DO YOU QUALIFY TO FILE FOR BANKRUPTCY PROTECTION?

Most people are very upset and embarrassed about needing to file for bankruptcy.  In today's tough times, many people, including professionals, need a fresh start by filing for bankruptcy protection.  

1. How much debt do you owe? Perhaps you can negotiate down your debts, rather than filing bankruptcy.  Remember that if you file, you need to include anyone who could sue you for money, e.g. former clients, hospitals, dentists, etc. 
2. Is the debt secured? Car loans are secured by the vehicle, house loans by the house, etc.
3. Is the debt dischargeable?  Support payments, generally divorce property settlements, student loans and recent taxes are not dischargeable.
4. How much you have earned over the past 6 months?  If you earned more than the allowed amount, you may have to file Chapter 13 debt reduction and reorganization. 
   
5. Do I have to include my spouse’s income?  Yes, if you are married and not separated.
6. How many people live in your household?  This affects whether you can pass the Means Test.   
7. How many vehicles do you own and what are the debts thereon?  The equity in the vehicles may affect whether you can discharge the debt.
8. What are your real property debts – mortgage payments, association fees?  Do you want to try to save your home?
9. Do you want to keep your personal property?  If so, you may need to reaffirm the debt, e.g. your car loan.
10. What property can you keep after the bankruptcy?  Most personal property such as clothing household furniture and furnishings, tools of your trade, a modestly valued car.  However, the Bankruptcy Court looks at what assets have equity and can be sold to get money to pay your creditors.
11. Can I keep my car and my home? Yes, if you do not have too much equity.   A homestead exemption should be available to protect some of the equity in your home.  If you have a car loan, you may want to reaffirm the debt and keep paying the loan to keep the car.
12. Do I still have to pay them for the car they repossessed it?  If your car was sold at auction for less than the debt, the creditor can come after you for the difference.  The difference owed should be included in your bankruptcy filing.
13. I am married, should I file a joint bankruptcy petition with my spouse?  In California your assets and debts are generally community property.  The Bankruptcy Trustee will look at 100% of the community property to see whether there is anything that can be sold to pay creditors. 
    
14. Can my creditors garnish my wages?  Yes, if they won a lawsuit against you and obtained a judgment.  That judgment can also be enforced by levying your bank account or filing a lien against your real property. 
    
15. Can I discharge a Promissory Note?  Probably if it is unsecured.  If it is secured, the creditor can go after the security.
16. If I filed for bankruptcy before, can I file again?  You cannot file again if you received a Chapter 7 discharge within the last 8 years or if you have not discharged more than 30% of your debts in an earlier Chapter 13 case within the last 6 years.
17. Do I have to take any courses before I file?  Yes, you have to complete an approved Credit Counseling Course and the certificate of complation must be sent with your bankruptcy petition. 
    
18. REMEMBER - BE TRUTHFUL:  Your spouse could show up at the creditor's meeting and reveal that you got a Porsche in the divorce that you did not disclose. 
    

DO YOU PASS THE MEANS TEST?

Do you have the means (income) to pay your bills?  If your income (before taxes, excluding social security) is less than the local medium income and you do not have much equity in your car or house, you should qualify to file for Chapter 7 bankruptcy. 

If you have more than $166.66 left over after paying all your permissible expenses and you have a job, you may have to file for Chapter 13 and establish a payment plan to pay at least 25% of your unsecured debts to your creditors over the next 5 years.  

Call our office to schedule an appointment to see whether you pass the Means Test. 

Call our office for a free consultation (760) 931-9495 to discuss issues that may affect your case.

Disclaimer: The above responses do not form an attorney-client relationship. The answers may or may not apply to you and should not be relied upon as legal advice.