Richard T. Baum

FREQUENTLY ASKED QUESTIONS ABOUT BANKRUPTCY

Los Angeles attorney Rick Baum sees many clients considering bankruptcy.  These are questions he is frequently asked.

1.  When should I consider filing for personal bankruptcy?

Bankruptcy is an option you may consider if you:

• Are having difficulty paying normal household bills for food, utilities, etc.
• Are paying only minimum amounts (or nothing) on your credit cards
• Can not budget yourself out of debt within five years
• Are getting notices that your mortgage or loans are being foreclosed
• Have had a severe financial setback, such as losing your job or a major client, or suffering a divorce or a costly illness

2.  What is the bankruptcy process?

There are steps everyone filing for bankruptcy must take. However, bankruptcy may become a complex process. Making one mistake can result in severe consequences. That is why most people consult a qualified bankruptcy attorney to protect their rights.  The process for each type of bankruptcy is different.  To file for Chapter 7 personal bankruptcy, for example, the steps you follow will probably include:

a)  Make a detailed and comprehensive list of past and current debts and assets.

b)  Complete the Official Bankruptcy Form provided by the federal government to determine actual income, how it compares to others, and whether you are eligible to file for bankruptcy.

c)  Obtain approved credit counseling.

d)  File any outstanding Federal Income Tax forms.

e)  Petition the bankruptcy court for relief, including the filing fee.

f)  Receive a court-appointed trustee assigned to your case to plan the process.

g)  Attend the First Meeting of Creditors,” also called the Section 341 meeting. The court-appointed bankruptcy trustee may question you under oath. Creditors may also ask questions, but seldom do.

h)  Your trustee determines what you can keep using exemption schemes developed by the State of California. You may select your exemption scheme.

i)  Attend a hearing where your debts are discharged and your bankruptcy proceeding is completed.

The process for each type of bankruptcy is somewhat similar, but may be more complex depending on the type of bankruptcy, number of creditors and assets, and many other factors.

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3.  What debts does bankruptcy not cover?

Bankruptcy does not relieve you of all debts. The following are generally still your responsibility:

A qualified bankruptcy lawyer can review the list with you to give you a full understanding of the debts covered and not covered.

4.  What form of bankruptcy is right for me?

An attorney experienced in bankruptcy law can help you determine the option that best suits your particular situation. Briefly—

• For consumers, filing for Chapter 7 relieves most debts, but not all. Businesses, corporations, and partnerships may also file for Chapter 7.
• Filing Chapter 13 helps consumers and sole proprietorships pay off debts with a structured repayment plan over three to five years.
• Commercial enterprises may file Chapter 11, repaying creditors through a court-approved plan of reorganization.

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5.  I am a creditor. Are there advantages to suing a debtor in court?

Without a judgment against the debtor, you run the risk of your claim falling to the bottom of the repayment list. If you receive a judgment, you can place a lien on real estate property or personal property the debtor owns. The lien will be paid when the property is sold.

Keep these advantages in mind as you analyze the costs of litigation—both financially and of your time. An experienced bankruptcy attorney can help you understand the likely outcome of a court case.

6.  What happens to my home mortgage during bankruptcy proceedings? I do not want to lose my home.

California dictates the threshold amount of exempt equity you can have in your home when you file for personal bankruptcy. Your trustee may elect not to sell your house if the equity surpasses the exemption. A bankruptcy attorney can review your bankruptcy options with you to meet your personal and financial recovery goals.

7.  How long does a bankruptcy stay on my record?

Bankruptcies remain on credit reports between seven and ten years. Deciding to declare bankruptcy is a serious decision. That is why it is important to consult an experienced bankruptcy attorney so you fully understand the bankruptcy options and their consequences.

8.  Will filing for bankruptcy end those calls from creditors and collection agencies?

Yes. When you begin the process, bankruptcy code dictates that your creditors must stop all collection efforts against you.

9.  What happens to my corporation if I file personal bankruptcy?

Personal bankruptcy does not affect the corporation, since the corporation is a legal entity separate and distinct from its shareholders.

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10.  Can a business be forced into bankruptcy?

Yes. Creditors can initiate an involuntary bankruptcy proceeding against a business. This occurs in infrequent situations when creditors are concerned that the business in debt is squandering or misappropriating assets that should otherwise go towards paying debts owed to creditors.

IF YOU ARE CONSIDERING PERSONAL OR CORPORATE BANKRUPTCY

Count on the experience, understanding, and professional counsel of Rick Baum.  Contact him online or call 310-277-2040 today to find out how he can help you take control of your financial future.  Rick Baum welcomes small business and private clients, as well as referrals from other attorneys.

Headquartered in Los Angeles, CA, the law office of Richard T. Baum serves: