• Learn more about chapter 7
• Learn more about chapter 13

1. Do I have to give up my house or my car or personal property if I file a Chapter 7 or Chapter 13?
   
2. What is the difference between a secured and unsecured debt?
   
3. How will a Chapter 7 or 13 effect my credit?
   
4. How can I re-establish credit after filing a bankruptcy?
   
5. Can I lose my job because I file?
   
6. How will a bankruptcy effect a co-signor?
   
7. How do I get started?  What's my first step?
   
8. How much does it cost to file?
   
9. Do I need a credit report?
   
10. Changes in the Law after October 17, 2005.
    

To the extent that you have creditors with a security interest in some of your property (homes, automobiles, furniture, etc.) you can still retain these items, but in a Chapter 7 you must pay for them by continuing regular payments or (in the case of furniture and appliances) by signing a Reaffirmation Agreement that usually reduces the amount of the debt and lowers the monthly payment. In a Chapter 13, secured debts can be paid through the plan, usually on terms more favorable than in the original contract.
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What is the difference between a secured and unsecured debt?

Simply explained, secured debts are debts in which the item purchased has been pledged as collateral for the repayment of the debt. If there has been a default in payments, the creditor may be able to repossess the property. Examples of this type of debt are automobile loans in which the bank or finance company holds the "pink slip" to the vehicle, and loans for the purchase of furniture, jewelry, computers, stereos, and appliances. The creditors for these debts possess a purchase-money security interest in the items purchased. In a Chapter 7 case, you have the option of keeping the merchandise and paying the debt or returning the merchandise and paying nothing. In a Chapter 13 case you can keep these items and repay them through the Chapter 13 plan. The Court will generally allow the creditor only 10% interest on the value of the merchandise, not the 18% to 20% you are probably being charged under the contract. If the value of the item is less than the amount of the loan, the excess amount of the loan (amount of loan less the value of the collateral) is paid under the plan as an unsecured debt, without interest.
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How will a Chapter 7 or 13 effect my credit?

It is a common misconception that once you file bankruptcy you can never again get credit. This is simply not true. How a Chapter 7 or 13 will effect you in the future depends upon many factors -- each creditor uses its own criteria to determine future creditworthiness. Income and job stability are key factors that creditors will look at in determining future credit. They will also review how you have handled credit since your Chapter 7 or 13 case was filed. Remember that anytime a creditor is not being paid under a contract, a negative comment can be placed on your credit record. Repossessions, foreclosures, slow payment, and nonpayment all have a negative effect upon your credit record. A Chapter 13 and a Chapter 7 also have a negative effect, but that alone will not prevent you from re-establishing your credit and obtaining credit in the future. Bankruptcies remain on your credit report for 10 years; however, many people receive solicitations for new cards immediately following a bankruptcy. While credit may have been the problem that got you into financial difficulties in the first place, there is an old adage, "It takes credit to get credit."
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How can I re-establish credit after filing a bankruptcy?

There are many institutions that offer secured MasterCard and Visa accounts. They require a nominal deposit (usually less than $500.00) and allow you a credit line based on the amount of money on deposit. If you use these credit cards regularly and make prompt payments, your credit report will state "paying as agreed," which is acceptable to future creditors.

As to home and automobile loans, you will have to shop around. Some creditors may deny you credit, but others will finance your house or automobile. Supply and demand often dictate a creditor's policies. Therefore, if a creditor wants to make a sale, it will finance the purchase. However, there is one word of caution: some lenders or finance companies will tell you they can "make the loan" and then charge you a higher interest rate -- that's why it is very important to shop around for credit. If you are turned down, try another bank or finance company. Frequently buyers with a prior bankruptcy are only concerned with getting approved for the loan and fail to get the best possible interest rate on the loan. Remember, loan companies make their profit writing loans and charging high interest notes.
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Can I lose my job because I file?

Section 525 of the Bankruptcy Code prohibits your employer from firing you because you file a bankruptcy. The filing of a bankruptcy prohibits creditors from calling you at home or at work and immediately stops any wage garnishments, with the exception of current child/spousal support.
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How would a bankruptcy effect a co-signor?

In a Chapter 7 proceeding, unless both parties to the contract file bankruptcy, the creditor may pursue collection against the non-filing party. If the filing party reaffirms the debt and maintains current payments, the co-signor should not be effected. A Chapter 13 Plan can be structured so that the co-signed debt is paid in full through the plan and the creditor is prohibited from taking action against the non-filing co-signor.
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How do I get started?  What's my first step?

You have already taken the first step - you have obtained general information about Chapter 7 bankruptcy and Chapter 13 reorganization. If you still think bankruptcy or Chapter 13 may be the answer to your financial problems, call (619) 698-6800 for an appointment with an attorney. Remember that we have offices in three convenient locations and have appointments available every day except Sundays and holidays. The consultation is free and takes about an hour
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How much does it cost to file?

We file our bankruptcy cases on a flat-rate basis rather than on an hourly basis, which means the quoted fee for attorney's fees covers the necessary consultations, preparation and filing of the schedules, maintenance of a creditor line with your case information available to your creditors 24 hours a day 7 days a week, appearance by an attorney at the creditor hearing, and subsequent dealings with your creditors. The attorney's fees for a Chapter 7 vary depending on the amount of debt you have, the number of creditors you have and the type of debts involved. At the conclusion of your first consultation, the attorney will quote a fee for your case. Payment plans are available for the attorney's fees, which must be paid prior to the filing of your case. Attorney's fees for a Chapter 13 are usually paid through the plan. The Bankruptcy Court also has a filing fee that must be paid prior to the filing of your case. At this time the filing fee for a Chapter 7 is $299.00, and for a Chapter 13 the filing fee is $274.00. These fees are subject to change periodically. You can call our office to verify the current filing fee or you can check the Court's website at http://www.casb.uscourt.gov. Click on the Bulletin Board, and the Fee Schedule under General Information.
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Do I need a credit report?

A credit report is not necessary for the first consultation, but may be obtained if you need assistance in providing a complete list of your debts. You can order a credit report by phone, on line, or in person. Check the yellow pages under Credit Reports or go to www.experian.com. You can order a free report annually at annualcreditreport.com; however, be sure that the credit report you obtain provides both names and addresses for your creditors, as this information is required by the Court if you file a bankruptcy. If you desire, a 3-bureau credit report can be obtained through our office for a nominal fee.
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Changes in the Law after October 17, 2005.

As you may be aware, new bankruptcy laws went into effect on October 17, 2005. There are numerous and significant changes to the bankruptcy laws; however, most people can still seek protection from their creditors under the new law. These are some of the changes to the bankruptcy law:

1. There is now a requirement that a debtor counseling course be completed before an individual may file a bankruptcy. Another debtor education course is required to be completed before an individual can receive a Discharge. This course takes about 60 minutes and can be done in person, on the telephone or on the internet through an approved independent agency. The costs for this program are in addition to the attorney fees and the filing fee.

2. The eligibility for filing has been extended to 8 years for those individuals who have previously filed a Chapter 7 case. There are also new restrictions for those individuals who have filed previous Chapter 13 cases that were dismissed (not completed) and you should be sure to discuss this with the attorney if this applies to you.

3. The Bankruptcy Court now uses a state's median income to determine eligibility for filing a bankruptcy. If your income is above the State of California's median income for your family size, you may not be eligible to file a Chapter 7, but you may still be able to file a Chapter 13. This is commonly referred to as "means testing." We can only determine your eligibility after obtaining certain detailed financial information about yourself and family.
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