filing chapter 7 bankruptcy

5 Things That Happen After Filing Chapter 7 Bankruptcy

filing chapter 7 bankruptcyFAQs - What Happens After Filing Chapter 7 Bankruptcy?

After you have completed the pre-filing credit counseling course and have assembled all of your documents and schedules, it will be time to file your Chapter 7 bankruptcy petition. Preparing your bankruptcy forms and debt and asset schedules is normally the most time-intensive process involved in a Chapter 7 bankruptcy. However, getting the documents completed and filed does not mean that you are finished. It is common for people to feel apprehensive about what might happen after filing Chapter 7 bankruptcy cases. To help you understand the process and what you might expect, here are five things that happen after people file for Chapter 7 bankruptcy San Jose from the Shulman Law Office.

1. Initial matters- Assignment of the bankruptcy trustee

When your Chapter 7 bankruptcy petition is filed and you pay your filing fee, the court will assign your case a case number and a trustee to oversee your case. The bankruptcy trustee will be tasked with reviewing your bankruptcy forms and identifying any non-exempt assets that he or she can seize to satisfy a portion of your unsecured debts. You might be asked to provide additional documentation about your assets by the trustee.

You are legally obligated to cooperate with the trustee assigned to your bankruptcy case while it is pending and until the court issues a discharge. In addition to other documents, you will need to provide the trustee with a copy of your income tax returns.

The trustee will also schedule the meeting of creditors.

Later on in your case, once the meeting of creditors has been held, the trustee will either file a report of no distribution if the creditors will not receive anything or a notice of the bar date for claims providing a due date for creditors to file claims for funds. Beyond these filings, you will likely not hear from the trustee after your meeting of creditors has been held.

Many people who file for protection under Chapter 7 have all of their assets protected by bankruptcy exemptions. Exempt property includes assets that cannot be taken by the trustee and sold to satisfy your unsecured debts. If you have any non-exempt assets, the trustee can seize and sell them to repay a portion of your unsecured debts. If you want to keep non-exempt property, you can negotiate with the trustee to pay the trustee the value of the non-exempt asset.

2. Automatic stay is issued

One of the most immediate benefits of filing Chapter 7 bankruptcy is the automatic stay. This is an injunction that will be issued by the bankruptcy court directing your creditors to immediately stop all further collection activities against you while your case is pending. The automatic stay will be sent to each creditor you have listed in your bankruptcy petition, so it is important that you list all of them. Once the automatic stay is issued, your creditors will have to stop all of the following things:

  • Initiating or continuing with a creditor lawsuit against you
  • Continuing to garnish your wages
  • Enforcing, perfecting, or creating a lien against your property
  • Calling you to collect debts
  • Sending you debt collection letters
  • Levying your bank accounts
  • Foreclosing on your home
  • Repossessing property

While the automatic stay will temporarily halt foreclosure proceedings or repossessions of your vehicles, the relief will be temporary. Since mortgages are secured against homes, and auto loans are secured against cars, these creditors can resume foreclosure or repossession proceedings after your bankruptcy is over. If you are in danger of losing your home in foreclosure, you might want to talk to your bankruptcy lawyer about whether Chapter 13 might be an option for you instead of Chapter 7.

If one of your creditors violates the automatic stay and continues trying to collect on a debt, your attorney can help you notify the court. If the court finds that the debt collector's actions were willful, the collector can face sanctions. Debt collectors who violate the automatic stay after knowing the bankruptcy case existed can be fined, ordered to pay attorney's fees, and ordered to pay damages to the debtors.

3. Scheduling of the meeting of creditors

Your bankruptcy trustee will schedule a meeting of creditors after you have submitted all of your required documents. The trustee might send a letter to you asking for any additional documents to provide. Make sure to comply with any requests from the trustee, and do so before the listed deadline. If you fail to submit documents the trustee has requested, the bankruptcy court could dismiss your case.

The meeting of creditors will likely be scheduled a month or two after you file your Chapter 7 bankruptcy petition. You will need to show a picture ID and your Social Security number when you attend the meeting of creditors. The meeting of creditors is held outside of the court and will generally be in the area where you live. At this meeting, your creditors can attend and ask questions of you. However, in many Chapter 7 cases, only the debtors, their attorneys, and the trustees will be present.

The meeting of creditors is required. While it might sound intimidating, many people who file for bankruptcy find that it is not as scary as it might sound. You will attend with your lawyer. You will meet with the trustee, and he or she will ask you questions about your bankruptcy documents. In most cases, the creditors do not attend. Typically, a meeting of creditors will only last around 10 minutes. If you do not have any non-exempt assets, the trustee will issue a notice of no distribution to your creditors. If you do have non-exempt assets, the trustee will issue a notice to your creditors of the date by which they must file claims to recover money.

If you have a vehicle on which you are still making payments, you will have a couple of options about how to deal with it. The automatic stay will expire 45 days after the meeting of creditors. If you have not reaffirmed your car loan debt, the company can repossess it. You will need to file a statement of intention with the bankruptcy court in which you explain what you plan to do with your secured debts.

You will have the choice of reaffirming your car loan so that you can keep your car and continue making payments. If you reaffirm your car loan, it will not be discharged. You will need to continue making your monthly payments, and if you miss payments in the future, your lender can repossess your car. If you choose this option on the statement of intention, your lender will send a reaffirmation agreement to you to fill out and return.

You can also choose to surrender your car. If you choose this option, your vehicle will be repossessed. Any remaining debt will be discharged in your bankruptcy case.

Finally, you can choose to redeem your vehicle. To do this, you will have to pay your lender the value of your vehicle. You will need to figure out how much your vehicle is worth and pay that amount in full. If your vehicle is worth a lot less than how much you owe, a redemption can make sense. To redeem a vehicle, you will need to file a motion to redeem with the bankruptcy court, and the judge will have to approve it. If you and your lender cannot agree to the value of your vehicle, the judge can determine it for you.

If you have a vehicle lease, you can also choose how to handle it in your statement of intention. You can assume the lease and continue to make your payments or reject the lease and return the car.

4. Second credit counseling course

Before you file a petition for bankruptcy, you are required to complete a credit counseling course and file a certificate of completion with the court at the time you file your petition. You will also be required to complete a second credit counseling course before the court will issue a discharge. The second course must be taken from an approved provider and will cover topics of personal financial management so that you can take advantage of the fresh financial start you will receive from discharging your debts in bankruptcy.

This course must be taken after your bankruptcy case is filed. You need to make sure that you complete it within 60 days of when the meeting of creditors is held. Once you complete it, you will receive a certificate of completion. Give this certificate to your attorney to file with the court.

5. Discharge of your debts

The final step of your Chapter 7 bankruptcy case occurs when your debts are discharged. However, not all of your debts will be dischargeable in bankruptcy. If you want to keep the property secured by a loan such as your vehicle or home, you will need to continue making your payments during and after your bankruptcy case. Your lenders will not be able to try to collect from you, so you won't receive statements. If you want to keep your vehicle, you will likely need to mail in checks during your bankruptcy.

Some debts cannot be discharged in bankruptcy and will continue after you receive your discharge. Some of these types of non-dischargeable debts include the following:

  • Child support arrearages
  • Alimony arrearages
  • Most student loan debt
  • Most tax debt
  • Criminal restitution

However, your dischargeable unsecured debts can be discharged in bankruptcy, including personal loans, medical debt, and credit card debt. If your bankruptcy case is successful, you will no longer be responsible for repaying these types of debts after a bankruptcy discharge. The creditors also will no longer be able to collect on discharged debts, allowing you to enjoy a fresh financial start.
How do you find the best bankruptcy lawyer?

When you are considering whether to file for Chapter 7 bankruptcy, it is a good idea to get help from an experienced bankruptcy lawyer who is knowledgeable about bankruptcy laws. Your attorney should be able to communicate legal topics with you in a way that you can understand and be compassionate about the situation you are facing. To learn more about what to expect when filing for Chapter 7 bankruptcy in San Jose, call the Shulman Law Office at 408-297-3333.

 


declaring personal bankruptcy

5 Reasons Why Declaring Personal Bankruptcy Can Make Sense Financially

Deciding to file for bankruptcy is a hard decision for many people. You might worry about the costs and time involved and think the money you will have to pay could go toward your bills. Many people also worry about the social stigma of bankruptcy and the loss of financial privacy.

However, bad things sometimes happen to most people, and bankruptcy exists to provide relief to people who are unable to repay their debts. San Jose bankruptcy attorney Ike Shulman at the Shulman Law Offices understands how difficult it can be for people who are struggling under the weight of unmanageable debt.

If you are in that type of situation, filing for personal bankruptcy might be the best option. Here are five common reasons why declaring personal bankruptcy might make financial sense.

1. Personal Liability for Debts From a Small Business

When people start businesses, they encounter risks. Businesses fail every year and for many different reasons, including economic downturns and others. According to the Wall Street Journal, 200,000 more small businesses than normal closed during the COVID-19 pandemic. In February 2021, CBS News reported that nine million small businesses in the U.S. said that they feared they wouldn't survive because of the pressures of the pandemic.

If you are a small business owner as a sole proprietor, a business failure could leave you facing substantial debts and a lack of income to repay them. In sole proprietorships, the business debts pass through to the business owner, meaning that the owner is personally liable for the debts incurred by the business.

If your small business has failed, filing for Chapter 7 bankruptcy might protect you. Chapter 7 bankruptcy involves the liquidation of certain assets to repay a small percentage of what is owed. Once a discharge is granted, the remaining unsecured debt balances do not have to be repaid. However, filing for Chapter 7 personal bankruptcy will also result in a permanent closure of your business.

If you and your small business have accumulated substantial debts that you cannot repay, you can also consider Chapter 13 bankruptcy. In Chapter 13 bankruptcy, you will propose a repayment plan to repay some of your debts over a period lasting from three to five years.

With this type of personal bankruptcy, you will not necessarily have to close your business. Instead, you can restructure your debt. Once you have completed your repayment plan, the remaining unsecured debt balances will be discharged, meaning you will no longer be legally obligated to pay them.

In many cases, small business owners with excessive business debts that they cannot repay can find relief through bankruptcy courts. If you have not been able to negotiate a solution with your creditors and cannot repay your debts, bankruptcy might make financial sense. People might be able to survive a few financial downturns, but when their situations become unmanageable, they might need to ask for help through bankruptcy protection.

2. Unexpected and Catastrophic Illnesses or Injuries

Many people are forced into financial difficulties when they suffer catastrophic injuries or devastating illnesses. Even with health insurance, medical bills and prescription costs can quickly pile up. According to a survey conducted by the Kaiser Family Foundation and the New York Times, one million Americans filed for personal bankruptcy protection because of medical bills. The researchers also found that 26% of adults between the ages of 18 and 64 have trouble paying their medical bills, which amounts to approximately 52 million people.

While health insurance coverage might pay for some of your medical bills, many people have insurance with high deductibles that must be met before the insurance will kick in. Copays can also quickly add up for treatment, rehabilitation, and prescriptions.

If you are seriously ill or injured, you might also have lodging and travel expenses to receive the treatment you need and might be left with a disability that prevents you from returning to work. Catastrophic injuries might also require you to make modifications to your home. All of these types of expenses can quickly mount.

If you do not have short- or long-term disability insurance, you might be left without an income when you sustain serious injuries or develop a serious medical condition like cancer. This type of situation might mean that you do not have money to meet your basic living expenses let alone to repay your medical debt and related costs.

Bankruptcy can provide tremendous relief to people struggling with overwhelming medical debt when they are not anticipating further debts. In this type of situation, if you anticipate needing additional treatment from the same providers, they might not agree to treat you unless you can prepay for their services once you have discharged your medical debts in bankruptcy. A bankruptcy attorney at the Shulman Law Offices can help you determine the best time to file under your specific circumstances.

3. Debt Accumulations During Periods of Extended Unemployment

If you have ever been unemployed for a lengthy period, you likely understand how quickly your bills can add up. If you later return to work, it can be difficult to repay the debts that you accumulated during an extended period of unemployment.

While people might have received unemployment benefits, the benefits payments are much lower than the incomes people earned while they were working. This means that unemployment benefits are frequently insufficient for people to use to repay their debts.

Unemployment compensation benefits typically are low enough that they barely cover people's basic utilities, food, and housing costs. Debt payments can quickly grow during periods of unemployment, and people might also exhaust their savings just trying to get by. If you are in this type of situation, bankruptcy protection might help to provide you with some relief.

4. Lawsuits

In some cases, people are sued for large amounts of money and lose. If you lost a lawsuit and did not have liability coverage to protect you, you might never be able to pay the judgment. If the case against you did not involve allegations of fraud, civil judgments can be discharged in bankruptcy.

Some people cannot afford to pay to defend themselves against lawsuits or pay judgments that are issued against them.

When a bankruptcy petition is filed, the court will issue an automatic stay. This is an injunction that orders creditors to stop all collection activities, including judgment creditors. If your judgment is discharged in your bankruptcy, you will not have to pay it. Filing for bankruptcy protection also stops existing lawsuits against you from proceeding. For example, if one of your creditors filed a lawsuit against you to collect on a debt, filing for bankruptcy will prevent the case from going through further court proceedings.

Filing for bankruptcy protection can also result in a discharge of personal injury case judgments against you. If you file for bankruptcy while a personal injury claim against you is still pending, the plaintiff in the case can ask the bankruptcy court to lift the automatic stay so that the case can continue. However, if the bankruptcy court denies the request, the court proceedings will have to stop.

There are two types of situations in which the bankruptcy court cannot discharge personal injury judgments. If you were sued because you were driving while impaired by alcohol or drugs and caused an injury accident, you cannot discharge the judgment against you in bankruptcy. Similarly, the bankruptcy court also cannot discharge judgments against you for intentional torts.

5. Getting A Divorce

Getting divorced can be financially devastating for many people. Some couples who get divorced might have decided to end their marriages because of the financial problems they faced. If you and your spouse both plan to file for bankruptcy to deal with the debts you accumulated during your marriage, it might make sense for you to file for bankruptcy together before you file a divorce petition.

Waiting to file your petition for divorce until after your bankruptcy case is over can make the division of assets and debts in your divorce case much simpler. Filing for bankruptcy before you file for divorce also can be less expensive for both of you since you will only have to pay one filing fee instead of two by filing a joint bankruptcy petition.

If you have already filed for divorce, your bankruptcy attorney can talk to you about when to file your bankruptcy petition. If you file a petition for bankruptcy while your divorce case is pending, it will stop any division of assets and debts in your divorce case. This means that your divorce might take much longer to resolve. However, the family court can still issue orders to establish child support and child custody.

After your divorce, you might also be in a financially precarious position. Going from two incomes to one can be difficult, and you might no longer be able to afford the lifestyle you have grown accustomed to. You might also be responsible for paying some of the debts that your spouse accumulated during your marriage along with jointly held debts. Bankruptcy can help by discharging these types of debts so you can enjoy a fresh start as a newly single adult.
Does Filing for Bankruptcy Make Sense in Your Situation?

Declaring Personal Bankruptcy

Bankruptcy will remain on your credit for several years, making it important to carefully consider declaring personal bankruptcy whether it makes sense in your particular situation. You should be clear about what you want to accomplish by filing for bankruptcy.

Filing a bankruptcy petition makes sense when you have debts that can be reorganized or discharged, and the issue that led to your need for bankruptcy is not continuing. Filing for bankruptcy can provide you with financial relief. However, it will not help you end poor spending habits. Bankruptcy is also not a solution for having an income that is insufficient to cover your needs.

After you file for bankruptcy and receive a discharge, it is a good idea for you to carefully budget your money to avoid getting into financial straits again. While you can file for a second bankruptcy, you will have to wait for multiple years before you will be allowed to do so.

If your minimum debt payments exceed your monthly mortgage payment or rent, filing for bankruptcy might be a good idea. Your attorney can review your current budget to determine whether you are at a point where you are unable to afford to make your payments.

If you are nearing retirement, getting out of debt so that you can save for retirement might be important. If you do not have any savings built up for retirement and have significant debt, filing for bankruptcy might make sense so that you can work on building your savings after your debts are discharged.

Talk To an Experienced Bankruptcy Attorney

Regardless of the reasons that caused your current situation and financial problems, bankruptcy might offer a good solution and a way to start over. If you are concerned about the social stigma and loss of financial privacy you might face by filing for bankruptcy, others will remember you by how you treated them rather than the fact you filed for bankruptcy. To learn more about the financial remedies that might be available to you through bankruptcy, contact the Shulman Law Offices today for a free consultation by calling 408-297-3333.

 


What are the Upsides and Downsides of Filing for Bankruptcy?

What are the Upsides and Downsides of Filing for Bankruptcy?

Many Californians are struggling with unaffordable levels of debt. While many people qualify to file for bankruptcy, some never do. For some people, filing for bankruptcy is the best solution to managing their debts. Deciding if you should file for bankruptcy will depend on your financial circumstances and the potential ramifications. An experienced bankruptcy attorney at The Shulman Law Office can help you to determine whether bankruptcy is the right choice for your situation. Knowing the upsides and downsides of filing for bankruptcy can help you to decide if and when you should file a bankruptcy petition.

What are the upsides to filing for bankruptcy?

Filing for bankruptcy offers multiple benefits for people who are unable to afford their payments. Some of these advantages provide good reasons for people to consider filing for bankruptcy.

Issuance of an automatic stay

When you file a bankruptcy petition, the bankruptcy court will issue an automatic stay. This is an injunction that prohibits your creditors from engaging in any further collection activities. The stay does not eliminate your debt, but any debt collection activities will be suspended until the stay is lifted or your bankruptcy case is over. The automatic stay will end letters and calls from debt collectors, wage garnishments, foreclosure proceedings, creditor lawsuits, and repossessions.

If one of your creditors continues to engage in debt collection activities after the automatic stay has been issued, your bankruptcy attorney can file a motion with the bankruptcy court to hold the creditor in contempt of court. The court can then force them to stop trying to collect on the debt and order them to pay a fine and possibly pay damages to you.

An automatic stay in a bankruptcy case will not stop tax audits, criminal proceedings, child support, alimony, or efforts to collect the debt from cosigners. If you previously filed for bankruptcy during the last year, you can ask the court to extend the initial automatic stay. However, if you have filed for bankruptcy several times during the past year, the automatic stay will have to be ordered by the court.

Ability to discharge debts

While some types of debts are non-dischargeable in bankruptcy, others can be discharged. When a debt is discharged, it ends your obligation to repay it. When your bankruptcy case is over, the creditor for a discharged debt may not resume collection activities. Dischargeable debts include many types of unsecured debts, including medical bills, credit card debt, and personal loans. Secured debts will not be discharged, however. There are also certain types of debts that cannot be discharged in bankruptcy, including back child support and alimony, student loans, certain types of taxes, criminal restitution, and others.

Bankruptcy exemptions

California has two bankruptcy exemption systems that you can choose from. Exempt property is not included in your bankruptcy estate and cannot be sold by the trustee to repay your creditors. The exemptions let you keep the exempted property after you file for bankruptcy. Some exemptions apply to specific types of assets while others apply to property worth up to a specific dollar amount. Other exemptions can be applied to anything that you own. Bankruptcy exemptions help you to save some of your property during and after your bankruptcy case.

Surprising improvements of credit scores

When you file for bankruptcy, it will make your credit score fall and will remain on your credit history for seven to 10 years. However, many people who file for bankruptcy see score improvements once their debts are discharged. They can then begin to rebuild their credit and enjoy a fresh start. However, even if bankruptcy is the right option for you, understanding the consequences is also important before you file.

What are the downsides of filing for bankruptcy?

While filing for bankruptcy offers some benefits, there are also some disadvantages that you should consider. Knowing the downsides of filing for bankruptcy can help you to know what to expect.

Immediate drop of your credit score

When you file for bankruptcy, your credit will be immediately impacted. The bankruptcy will stay on your credit record for seven years if you file for Chapter 13 bankruptcy or 10 years if you file for Chapter 7 bankruptcy. Having a bankruptcy on your credit record can make it more difficult to get a mortgage or other loan for several years.

Losing your credit cards

When you file for bankruptcy, your credit card companies will likely cancel your cards. After your debts are discharged, you may receive credit card offers. While these can help you to rebuild your credit after bankruptcy, they will likely carry high rates of interest and annual fees.

Losing some types of property

While California has exemptions available for some types of property, not all property can be exempted. If you have high-value property or non-exempt assets, the bankruptcy trustee might seize them to sell and repay your creditors.

Some debts can't be discharged

Some types of debts cannot be discharged in bankruptcy. These include most student loans, certain tax debts, alimony, child support, and criminal restitution. Your obligation to repay these debts will continue after you receive a discharge of your dischargeable debts.

Cosigner liability

If you had a cosigner for a personal loan and file for bankruptcy, the creditor can still pursue your cosigner for payment. His or her liability to repay the debt will not be erased because of your bankruptcy. You should tell a cosigner that you intend to file for bankruptcy before you do. He or she will also be notified by the bankruptcy court after you file.

Stigma

Some landlords and prospective employers ask about bankruptcy cases. If you apply for a job or an apartment after you file for bankruptcy, it can hurt your chances.

Talk to an experienced bankruptcy lawyer today

The decision to file for bankruptcy is complex. Understanding the upsides and downsides of bankruptcy is important so that you can make a more informed choice. If and when you should file for bankruptcy will depend on your financial circumstances. To learn more about whether it is the right decision for you, contact the Shulman Law Office in San Jose today by calling us at 408-297-3333.

 


unemployed covid layoff bankruptcy

Unemployed Due to The Coronavirus Shutdown? Should You Consider Bankruptcy?

The novel coronavirus pandemic has upended millions of people's lives. Many Californians have lost their jobs because of COVID-19 and are barely scraping by, trying to keep their heads above water. If you are unemployed because of the pandemic, you may be struggling to pay your bills and debts, and you may be facing eviction or foreclosure.

Many people who have lost their jobs during the pandemic have also lost their health insurance, leading them to amass medical expenses that they cannot pay if they contract COVID-19. Fortunately, the bankruptcy process is available to help you to get a fresh financial start by wiping out many types of unsecured debts that you are unable to pay. While bankruptcy is not right for everyone, it is a good solution for many people who are overwhelmed by unmanageable debt.

How bankruptcy works

How bankruptcy works for consumers depends on what type of case will work best for you. The two primary types of consumer bankruptcy cases are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy is the most widely-used type of bankruptcy because a person's debts can be discharged in as little as three months after the petition is filed. However, not everyone will qualify for Chapter 7 bankruptcy, and people with certain types of debts may be better off filing for protection under Chapter 13.

To file for Chapter 7 bankruptcy, you will have to pass the means test. The means is an "ability to pay" test which takes a look at your total income and expenses to determine whether you would have sufficient income left over to repay your debts in a Chapter 13 bankruptcy case. If you do not, you can file for protection under Chapter 7.

Before you can file for bankruptcy, you must complete a pre-bankruptcy credit counseling course from an approved provider. This course is short, and it is available online. When you complete the course, you will receive a certificate of completion that you will need to print and save. This certificate must be filed with your petition when you file for bankruptcy.

Before you file your petition, you will also need to review your assets, debts, and income and expenses with your attorney. You should make sure you disclose all of this information, which is required by the law.  Any debts that you fail to list in your bankruptcy petition may not be discharged.

Once you file a Chapter 7 petition, the bankruptcy court will automatically issue a stay on collections. This stops your creditors, excluding support obligations, from engaging in further collection activities against you, including sending you letters, calling you, suing you, garnishing your wages, or collecting on judgments. There are exemptions (protections) available that protect many types of assets from bankruptcy court liquidation during the process. If your assets are not exempt, they may be sold by the bankruptcy trustee to repay your debts,  In many cases, people who file for Chapter 7 bankruptcy can keep most or all of their assets.

After your Chapter 7 bankruptcy case is completed, most types of unsecured debts, including credit card debts and medical bills, will be discharged, although student loan debts are normally not discharged. A discharge of your debts means that you will no longer be obligated to pay them.

Chapter 13 bankruptcy does not involve a liquidation of any assets you wish to keep. Instead, people who file for protection under Chapter 13 will repay some or all of their debts during a repayment period that normally lasts for three or five years. Chapter 13 is particularly helpful for people with non-exempt assets, or debts which will not be fixed in Chapter 7, such as recent tax debts, past-due mortgage payments or missed car loan payments. To qualify for Chapter 13 bankruptcy, your total liabilities cannot exceed certain dollar limits. Y

ou must also have a regular income source that is sufficient for you to make your required payments. If you complete the Chapter 13 repayment plan, your remaining unsecured debts will be discharged, although student loan debts are normally not discharged.

When is bankruptcy a good option for people who are unemployed?

Many people hesitate to file for bankruptcy because of the stigma that surrounds it. However, it is important to understand that the bankruptcy laws are in place for a reason. Unexpected financial circumstances can affect nearly anyone. The COVID-19 pandemic has led to a large increase in folks that have suddenly and unexpectedly lost their jobs, and an economic downturn that has affected almost everyone.

While the Congress passed the CARES Act in March to provide temporary relief to people who are unemployed because of the pandemic by giving them an extra $600 per week in unemployment benefits and placing a temporary moratorium on evictions, those additional protections were allowed to expire by Congress on July 31st. Congress continues to debate renewing these benefits at some level, but there is no guarantee that they will be passed.

This means that many people have fallen off a proverbial financial cliff and are facing real threats of losing their homes and experiencing a substantial drop in their incomes. Others who have been sickened by the virus and have required hospital care have received medical bills ranging up to hundreds of thousands of dollars. These types of situations cannot be blamed on the people who are experiencing them. If the pandemic has left you unemployed and facing substantial debt or a potential eviction or foreclosure, filing for bankruptcy might help you to find a way out. You should not feel ashamed of encountering financial difficulties. Millions of people in the U.S. are facing similar problems.

How will bankruptcy affect you?

If you file for bankruptcy protection, your creditors will have to immediately stop their collection activities. This means that you should not receive threatening calls or letters. If a lawsuit has been filed against you to collect on your debts, those proceedings will be frozen. Wage garnishments for unsecured debts will also stop. Bankruptcy can help to eliminate your obligation to repay your discharged debts. This means that you might get out from under the weight of huge medical bills and credit card debts so that you can move forward with your life.

While bankruptcy will affect your credit, many people find that they can rebuild their credit after bankruptcy by prudently getting new credit cards and paying them off every month. You can potentially be approved for a mortgage loan two years after your bankruptcy case is completed.

California at the Shulman Law Office

The COVID-19 pandemic has wreaked havoc in the lives of millions of people. If you have lost your job or had your income reduced and are unable to pay your bills, bankruptcy may be the best option available for you. The Shulman Law Office provides knowledgeable and compassionate representation to people who are struggling under the weight of their debts, and we can provide you with some guidance about whether bankruptcy might be a good choice for you. Email or call us today at (408) 297-3333 for a free, confidential consultation.

 


couple considering bankruptcy

Filing for Bankruptcy: Chapter 7 vs. Chapter 13

chapter 7 vs chapter 13 bankruptcy infographicNobody wants to file for bankruptcy, but it's a key safety net for certain situations. If you are buried in debt, being harassed by creditors, and on the verge of losing your home, then filing for bankruptcy can be your way out.

It's an admission that you are not going to be able to handle your debt without some help, and a reset button to help you get your life back in order. One key question is whether you should file Chapter 7 or Chapter 13 bankruptcy. Understanding the differences between the two is vital.

What Both Kinds of Bankruptcy Achieve

Regardless of the kind of bankruptcy you file, there are some benefits that you will get from filing bankruptcy:

  1. Creditors will have to stop hassling you. When you file bankruptcy, something called an automatic stay goes into effect immediately. Your creditors have to stop trying to collect the money from you (with some exceptions, such as support obligations).
  2. Civil lawsuits will immediately stop. If you are facing a civil debt collection action and file for bankruptcy, the automatic stay will prevent a creditor from pursuing the case. Note that filing for bankruptcy does not halt criminal cases or family courts cases such as divorce or child custody.
  3. It can get rid of your credit card debt. The amount depends on the type of bankruptcy you are filing, but even under Chapter 13, you may be able to discharge quite a bit of that debt. This is because credit card debt is considered general unsecured debt, and has the lowest priority in a bankruptcy.
  4. It can get rid of medical debt. Like credit card debt, medical bills are considered general unsecured debt, and are easily wiped (under chapter 7) or maybe dramatically reduced or eliminated (under chapter 13) - this is why medical bankruptcy is a thing.
  5. It stops most wage garnishment. The automatic stay also stops wage garnishment, except for domestic support obligations. One big reason to file bankruptcy is if wage garnishment is leaving you without enough money to live on.
  6. It can discharge personal loans.  which are also considered general unsecured debt.

So, that's both kinds of bankruptcy, now let's go through the differences.

couple looking at laptop

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as "liquidation" bankruptcy; it's for people who are so buried in debt they know that they can demonstrate that no payment plan is going to help. In order to get chapter 7, you have to pass a means test to show that you are literally unable to pay your debts. If not, you are still eligible to file chapter 13.

Chapter 7 bankruptcy has these features:

  1. It's quick. Chapter 7 bankruptcy normally takes about three months to complete, although it can sometimes take longer. Then it is over and done with, and you can start to rebuild your life.
  2. You may have to give up some of your stuff. Your assets are listed and reviewed to determine whether they are protected (exempt) under your state's exemption laws. This might include a home with too much equity. However, creditors can't touch exempt property. This may include your home with equity that is covered by your exemptions, and may include most or all of your personal property, including clothing, household goods and appliances, cars, retirement accounts, and even cash or bank accounts. Each stat has its own exempt property list, so the number of assets that can be protected under chapter 7 will be different depending on where you reside.
  3. Foreclosure is halted only during the short period that the chapter 7 case is open, and a lender may petition the court to continue with it anyway. If you are behind on home mortgage payments, chapter 7 will not fix that and is most likely not the best bankruptcy option for saving your home.
  4. Vehicle repossessions are the same deal. If you are behind on payments and your auto lender is coming after your car, chapter7 will not fix that and is most likely not the best bankruptcy option for keeping your car.
  5. Chapter 7 does not wipe out tax debts owed to the IRS or to states for recent years. You will still have to pay those debts after chapter 7, although you may be able to establish a repayment plan separately with the tax agency.

Chapter 7 does wipe out most of your debt and give you a complete fresh start, but if you are behind on home or car payments, or own assets that are not exempt, it is usually not your best option.

Chapter 13 Bankruptcy

Chapter 13 is also called a reorganization bankruptcy. While a chapter 7 bankruptcy is to get rid of most unsecured debts you know you will never be able to pay, Chapter 13 is often a better option if one of these factors is present: 1) you can't pass the chapter 7 Means Test; 2) you own assets that can't be protected by your exemptions; 3) you are behind on car or house payments, or 4) you owe tax debts or other debts that cannot be wiped out in chapter 7.

Features of Chapter 13 include:

  1. Generally, a three to five-year repayment plan on debts, with first priority given to paying secured debts such as your mortgage or car loan, as well as recent tax debts. Other debts, including older tax debts and other general unsecured debts, maybe paid all, some, or none of the debt owed, depending on your income and your non-exempt assets.
  2. You will not have to surrender any of your stuff.
  3. A foreclosure will be halted, as long as you keep up with your chapter 13 repayment plan.
  4. Repossessions will also be halted, and your car loan can be included in your chapter 13 repayment plan.

If you have high debts and are not sure how to pay them all off, then it may be time to call a bankruptcy lawyer. Contact Shulman Law Offices for a free consultation. We can advise you whether bankruptcy is your best option. We'll also help you decide which kind of bankruptcy to file, or help you determine if there is another way out of your current financial situation.


bankruptcy and coronavirus covid-19

Bankruptcy and Dealing with Debt During & After the COVID-19 Crisis

bankruptcy and coronavirus covid-19

The COVID-19 pandemic is a public health crisis that has impacted the lives of millions of people around the world and in California. To try to control the spread of the virus, many cities and multiple states have issued stay-at-home or shelter-in-place orders and have ordered nonessential businesses to close. While slowing the economy is necessary to prevent further spread of the disease and to flatten the curve so that the health care industry won’t collapse, it has also left millions of people facing job losses and financial devastation. Here are some of the options that are available to people to help them to make it through the COVID-19 crisis and to gain financial footing once the crisis ends.

 

Mortgage and Other Types of Relief

As millions of Americans have lost their jobs, some major banks have announced that they will offer homeowners some mortgage relief. This relief varies and depends on the lender. For each bank or lender, the onus is on the borrower to take the first step to make contact and ask about the available options. Here are some of the programs that are currently being offered (updated as of 3/28/20):

Ally Bank says that it will defer payments for mortgagees for up to 120 days without charging them late fees or finance fees.

Bank of America has also stated that it will offer payment deferrals to mortgagees for mortgages that it holds and will pause evictions and foreclosures.

Chase says that it will offer assistance to people who are struggling with their mortgages but does not state what type of assistance will be provided. It encourages people to call the bank for more information about the relief that might be available to them.

Wells Fargo states that it will offer payment deferrals and fee waivers upon request for mortgages, auto loans, credit cards, small business loans, and others.

Some other banks and lenders are also offering relief to homeowners who have lost their jobs because of the COVID-19 pandemic. You should contact your lender to find out whether any programs might be available to you. Many lenders, including Capital One, Santander, TD Bank, Hyundai, and others, are also offering payment assistance to people who are struggling to keep up with their auto loan and credit card payments. Check with your lender for more information about the options that you might have.

 

Coronavirus Tax Relief

The Department of the Treasury, the Department of Labor, and the Internal Revenue Service have all announced tax relief measures during the COVID-19 pandemic. The tax filing deadline has been changed from April 15 until July 15, regardless of the amounts that people might owe. If you are expecting a refund, however, you should go ahead and file your income tax forms to receive what you are owed.

 

The Franchise Tax Board has announced similar extensions for California tax filers here:  https://www.ftb.ca.gov/about-ftb/newsroom/news-releases/2020-3-state-postpones-tax-deadlines-until-july-15-due-to-the-covid-19-pandemic.html

 

Government Stimulus Checks

Another part of the $2.3 trillion stimulus bill that was passed by Congress and signed into law by the president is $250 billion of direct payments to people. Under this plan, individuals with an Adjusted Gross income (AGI) $75,000 per year or less will receive stimulus checks of $1,200. Married couples who make a combined total of $150,000 or less will receive $2,400.

The payments start to phase out for individuals and couples who make more than those amounts. Individuals with an AGI of at least $99,000 will receive nothing, and married couples with a combined AGI of at least $198,000 will also receive nothing.  In addition to the stimulus checks to individuals or married people, those who have children who are younger than age 17 will also receive checks of $500 per child.

The stimulus checks will be based on the last tax return that you filed. If you did not file in 2018, you should go ahead and file your 2019 return now. Similarly, if you made too much to qualify for the 2018 tax year but made a qualifying amount in 2019, it is also a good idea to go ahead and file your tax return now. People who owe back taxes or are past-due on their student loans will still be eligible for checks.  If you owe back child support, however, your check may be reduced or used to pay towards your arrears.

 

Here is a link to a New York Times article with more information: https://www.nytimes.com/article/coronavirus-stimulus-package-questions-answers.html?referringSource=articleShare

 

Is Bankruptcy an Option?

During this period of economic upheaval, many families will be facing difficult financial decisions that they never thought would face them.  Bankruptcy has long been an option for people who are overwhelmed by unmanageable debt and are unable to make their payments. Bankruptcy is a safety net for people who need it.

There are a couple of different types of bankruptcy that might be available to you:

Chapter 7 – This is a type of bankruptcy through which most types of unsecured debts, such as medical bills, credit card debt, and personal loans, can be wiped out. While some of your assets might become a part of the bankruptcy estate, many people can keep most if not all of what they own through the available exemptions.

Chapter 13 – This type of bankruptcy allows people to enter into a court-supervised repayment plan that lasts from three to five years.  Chapter 13 might be a good option for people who do not qualify for Chapter 7 or who need relief to stop a home foreclosure or a car repossession.  For example, a Chapter 13 bankruptcy plan can allow you more time to catch up on your mortgage payments and save your home.

Another important consideration is that, if you are thinking of borrowing money or taking withdrawals from your retirement savings to pay your debts,  bankruptcy may offer a better option.  If the Covid-19 crisis has left you unable to both pay all your bills and provide for your family’s basic living expenses, bankruptcy might be the right solution for you.

If you are in financial distress, you should consult with an attorney to learn more about your bankruptcy options.  During the shelter-in-place orders currently in effect, Shulman Law Offices in San Jose, California is offering free consultations by phone or Zoom conference to residents of Santa Clara, Santa Cruz, San Benito, and Monterey counties. Click here to contact Ike Shulman for more information.


san jose bankruptcy shulman law

What Assets Can I Protect If I File Bankruptcy?

What Assets Can I Protect If I File Bankruptcy?

Hi, this is Ike Shulman of Shulman Law Office. Exemptions help you determine how much of your property you get to keep when you file for bankruptcy. Exemptions play different roles depending on whether you are filing a Chapter 7 or Chapter 13 bankruptcy. Exemptions allow you to keep a certain amount of assets safe in bankruptcy, such as an inexpensive car, professional tools, clothing, and a retirement account.Read more


san jose bankruptcy shulman law

Can Bankruptcy Stop Creditors From Garnishing My Wages, Taking Money From My Bank Account?

Can Bankruptcy Stop Creditors From Garnishing My Wages, Taking Money From My Bank Account?

Hi, this is Ike Shulman of Shulman Law Office. If you fall behind on your debts, your creditors might sue you and try to garnish your wages. This can make it impossible for you to pay other bills, or even pay your rent or mortgage. Should you find yourself in this situation, filing for Chapter 7 or Chapter 13 bankruptcy may be the best option for you.Read more