Your Common Questions About Bankruptcy Answered
Filing for bankruptcy can be a difficult and overwhelming decision, and it comes with a lot of questions. However, bankruptcy can be a viable solution that can help get you back on track. Here are some of the most common bankruptcy questions and answers to help you decide if this debt relief option is right for you.
What is The Minimum Debt Requirement to File for Bankruptcy?
People typically file for bankruptcy because they are in a dire financial situation. When expenses are mounting, and bills aren't getting paid, trying to stay afloat can be a stressful and vicious cycle. There is no minimum amount of debt required to file for bankruptcy, but you'll want to make sure that bankruptcy will make financial sense for you. Ask yourself these questions:
- Can I repay my debts without bankruptcy?
- Are my creditors willing to make negotiations on settlements?
- Are the debts that I want to eliminate dischargeable through bankruptcy?
Can I Discharge Spousal Support Through Bankruptcy?
No, spousal support is not eligible for bankruptcy. Other debts that are not dischargeable may include but are not limited to the following:
- Spousal support
- Child support
- Some income tax debts
- Certain property taxes
- Fines and penalties from violations of the law (i.e., speeding tickets, criminal restitution)
- Student loans
- Retirement plan loans
Can I Keep My Property When I File for Bankruptcy?
You will be able to keep certain property through bankruptcy exemptions when filing for Chapter 7 or Chapter 13 bankruptcy. Bankruptcy law can be complicated to understand, but here are some of the basic exemptions you may be eligible for when filing for bankruptcy in California:
- Your home
- Motor vehicles
- Personal property such as family heirlooms and works of art
- Retirement and pension accounts
- Public benefits such as workers' compensation or student financial aid
- Tools of trade
- Insurance benefits
- Trust funds
- Property of business partnerships
When listing any exemptions in your bankruptcy petition, it's essential to keep in mind that most exemptions have monetary value limits. While bankruptcy exemptions can help get back on your feet, luxury items such as a yacht or highly valuable jewelry are not eligible for bankruptcy exemptions. Consulting a bankruptcy attorney can help you determine the best course of action to keep your property after filing.
What Happens to My Property That Isn't Eligible for an Exemption?
If you have certain property that is not eligible for an exemption through bankruptcy, here's how the process works in both Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 - all non-exempt property will be sold, and funds from the sale will be used to pay unsecured debt such as:
- Credit cards
- Medical bills
- Personal loans
- Payday advances
Chapter 13 Bankruptcy - in most cases, you will be able to keep your non-exempt property and pay unsecured debt through a three to a five-year payment plan.
Can Filing for Bankruptcy Save My Car From Repossession?
You rely on your car to get to work, run errands, and get your kids off to school. However, if you are struggling to make your car payments and fall too far behind, you could risk losing your car. Depending on your financial situation, you may use Chapter 13 or Chapter 7 bankruptcy as an avenue to save your car from repossession. Here's how each one works:
Chapter 13 bankruptcy, also known as a "wage earner's plan," can help you keep your car and other property. Chapter 13 bankruptcy is essentially a debt repayment plan which can last from three to five years. To be eligible to keep your vehicle and other property through Chapter 13 bankruptcy, you must meet the following requirements.
- Be up to date on your tax filing
- Meet the debt limitation requirements
- Be employed and have enough income to cover the scheduled monthly payments
- Be filing as an individual and not a business
Chapter 7 bankruptcy can also allow you to keep your car, but only under the condition that you can afford your car payments and the value of your car. Chapter 7 requires liquidation of certain assets to pay back the debts you owe to unsecured creditors. Chapter 7 bankruptcy can be a tricky option for keeping your car. However, a bankruptcy attorney can guide you in the right direction on what option will be the best to avoid car repossession.
Can Bankruptcy Help Me Get My Car Back If It Has Already Been Repossessed?
While the short answer is yes, the process can be tricky, and time may not be on your side. The auction clock ticks fast. Your best plan of action is to contact a bankruptcy attorney immediately to learn your rights in getting your car back before its too late.
Can Bankruptcy Protect My Home From Foreclosure?
If you are facing foreclosure, it goes without saying that you are probably under a lot of stress and are feeling confused about what to do. Chapter 13 bankruptcy can save your home from foreclosure by reorganizing your mortgage debt and repaying your delinquent payments over a three to five year period.
You may also be able to alleviate your second mortgage as second mortgages are treated as unsecured debt.
Will Bankruptcy Prevent Me From Owning Property in the Future?
Filing for bankruptcy doesn't mean you can never own a house or car again. While you may not get a mortgage or car loan immediately after filing for bankruptcy, you won't have to wait forever. If you are planning to buy a home or car after filing for bankruptcy, consult your bankruptcy attorney for advice on when is the best time to do so.
How Does Bankruptcy Work if I'm Getting Divorced?
If a couple is going through a divorce and wants to file for bankruptcy, it can be a complicated process. Here are some things to consider before filing for bankruptcy when divorcing:
- Debts can be discharged through your personal bankruptcy, but creditors may still seek out the non-filing spouse to pay back the debt.
- If you are legally separated, but not living together, you may be able to file for bankruptcy without disclosing your spouse's income.
- If you've already filed jointly and decide to separate mid-bankruptcy, you may be able to divide your bankruptcy into two separate cases.
Divorce and bankruptcy together can be a daunting task. Seek the help of an experienced attorney to guide you in the right direction.
Deciding to file for bankruptcy can be a difficult one. A skilled bankruptcy attorney can assist you in finding the right bankruptcy options to meet your financial needs.
If you've been threatened with foreclosure, facing mounting credit card debt, or medical bills, Contact Wadhwani & Shanfeld today at (800) 996-9932 for a free consultation to learn more about your bankruptcy options.