes debts for child support and alimony,
(2) debts for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel or aircraft while intoxicated,
(3) most tax debts,
(4) debts for restitution or criminal fines included in a sentence imposed on the debtor for conviction of a crime,
(5) debts for fraud, embezzlement or larceny,
(6) debts for student loans or educational obligations unless a court rules that not discharging the debt would impose an undue hardship on the debtor and his or her dependents, and
(7) debts for damages caused by willful or malicious conduct by the debtor.

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