Q: How much does a bankruptcy filing cost?
A: The court charges a filing fee for every
filed Bankruptcy Case. As of 2/2010, the filing fee for Chapter 7 is $299.00 and the filing fee for Chapter 13
is $274.00.
The attorney fees for bankruptcy vary
significantly depending on the circumstances of each case.
The attorney fees for a Chapter 7 case can
run between $1000 to $3,000+ depending on the circumstances. Fees for Chapter 7 filings must be paid in full prior to the case being filed with the Court. Chapter 13 attorney fees are usually consistent with
the US Trustee guideline Chapter 13 fees and are usually $3,300 for employed
debtors, $4,000 for self-employed debtors in the Southern District of CA (San Diego County), and $4000/$4500 in the Central District of CA (Riverside, Orange, San Bernardino, and Los Angeles Counties).
However, only a portion of the Chapter 13 fees must be paid prior to
the filing of the case. The balance of the fees in a Chapter 13 case are paid through your Chapter 13 plan
payments, usually at the expense of your creditors.
Q: Do I need to undergo credit counseling
before I can file bankruptcy?
A: Yes.
The bankruptcy code mandate that all debtors undergo pre-bankruptcy
credit counseling from an authorized credit counseling agency within the 180
days prior to a bankruptcy case being filed with the court. The bankruptcy laws also mandate that a
second counseling, called the "financial management course" or "debtor's education class", be taken
after the filing but before a discharge can be issued in the case.
Both the pre-bankruptcy credit counseling and
the pre-discharge financial management course can be taken over the phone or
online, usually in an hour or two, and the fees for these services range
from $15 to $75.
Q: What is the means test, and, if I fail the means test, can I still file for Chapter 7?
A: The means test is an addition
to the Bankruptcy process and enacted by the Bankruptcy Abuse Prevention and
Consumer Protection Act which became law in October, 2005.
The means test is a complex
calculation of your income and expenses that determines whether or not your
case is presumed to be an abuse of Chapter 7.
The means test takes an average of your
income over the six months prior to the filing of your case, then pro-rates it to
a yearly amount and compares this amount with the median yearly income for the
same number of household as based on IRS census information.
If your income is below the median income,
the means test is not applicable at all.
If your income is above the median income, then you are subject to means testing to determine whether your case is presumed to be an abuse of Chapter 7.
Once it is determined that your income over
the 6 months prior to the case being filed with the court is above the median
income for the same number of household, this income is then reduced to a
monthly figure and certain expenses are allowed to be deducted, half of which
are set numbers based on IRS Census information and the other half are set by
your actual monthly expenses. If, after
deducting these allowed expenses from your income, there leaves a sufficient
amount of disposable income to be able to repay a portion of your debt through
Chapter 13, then you have failed the means test and the filing of your Chapter
7 case will be presumed an abuse.
The presumption of abuse is solely a burden
of proof shifting mechanism. In other
words, filing a Chapter 7 when you fail the means test means that upon a party
in interest filing a motion to dismiss or convert your case to chapter 13, it
is now your burden to prove that there are special circumstances in existence
that act to rebut the presumption that your case is an abuse of Chapter 7. (i.e.
you had lost your job and have no ability to gain employment at the same
income level.) In those circumstances, the presumption of abuse would most
likely be rebutted.
If you pass the means test, there is no presumption of abuse. However, a party in interest may still file a motion to dismiss or convert if they believe that, notwithstanding passing the means test, you still have the ability to repay your debts through a Chapter 13. However, since you passed the means test, it will be the moving party's burden of proving that your case is an abuse of Chapter 7 and there will not be any presumption in their favor.
Q: If I file bankruptcy, can I still keep my
car and/or home?
A: In most circumstances, yes. In Chapter 7 bankruptcies, there are two
things to consider. One being whether or
not there is unexempt equity in the car/home and the other, whether or not you are
current on your secured loan payments and whether or not you plan to continue
making those payments.
In most Chapter 7 cases, we can protect all
of your assets from liquidation by the Chapter 7 trustee. However, if you are not able to fully exempt
your vehicle, the Chapter 7 trustee would have the power to sell your vehicle
and use the proceeds to pay your creditors.
Sometimes, however, the trustee will give you the opportunity to
purchase the vehicle back from the bankruptcy estate. Remember though that California exemptions
are very liberal and in most cases we can fully exempt your property.
The other thing to consider in determining
whether or not you can continue to keep your car and/or home is whether or not
there is a secured loan attached to the asset and whether or not you are
current on your payments and whether you plan to continue to make the
payments.
With homes, as long as you can exempt your
home from the bankruptcy estate, you are substantially current on your payments,
and you continue to stay current, you will most likely be able to keep your
home. The bankruptcy discharge will
actually release you from personally liability on the mortgages regardless of
whether you surrender or keep your home, but as the loan will continue to be
secured by the property, your mortgage lenders can still foreclose if you do
not make payments.
As to vehicles and other personal property subject to secured loans, the same rule applies as to real property. However, in certain circumstances, you may wish to reaffirm the secured debt rather than simply continue to make payments. A reaffirmation agreement makes you personally liable on the debt again but eliminates the risk of repossession as long as you stay current on your payments.
Q: What is a reaffirmation agreement and do I
need to sign one?
A: A reaffirmation agreement is a written
agreement filed with the bankruptcy court during the pendency of your
bankruptcy case and acts to ratify a specific contractual obligation that is
subject to the reaffirmation agreement.
In other words, the bankruptcy will
automatically discharge certain debts unless you reaffirm the debt during your
case, in which case that specific debt will not be discharged.
You are not obligated to reaffirm any debt(s). However, a reaffirmation agreement may be preferable in certain circumstances, including debts secured by personal property (i.e. car loans) as the new bankruptcy laws have been interpreted to require either reaffirmation of a secured loan or surrender of the collateral subject to the loan. Thus, if no reaffirmation agreement is filed, the secured lender may still repossess the collateral even though you are current on your payments.
Q: What if forget to list a creditor in my
bankruptcy schedules?
A: Legally, you are required to list everyone
you owe money to at the time your case is filed, whether or not you plan to pay
them back.
If your case is filed and during the pendency
of your case you discover that a creditor was omitted, you are obligated to
amend your bankruptcy schedules to list that additional creditor.
If your case has already been discharged and
closed when you discover that you've omitted a creditor, the debt may still be
discharged in your bankruptcy as long as (1) the debt was incurred prior to you
filing bankruptcy, (2) no funds were distributed to your creditors in your
bankruptcy case, and (3) there exists no legal basis to render the debt
non-dischargeable.
If you are receiving collection notices, bills, calls, etc. from a creditor regarding a debt incurred prior to your bankruptcy but inadvertantly omitted from your bankruptcy schedules, you need simply send them written notice of the bankruptcy case with a copy of the discharge order. Upon their being on actual notice of your bankruptcy discharge, they are thereafter prohibited from collecting on that debt.
Q: If i stopped paying my mortgage payments
and my home is headed for foreclosure, how long can I stay in my house?
A: The amount of time you may continue to
stay in your home is dependent on many different factors.
The average foreclosure time line is as
follows: (1) you stop paying your
mortgage payments, (2) when you are between three and four months behind in payments,
the mortgage lender will file a "Notice of Default" with the County
Recorder's office. This notice gives you 90 days by law to cure the default
before the lender can file a notice of sale, (3) three months go by since the
recording of the notice of default, the lender now files the "Notice of Trustee's Sale" which sets the sale date for your home approximately two to three
weeks later. You have up to five days
before the sale to reinstate the loan by paying the full past due amount.
Within five days of the sale, the lender can refuse reinstatement and demand full
loan payoff, (5) they sell your property at auction (usually back to the lender),
(6) the new owner of your property serves you with a 3-day notice to quit. If you are not out in three days, (7) the new
owner files an unlawful detainer to evict you.
Even without a bankruptcy filing, the above
process could take a lot longer and depends how fast the mortgage lender moves.
(1) You stopped paying your mortgage 3 1/2
months ago but the lender has yet to file the notice of default. If you immediately file a bankruptcy case,
the lender will not be able to file the notice of default until they have an order from the bankruptcy court granting them relief of the automatic stay. Assuming it will take them an
average of two months from the time your bankruptcy case is filed to get that court order, the notice of default will not be filed until you are roughly six
months behind on your mortgage payments, which means you have another 3 1/2 to
4 months from that time before they can sell your home. Thus you bought another two months to stay in
your home without having to make payments because of the timing of your bankruptcy case.
Another Example:
(2) You've already received the notice of default 90 days ago and just received the notice of trustee sale which states the lender plans to auction your home in two weeks. If you file your bankruptcy within a few days of the sale date, the bankruptcy filing will stop the pending foreclosure sale and the lender will have to get a court order granting them relief from stay before they can proceed with foreclosure. If it takes them another two months to get the court order, you've bought another two months to stay in your home.
