Sacramento Bankruptcy Attorneys
The brilliant Sacramento Bankruptcy Attorneys at our trusted law firm possess vast experience in handling a wide variety of bankruptcy matters. Their expertise, as bankruptcy lawyers, includes the filing of Chapter 7 Bankruptcies, usually filed to eliminate credit card debt or medical bills, along with the filing of reorganization bankruptcies: Chapter 13 Bankruptcy and Chapter 11 Bankruptcy. These are generally filed to stop foreclosures and reorganize real estate or businesses.
“We are a debt relief agency. We help people file for
bankruptcy relief under the Bankruptcy Code.“
“The Sacramento Bankruptcy Attorneys at Eason & Tambornini did a great job handling my Chapter 7 Bankruptcy case . . . my hearing was the smoothest and quickest of the 10 cases I observed. This proved that they did a great job preparing my case for the hearing.” Sarah, a Sacramento Bankruptcy Attorney Client
Broadly speaking, there are two primary types of bankruptcies that our Sacramento Bankruptcy Attorneys handle: Chapter 7 (which is the cheapest and easiest to finalize) and the Reorganization Bankruptcies (Chapter 9, 11, 12, and 13), which provide debtors with an opportunity to make payments over a period of time. The Eastern District Bankruptcy Court (Sacramento Division) is the primary court where our Sacramento Bankruptcy Attorneys handle bankruptcy petitions, and that court serves the largest region in California, which includes those living in Sacramento, El Dorado, Placer, and San Joaquin counties.
Our Staff of Sacramento Bankruptcy Attorneys have solid legal expertise with the following Bankruptcies:
The Sacramento Bankruptcy Attorneys in our office have successfully represented hundreds of clients in eliminating tens of millions of dollars in credit card and unsecured debt. Chapter 7 Bankruptcy Law is extremely helpful in protecting individuals from over-bearing creditors. It is often referred to as the “Fresh Start” bankruptcy. Chapter 7 Bankruptcy, (named after a section within the Bankruptcy Code), is generally the cheapest, the easiest, the best for credit rehabilitation, the quickest to obtain a discharge, and for most people the preferred type of bankruptcy to file.
When a Chapter 7 bankruptcy is handled by competent Sacramento Bankruptcy Attorneys, an individual is permitted to keep all of their “Exempt Assets”. For the vast majority of people, all of their assets qualify as exempt. With few exceptions, in a Chapter 7 Bankruptcy, you eliminate or discharge all of your debts. Other than those few debts that are logically excepted from discharge for social policy reasons under bankruptcy law, you are not required to make any payments, unless of course you want to keep an asset that was pledged as collateral. For those assets for which collateral was pledged, you will need to continue to pay, reaffirm the debt, or redeem the collateral if you want to avoid the risk of the collateral being repossessed or foreclosed.
Unfortunately, a Chapter 7 bankruptcy does not give you a formal mechanism to force secured creditors, such as, home or car lenders, to let you catch up on past due payments. A Chapter 13 Bankruptcy, or possibly a Chapter 11 Bankruptcy, is usually the preferred set of bankruptcy laws for those who are looking to establish a formal “plan” for the payment of delinquent debts.
While you can use a Chapter 7 Bankruptcy to remove many involuntary or judicial liens, you cannot normally use a Chapter 7 Bankruptcy to remove voluntary liens such as second deeds of trust or home equity lines of credit. In contrast, there are many circumstances in which a Chapter 13 proceeding can be used to remove these junior deeds of trust or home equity lines of credit. Read More…
The Sacramento Bankruptcy Attorneys in our office have successfully handled many Chapter 11 Bankruptcy Reorganizations. Chapter 11 Bankruptcy Law is the most common bankruptcy for corporations and individuals with high income or very high debt who want to reorganize their debts. It is particularly popular for Corporations and Limited Liability Companies that own commercial real estate property and need to restructure. In a Chapter 11 Bankruptcy, a Plan of Reorganization is proposed to the court. Under the Plan of Reorganization, a repayment program is proposed which may include the writing-off of certain types of debt. In addition to a Plan of Reorganization, a Disclosure Statement is prepared. A Disclosure Statement is much like a prospectus. Its purpose is to describe how the Plan of Reorganization will be feasible, and to provide information for a creditor to make an informed decision of whether to vote for the Plan. Generally, the Debtor continues to operate the business or property during the pendency of a Chapter 11 Bankruptcy. However, there are situations when the Debtor may lose control of its business or assets in a Chapter 11 Bankruptcy to a trustee. The loss of control usually occurs when there have been financial irregularities in the past, financial irregularities in the case itself, or a failure of the Debtor to following the court’s rules.
Generally, if you are looking for a reorganization bankruptcy and qualify for a Chapter 13 Bankruptcy, it is preferred over a Chapter 11 Bankruptcy. The cost to hire Bankruptcy Attorneys to prepare a Chapter 13 Bankruptcy is considerably cheaper, the reporting requirements much less, and the requirements to have a Plan of Reorganization approved are easier. However, if your debts are particularly high, you are not an individual (e.g. a Corporation), or you need more flexibility than generally provided in a Chapter 13 Bankruptcy, Chapter 11 Bankruptcy may be the better alternative. Read More…
Chapter 13 bankruptcy law is traditionally the most beneficial for those wanting to reorganize their debts. Chapter 13 bankruptcies are particularly popular for individuals who have become delinquent on their home loans and need time to get caught up. It is also a good choice for those individuals who may not qualify for a Chapter 7 bankruptcy for income or other reasons.
In a Chapter 13 Bankruptcy, our Bankruptcy Attorneys prepare a Plan of Reorganization to be proposed to the court. Under bankruptcy law, if the Plan of Reorganization meets certain criteria, it is approved by the court even over objections of creditors. In other words, a Chapter 13 Bankruptcy Plan is a way to force uncooperative lenders or debt collectors into working with you.
The formulation of a Plan of Reorganization is rather complicated, but generally speaking, you are required to pay your disposable income to the Trustee for typically three to five years. The trustee, after taking his/her fee of approximately 10% of the payments, uses the money you paid to pay your creditors as set forth in your plan. Typically, at the end of the Plan of Reorganization, your secured loans are caught up, and with limited exceptions, the unsecured creditors are either paid in full or their balances are discharged.
The biggest difference between a Chapter 13 Bankruptcy and a Chapter 7 Bankruptcy is that in a Chapter 13 Bankruptcy you make monthly payments to the trustee. In a Chapter 7 Bankruptcy, you do not make monthly payments to the trustee.
A Chapter 13 Bankruptcy is typically more advantageous than a Chapter 7 if you are behind on secured loans and need time to get up. Likewise, as Sacramento Bankruptcy Attorneys, in a Chapter 13 bankruptcy we can sometimes strip certain deeds of trust from your residence if you owe more on a first deed of trust/mortgage than your home is worth. This option of removing a junior deed of trust and/or mortgage does not currently exist in a Chapter 7 Bankruptcy. In the current housing market, this is one of the greatest benefits of a Chapter 13 Bankruptcy.
Besides providing a plan to catch up on delinquent secured payments and remove junior deeds of trust, a Chapter 13 Bankruptcy is also often filed in cases in which individuals make too much money to qualify for a Chapter 7 Bankruptcy. Read More…
Frequently Asked Questions about the Bankruptcy Process:
The process for filing a Chapter 7 Bankruptcy is relatively straight forward. Unlike many other legal matters, it is extremely rare for Chapter 7 Bankruptcy cases prepared by experienced bankruptcy attorneys to drag on. Arguably 90% of the work is completed before the case is filed.
Almost all of the work for an effective Chapter 7 Bankruptcy is done prior to filing. Typically, you meet with one of our bankruptcy attorneys to discuss your situation and see if non-bankruptcy alternatives are available. If not, then one of our bankruptcy attorneys will assess your income, expenses, assets, and goals to determine if a Chapter 7 or Chapter 13 is better for your situation.
During that same meeting, which usually last about one hour, we will often do some of the basic data entry necessary to complete your schedules, download a credit report, and come up with a list of things needed for the second meeting.
After the first meeting, we will usually ask you to gather necessary documents such as your most recent tax return, bank statements, and pay stubs, and take the court required online counseling session. This online session is usually 30 minutes to an hour in length, and can be done in our office or in your home. At the end of that online session, you will be provided an electronic certificate that must be filed with your case.
After you have obtained the few necessary documents and taken the online counseling session, we typically schedule a second meeting with our bankruptcy attorneys to finalize your schedules, review the petition, and sign the documents. This second meeting can take anywhere from 15 minutes to two hours depending on the complexities of your case and how much we were able to accomplish during the first meeting. Typically, within one to two business days after you have signed the documents, our bankruptcy attorneys will file them with the court.
After your case has been filed, you will receive a one page piece of paper from the court titled “Notice of Commencement of Case.” This is the same document that your creditors get, and to the extent you are receiving harassing phone calls, they usually stop once this document is received. This document typically arrives within four to seven business days after filing.
The Notice of Commencement of Case is important as it describes the date, time, and location of your “First Meeting of Creditors.” Unfortunately, the name “First Meeting of Creditors” is a misnomer as creditors rarely attend in consumer cases. It is usually only the clients, the bankruptcy attorneys, and the Chapter 7 trustee in attendance. These meetings are scheduled for a one-hour block of time, but there are usually 10-15 cases on calendar for that same hour. If your case was prepared by one of our experienced bankruptcy attorneys, it is unlikely that your interview will last more than 3-5 minutes! A quick Meeting of Creditors is the result of good bankruptcy attorneys who have completed your schedules accurately and discussed any potential issues with the trustee in advance. It is required that you bring approved evidence of your Social Security Number (e.g. Social Security Card) and a government issued photo identification to the meeting. Otherwise, you may have to attend a second meeting of creditors.
Besides attending the meeting of creditors with proper identification and answering a few basic questions, there is really only one additional requirement in order to complete your bankruptcy case. You will need to take a Debtor Education course. These courses are offered online, often by the same company that handled your pre-bankruptcy counseling session, and typically take 90 minutes to complete. Once you have taken that course, be sure that one of our bankruptcy attorneys receives the certificate, because it needs to be filed with the court.
In 95% of the Chapter 7 cases handled by our bankruptcy attorneys, no further work is needed on your part, and you will receive your discharge approximately 100-110 days after the date your meeting of creditors was first scheduled.
The process for a Chapter 13 bankruptcy is very similar to that for a Chapter 7. Most of the work is done at the outset. The petition, schedules, and statement of financial affairs are filed usually at the same time, or within 14 days of the petition. Likewise, a “Means Test” type analysis is performed to determine the amount of current monthly income and disposable income of the debtors. The form seems relatively straightforward, but completing it accurately is very difficult, and can have a huge impact in deciding the length of the plan of reorganization, and the amount that has to be paid to creditors during the course of the Chapter 13.
In addition to the above documents which are very similar to a Chapter 7 bankruptcy, in a Chapter 13 bankruptcy a Plan of Reorganization has to be prepared, filed, and transmitted to the creditors. If the Plan meets certain statutory requirements, it will be approved by the court. There is no “vote” of creditors required, and even if a creditor objects to the Plan it will still be approved if the statutory requirements have been met.
In addition to the filing of a Plan, there are often motions to value collateral that must be filed and potentially litigated. These motions are important as they can determine how a potentially secured creditor’s lien is to be treated in the bankruptcy.
When a Plan is approved by the court, the Debtor then traditionally makes monthly payments to the Chapter 13 trustee. While theoretically the Plan payments may only last a few months, in virtually all cases the Plan payments last between 36 and 60 months. The length of the Plan payments is determined by many factors including the income of the debtors, the assets of the debtors, and the amount of claims that need to be paid.
Before the debtors have completed their plan payments, they will want to have taken Debtor Education Course which is required before a discharge can be entered. The course is usually done online, takes approximately 90 minutes, and costs less than $25.00. Once all of the Plan payments have been made, and the course has been taken, the trustee will issue a final report. Following the issuance of the final report by the trustee, and a final report by the Debtor regarding support payments and similar items, the clerk will issue a “discharge”. This is typically the final act in the case, and thus shortly thereafter an order closing the case is issued.
Chapter 7 and Chapter 13 bankruptcies are very much controlled by mandatory forms and procedures. The benefits of them are that they are economical, and not subject to much litigation or dispute. The problem with Chapter 7 and Chapter 13 bankruptcies is that they allow for very little customization. A Chapter 11 is a customizable reorganization bankruptcy. Unless the Debtor had a previous history of wrongdoing, generally speaking, a Debtor that acts with diligence, provides accurate financial reports, and acts in the best interest of the estate is entitled to remain in possession during the bankruptcy.
Many of the same schedules and statements that are required in a Chapter 7 or Chapter 13 bankruptcy are required in a Chapter 11. However in most Chapter 11 bankruptcies, the debtor may customize the plan of reorganization. However, with that right to customization comes with it an obligation to prepare, file, and circulate a disclosure statement. A disclosure statement is much like a business prospectus in that it seeks to be a plain English explanation of what the plan provides, and provides information from which a creditor can determine if they want to vote for the plan.
Unlike in a Chapter 7 of Chapter 13 bankruptcy, to confirm a plan of reorganization in a Chapter 11 requires a vote of the creditors. The number of votes needed is subject to many nuances. While the occasional debtor can successfully handle a Chapter 7 or a Chapter 13 without an attorney, it is extremely rare that a successful Chapter 11 occurs without the assistance of an experienced bankruptcy lawyer. Chapter 11’s not handled properly are typically converted to a Chapter 7, and occasionally dismissed.
No matter which bankruptcy you file, it is very likely you can keep your home. If your home does not have any equity, or the equity is within the limits of California exemption limits, you will be able to keep your home. However, if you want to keep your home you will need to negotiate with, continue to pay, or strip off any secured claims against your home.
If your home is in the foreclosure process or otherwise in default, Chapter 13 is usually the preferred of the bankruptcies to file to save your home. In a Chapter 13, you have the ability to force the creditors to allow you to make catch-up payments over a period of time, which can be as long as 60 months. Regarding the ability to make catch-up payments, a Chapter 11 bankruptcy gives you very similar rights as a Chapter 13. However, a Chapter 11 is typically more expensive and cumbersome than a Chapter 13.
A Chapter 7 bankruptcy may give you a brief period of breathing room, but it is not a long-term solution to mortgage delinquencies. In a Chapter 7, the foreclosure will be temporarily stayed, but a formal plan of reorganization cannot be forced upon a creditor, it must be voluntarily negotiated. However, Chapter 7’s can still be useful in that you can discharge, or get rid of, most of your other debts allowing you to focus your energy and resources on getting caught up on your home mortgages.
We are often asked whether it is better to have a short sale, a foreclosure, or to file bankruptcy. Unfortunately, there is no simple answer. It is like asking whether it is better to have a black eye, a bloody nose, or a busted lip. In many aspects they are all superficial injuries and have similar discomfort. However, personal preference and unique financial reasons have a huge impact.
Most people are better off with a bankruptcy because the home foreclosure is only one symptom of a bigger financial problem. If you are going to take a huge hit on your credit, you should usually do it all at once. Some would prefer a short-sale as that may be their only financial issue, and resolving that issue, may otherwise stabilize their financial life. Some would prefer a foreclosure as it can often maximize the length of time you can stay in the home. None of the reasons above are absolute, and in fact the opposite can be true depending on the circumstances. If you are struggling with this issue, there really is not a substitute for a consultation with a bankruptcy attorney to see what is best for your particular situation.
When you file a bankruptcy, all creditors are notified by the court. Other than the trustee, no one else is notified by the court. Unless you are a high profile person, it is unlikely that your friends, family, or employer will find out about your bankruptcy unless they are a creditor. Bankruptcies are filed regularly, and people have better things to do then troll the public files looking for the names of their friends.
Of course, there are exceptions. If you have a friend or family member that is involved in a financial industry, particularly nosy, or has access to your credit report or mail, they may see that you have filed a bankruptcy. Although very rare, occasionally a trustee will need to confirm your income, and may contact your employer. This is a very unusual circumstance, and not likely to be done if you respond to requests from the trustee directly.
Oddly enough, most of our new bankruptcy referrals come from existing or past bankruptcy clients. They are usually so relieved from all of the financial stress, and want their friends and family to have the same benefit . Consequently they tell their friends and family to call us.
The value of your home can play many different roles in a bankruptcy. It can impact which exemption list you choose, it can impact your ability to strip or remove liens, and it can impact whether you have to pay creditors, or how much you have to pay creditors. For standard single family residences located in standards subdivisions, using an on-line valuation tool such as zillow.com or redfin.com are very informative. However, if your home is not a standardized home in a standardized neighborhood, those valuation tools can be significantly off.
For most people, aside from any retirement accounts, your home is your most valued and most prized possession. If you are concerned about the valuation of your home and its impact on your bankruptcy, you should speak not only with a bankruptcy attorney, but also a real estate professional to get their opinions as to valuation.
Will filing bankruptcy impact my job? Can my employer fire me for filing bankruptcy? What if my employer is a creditor?
The good news for debtors is that the law is explicit about prohibiting discriminatory treatment against someone that filed bankruptcy. The law is codified at 11 USC §525 which states in essence that no private employer may terminate or discriminate against an employee who has filed bankruptcy or who has not paid a debt that was discharged in a bankruptcy. Consequently, it is generally illegal not only for a private employer to terminate or discriminate against an employee for filing a bankruptcy, but it is also illegal for private employer to require an employee to repay a debt as a condition of their employment.
While the statute against discrimination is clear, there are some exceptions that have been carved out by the courts. One of the more common exceptions includes those that need high level security clearance in a fiduciary capacity. The good news is that most employers view bankruptcy as a mature way of handling a bad financial situation, in contrast to the person that just struggles month to month juggling creditors.
We are often asked whether the filing of bankruptcy will impact the debtor or the debtor’s child from getting student loans. The good news is that Congress made it clear in enacting 11 USC §525(c) that student loan agencies and companies may not discriminate against the debtor or someone associated with a debtor in the making of a student loan.
The ability to discharge or eliminate taxes in a bankruptcy is very technical, and a nerve racking question for the most experienced bankruptcy attorneys. The short answer is that many taxes can be discharged, and many taxes cannot be discharged. In determining whether taxes can be discharged there are many twists and turns, and an individual should never try and navigate these waters without an experienced bankruptcy attorneys. The ability to discharge taxes depends largely on the type of tax owed, the period of time the taxes have been due and owing, whether a return was filed by the debtor, whether there was fraud involved, and whether there was an offer and compromise in place or some other stay against collection.
If you owe taxes, it is particularly important that you meet with a qualified bankruptcy attorney. Ideally when meeting with a bankruptcy attorney, you should have a copy of your tax transcript which the IRS will furnish for free and can be obtained both on the internet and by calling the IRS.
For most people, it does not matter if you file bankruptcy before or after a judgment is entered, especially if you are being sued for something like a credit card debt or personal loan. However, waiting until after a judgment can make a huge difference.
Some of the situations in which a judgment being entered can impact your bankruptcy include: when there have been liens placed on your assets as a result of the judgment; your assets garnished or seized as a result of the judgment; debt liquidated thus impacting your ability to qualify; and an express finding of fraud or other non-dischargeability circumstances.
If a lawsuit is threatened or pending, you should consult with a bankruptcy attorney at once to see what impact if any that an adverse finding or judgment could have on you.
Generally, judgments in California are good for 10 years. However, they can typically be renewed for additional 10 year periods, and the renewal of a judgment is very easy.
Checking cashing companies are like any other creditor in a bankruptcy, and generally the debts owed to check cashing companies are discharged. There are certain exceptions to discharge; one of the main exceptions is based on fraud. Unless the check cashing loan was fraudulently obtained, it is very likely to be discharged. To learn more, please contact one of our bankruptcy attorneys.
The length of time between bankruptcies is fairly complicated. Generally, you cannot receive a discharge in a second Chapter 7 bankruptcy filed within 8 years of the first bankruptcy. However, that does not mean you have to wait 8 years to achieve bankruptcy protection. There are many options in the bankruptcy court that exist to someone who has not had 8 years lapse. If you are in financial distress and it has not yet been 8 years since a Chapter 7 bankruptcy was filed, you should still consult with a bankruptcy attorney about other possible options.
When you file bankruptcy, you are required to list all of your creditors. You cannot pick and choose between creditors. However, in the bankruptcy you have the ability to reaffirm debts, meaning you formally agree to repay those debts as if the bankruptcy had not been filed or on new terms. Likewise, you can informally pay creditors back even without signing a reaffirmation agreement.
Even with the above options, it is usually not advisable to reaffirm or repay credit card debts post bankruptcy. Most people after a bankruptcy will be inundated with new credit card offers, or have the ability to obtain secured credit cards. These new options, while with drawbacks, are typically a far better solution than repaying an old unsecured credit card debt.
The issue of who can count as a dependent in a bankruptcy can vary significantly from jurisdiction to jurisdiction, and even judge to judge within that jurisdiction. Many judges believe that a dependant is someone who regularly sleeps within the household. Some judges are a little more liberal and will accept as dependents someone who looks to the debtor for their main financial support, even if not living in the household. This is a tricky question that can have important implications in a bankruptcy, and should be discussed with a bankruptcy attorney.
If you own a business, it is considered an asset. If you have enough exemptions left to cover the value of the business, you will likely get to keep the business. However, this is only the top of the mountain of issues regarding business ownership in a bankruptcy. In virtually all cases, the debtors get to keep the business but there are many issues that need to be addressed, and those issues can depend on: whether the business is a sole proprietorship or its own legal entity; whether the business is liable for the same debts; and whether the business is a personal services business.
When you file a bankruptcy, all creditors are prohibited from contacting you and harassing you during the period of the automatic stay. When you receive your discharge, all creditors that were discharged are forever barred from harassing you.
If you had an account seized and file a bankruptcy immediately, it is very likely that the creditor will have to surrender the money seized. If you have enough exemptions available, which is typical for most debtors, that money will likely be returned to you. If you do not have enough exemptions available, it may be turned over to the trustee to pay some of your debts.
The fact that a debt was written off by a creditor does not bar them from selling your debt to a collection agency, or seeking to come after you for that debt later. A bankruptcy discharge on the other hand is permanent, and they are forever barred from coming after you.
There is no prohibition on acquiring property after a bankruptcy. You receive a fresh start, and should use it as such. On the other hand, you should never commit bankruptcy fraud by having someone else hold property belonging to you until after a bankruptcy. It is a crime, and the risk of prison or denial of discharge is not worth it. Most property can be protected in a bankruptcy, so honesty is the best policy!
Frequently Asked Questions About Bankruptcy and your Husband, Wife, Spouse:
If you are married, both spouses do not have to file bankruptcy. Likewise, you do not need your husband’s or wife’s permission to file bankruptcy, and you cannot stop your spouse from filing bankruptcy.
However, in many cases when one spouse files bankruptcy, it is usually best if both file. The cost for both spouses to file bankruptcy at the same time is generally the same, or only a negligible difference. By filing together, both spouses get a discharge of the debts, and thus the household income is not jeopardized.
You husband or wife does not have to agree to you filing bankruptcy, and you do not “need” their cooperation. However, there are situations when their cooperation could be beneficial to you.
In a bankruptcy, you want to “exempt” certain assets. By exempting an asset, you get to keep that asset, or possibly reduce the amount you have to repay creditors based on that exemption. California has two sets of exemptions; one set is more beneficial if you have lots of equity in your home, and the other set is traditionally more beneficially if you have little to no equity in a home. If your spouse is cooperative, you can select either set of exemptions. If your spouse is not cooperative, then you can only select the set that has the large homestead exemption.
You husband, wife, or spouses credit is not directly affected by the filing of your bankruptcy. Your husband or wife’s credit score is separate and distinct from yours. When you file bankruptcy, it should not show up on their credit or otherwise affect their credit score.
When only one spouse files a bankruptcy, only the filing spouse receives a discharge. Consequently, if the other spouse was also obligated on that debt, then the creditor still has the right to demand payment from the non filing spouse. If the non filing spouse does not satisfy the debt, then their credit could be impacted. Consequently, it is important to recognize that the filing of bankruptcy by one spouse does not relieve the other spouse of their personal liability.
In very rare situations, creditor will inadvertently notate on the non-filing spouses credit report that the filed bankruptcy. This happens rarely, and is easily remedied by disputing that notation with the credit bureaus. If your spouse files for bankruptcy, it is recommended that you review your credit report approximately 120-180 days after they filed for bankruptcy to make sure this error was not made.
In determining your bankruptcy qualification, and/or the amount you have to repay, if at all, your household income is a major factor. If you are married and living together you must count your husband or wife’s income in the calculation. However, if you are not living with your spouse, then they are not part of the household and their income does not count against your qualification.
Unfortunately, bankruptcy and divorce often go hand-in-hand. Sometimes financial stress leads to divorce. Other times, the splitting of the household doubles many expenses thus leading to bankruptcy. Generally speaking however, the bankruptcy system makes the divorce easier rather than more difficult.
If you have two households rather than one, qualifying for a bankruptcy is usually easier. Usually when you are living separate and apart, the other spouse’s income is not counted towards the income qualification tests. Likewise, most divorces these days center around the division of debts, rather than the division of assets. With a bankruptcy, that fight over who has to pay the debts is simplified by the discharge. If you are in the process of a divorce, or think one might be imminent, it is important that you speak with a bankruptcy attorney about this. Knowledge of that fact in advance can simplify many issues for both your bankruptcy attorney and your family law attorney.
Even if you are in the process of getting a legal divorce, or are legally separated, you can still file a bankruptcy together. Often the cost of filing a bankruptcy for both spouses is the same cost as filing for just one spouse. Likewise, if you both file bankruptcy together it eliminates many disputes over who is responsible for the debts after a divorce, resolves issues over exemptions, and can sometimes make qualification for bankruptcy easier.
In most cases, if you and your husband/wife are in the process of getting a divorce, you can use the same attorney to handle a joint bankruptcy. It is very common for spouses in the divorce to jointly meet with the same bankruptcy attorney, as it saves money and ensures that their interests are aligned. However, jointly filing and using the same attorney is not always practical. If during the initial meeting or thereafter the bankruptcy attorney feels there is a potential conflict of interest, the bankruptcy attorney should disqualify themselves and refer each spouse to separate counsel. This conflict is usually apparent early on, and consequently, it is usually worth trying jointly at first.
How do I tell if my husband/wife is jointly responsible for my credit card? If a card is in my husband/wife’s name, are they also liable?
While California is a community property state, and each spouse is generally liable for the other spouse’s debts, it is very rare that a credit card company will sue both spouses. They usually only sue the spouse that is the signatory on the credit card contract. To determine whether the credit card company is likely to sue your husband or wife for the debt, review your spouse’s credit report. If the credit card in question shows up on their credit report, then they will likely be sued. If the credit card is not on their credit report, then they are often just and “authorized user” and not a direct signatory on the account. While it is not foolproof that your spouse will not be liable if the card is not on their credit report, it is usually a very good predictor.
Should I file bankruptcy before I get married? Will my wife or husband become responsible for my debt if we get married? Will I become responsible for my husband or wife’s debt if we get married?
California is a community property state. Oversimplified, that means that assets and debts acquired “during” marriage belong to both spouses equally. Consequently, if one spouse has a bunch of debts in their name before getting married, marriage does not automatically make the other spouse liable.
However, if a potential spouse has lots of debts and is contemplating marriage, it is particularly wise to consult with a bankruptcy attorney before getting married. Once married, the income of both spouses usually counts towards the eligibility of one spouse to file a bankruptcy. As such, it is sometimes best to file for bankruptcy just before or just after a marriage to maximize the ability to qualify, or minimize the amount that must be paid back.
The fact that your husband or wife filed bankruptcy does not directly affect your credit, or make you liable for their debts. However, if they filed bankruptcy and you were jointly liable for their debt, it is now all yours.
If my ex-wife or ex-husband became responsible for debts in our divorce, can they get out of that liability in a bankruptcy?
The object of a bankruptcy is to get a discharge of all of a person’s debts. If they are otherwise eligible for a bankruptcy, and comply with the bankruptcy requirements, they get a discharge of all debts with certain statutory exceptions. The two most common exceptions applicable in divorce cases are domestic support obligations, and to a lesser extent spousal equalization payments.
A spouse that files bankruptcy cannot discharge domestic support obligations. Those debts automatically survive the bankruptcy, and a non-filing ex-spouse does not need to take any action to make sure those debts survive the bankruptcy.
If one spouse assumed debt of another spouse as part of a spousal equalization agreement, it is possible that the impacted spouse can file a mini-lawsuit in the bankruptcy court to keep the filing spouse from being discharged of that debt. However, the lawsuit is not inexpensive, and not always successful. If you or your spouse agreed to assume debts as part of a divorce, and a bankruptcy is later filed, you should immediately speak with a bankruptcy attorney about your rights and/or possible obligations.
Many questions can be answered with a simple yes or no, however, this is not one of them. Filing before a divorce is final can sometimes simplify the divorce process making things easier. Alternatively, sometimes waiting until after divorce can be better for qualification and exemption reasons. If you are in a divorce proceeding, or will be, you should contact a bankruptcy attorney immediately to make sure you time things so as to best protect your rights and interests.
There is not technical requirement to wait at all after filing bankruptcy to get married. We have literally filed bankruptcies for people in the days and weeks prior to their marriage. However, you should consult with a bankruptcy attorney before getting married prior to the entry of a discharge to make sure that your case is not impacted by a change in household income or similar circumstances.
Frequently Asked Questions about a Bankruptcy Discharge
There are several potential reasons to file a bankruptcy. Reorganization or restructuring of your debt is a driving reason for many, but for most the object is to obtain a release of liability of your debts. This is commonly referred to as a “discharge” or a “bankruptcy discharge” by a bankruptcy attorney.
In a chapter 7 bankruptcy, the deadline to object to discharge is 60 days after the date first set for the meeting of creditors. That meeting of creditors is usually first set 31 to 45 days after the bankruptcy was filed. Consequently, the deadline to object to discharge in most cases is between 90 and 115 days. The clerks of the court usually issue the discharge order within a week to 10 days after the deadline has passed.
This date is significantly different in a Chapter 11, Chapter 12, or Chapter 13 bankruptcy when discharge often does not happen until the plan payments have been made, or in some cases confirmation of a plan of reorganization. This date could also be delayed if an action to deny discharge was filed. Calculation of the discharge debt in a Chapter 11, Chapter 12, or Chapter 13 bankruptcy is usually best done by a bankruptcy attorney.
The discharge of a debt operates to relieve an individual debtor of their obligation on that debt. To the extent that collateral was pledged to secure the debt such as a car or home, if the debt is not ultimately paid the collateral can usually be repossessed or foreclosed upon to satisfy the debt. While there are some exceptions, the discharge of the debt does not erase the debt, it just removes the debtors’ personal liability for the debt. The collateral or other co-debtors still remain liable and potentially subject to collection actions. A bankruptcy attorney can explain other options of dealing with collateral such as a motion to redeem, motion to surrender, or motion for reaffirmation.
Certain types of discharges happen automatically provided that there is no objection. For example, credit card debt is usually discharged automatically. Other types of discharges require affirmative action on behalf of a debtor, a creditor, or their bankruptcy attorney. If a creditor opposes a discharge of a debt, they usually file an adversary proceeding which is like a mini-lawsuit in the bankruptcy court opposing the discharge. This type of action is typically required to make debt s arising out of fraud non-dischargeable.
Conversely, certain types of debts are automatically not given a discharge even if the creditor takes no action whatsoever. A typical example of a debt that will be due after a general discharge even if the creditor did nothing is child or spousal support.
Certain debts, such as student loans, require an affirmative showing of undue hardship by the debtor before a discharge will be entered. Determining what type of action needs to be taken to avoid or obtain a discharge is very important, and discussing this matter with a bankruptcy attorney is usually wise.
Besides exceptions of certain debts to discharge, there are also possible issues of denial of an entire discharge. Section 727 of the United States Bankruptcy Code discusses in detail certain times in which the debtor’s discharge of all debts is denied. The most common scenarios of non-dischargeablility of all debts are: when the debtor is not an individual, but rather an entity; when the debtor has hidden, concealed, or transferred assets prior to or during the bankruptcy; when the debtor has concealed or destroyed financial records; or when the debtor makes false statements in a bankruptcy. A good bankruptcy attorney should be able to advise you on how to cooperate with the trustee and schedule assets so as to avoid a complaint to deny discharge.
For debtors that are eligible to get receive a discharge, generally speaking all debts are discharged with certain specific exceptions. The good news is that those exceptions are not a random list based on the judge or the court, but rather spelled out relatively clearly in the United States Bankruptcy Code. More specifically, Section 532 of the Bankruptcy Code which is found in Title 11 of the United States Codes provides for eighteen different categories of debts that are not dischargeable. Before filing bankruptcy, a bankruptcy attorney should review that section in detail with you to determine what may be applicable.
While there are sometimes exceptions-to-the-exceptions, the most common exceptions to a bankruptcy discharge include most: taxes or customs duties; debts obtained by fraud; debts not listed or scheduled by the debtor; embezzlement; child support, spousal support, or certain other domestic support obligations; willful or malicious injury to someone or their property; death or injury arising out of drunk driving; criminal fines and restitution orders; and student loans.
As you would expect, there are many twists and turns within each category of debts that may make the debt dischargeable or not, and that is where an experienced bankruptcy attorney can give you some guidance. Likewise, the list above was not intended to list everything, as there are many other types of debts that may not be discharged.
Please contact our law firm today to discuss your case with one of our Sacramento Bankruptcy Attorneys.