The following is general information for people that live in California. Please do not take it as legal advice for your particular situation. As with any area of the law there are exceptions, exceptions to the exceptions, and so on. Please consult an attorney for your individual case.
Q: What is the benefit to me in hiring a bankruptcy attorney?
A. Most of my prospective bankruptcy clients are being bothered by creditors. The creditors are calling, writing letters and making threats. Some of my clients are afraid to pick up the phone because it might be an aggressive collection agent. Once you hire me the next time a creditor calls you simply tell him or her: "I’d like to speak to you but I have retained Harley A, Feinstein, Attorney at Law. Mr. Feinstein has instructed me not to speak to any creditors. Call Mr. Feinstein." Then hang up.
Now, legally speaking, the creditor is not breaking the law if he or she still calls you until we actually file the petition for bankruptcy. But as a practical matter the creditors usually stop calling you once they hear this. They call me instead.
Of course, the most important benefit of hiring me is to help you achieve your goal of canceling your debts in order to get a fresh start.
Q: Aren’t there different types of bankruptcies? I’ve heard of a Chapter 7 bankruptcy and a Chapter 13 bankruptcy.
A: A Chapter 7 discharges your debts. That means you don’t owe the money anymore. But some debts may not be discharged such as student loans, support obligations, and most taxes.
A Chapter 13 gives you more time and may reduce the amount of your debs. You submit a plan to pay off your debts over a period of years.
Most of my clients want to have their debts discharged under Chapter 7. They do not desire a Chapter 13.
Q. Ok. It sounds like I could definitely use your services. What does it take to hire you, Mr. Feinstein?
A. You sign a agreement to retain me as your attorney. Depending on your ability to pay you will need to make a down payment towards the attorney’s fees. I am willing to start most cases with only a small down payment.
Q: How much do you charge?
A: For the answer to this question we need to talk I need to ask you a few questions so that I can determine the complexity of your case. But I can assure you my rates are competitive. There are some bankruptcy firms that spend a tremendous amount of money on advertizing. You know who they are if you watch television. In my opinion these so called "bankruptcy mills" put their resources into getting the clients though expensive advertizing rather than using their resources to do good work. My philosophy is to use my resources to do the best job reasonably possible for a relatively small number of clients rather than to have a very large number of clients but doing mediocre work.
Q: What is the "automatic stay"?
A: As soon as we file the petition for bankruptcy your creditors are prohibited from taking any collection action against you. A big exception is the secured creditor such as the bank that holds the mortgage on your house. The mortgage holder is initially subject to the stay but the bank can be exempted from the stay by filing some papers with the court. This is called "requesting relief from the automatic stay". Once the bank gets relief from the automatic stay the bank can proceed with collecting the debt or foreclosure.
Q: Does it matter if the creditor has already sued me?
A: No the creditor is not is a superior position because he has sued you. Even if the creditor has a judgment against you the debt is still subject to discharge in bankruptcy,
Q: Will I lose property if I file for bankruptcy?
A: In theory, when you file for bankruptcy you turn over your property to the trustee for the court and the court divides up the property among the various creditors so that they each receive partial payment. But the bankruptcy laws allow you to keep some of your property. The property that you are allowed to keep is called "exempt property". My goal is to have all of your property be considered "exempt property" so that you don’t lose any property in the bankruptcy.
Q: How much of my property will be considered "exempt"?
A: Each state has its own system of exemptions. Plus there is a set of exemptions under Federal law. California law permits you to chose between the California set of exemptions and the Federal exemptions. Its too detailed for me to explain the exemptions here. But generally speaking if you have lived here long enough so that you are allowd to use the California exemption system then you will want to go with the California set of exemptions if you own a home. You will usually go with the Federal set of exemptions if you do not own a home.
Q: I live in California but I’ve only been a resident here for a year. Does that matter for the purposes of which exemption system I use?
A: Yes. If you moved to California less than 730 days before filiing you can file your petition here but you must use the exemption system of the state where you lived before the 730 period. This may be good or bad for you depending on where you moved from. Fortunately, you can generally fall back on the Federal exemptions.
Q: How long do I have to have been a resident of a particular district to be allowed to file the petition in that district?
A: 91 days
Q: I have heard that if I earn too much money then I can not declare bankruptcy. What is this about?
A: If your monthly income (averaged over the last 6 months) exceeds your permitted monthly expenses then you will not be eligible to file a Chapter 7 bankruptcy. The court will either dismiss your Chapter 7 bankruptcy case or force you to convert it to a Chapter 13 case.
The way the court determines if you make too much money works like this:
Step 1: Your income is compared to the median income for a similarly-sized family in California. The median family income may be found on the following web site:
http://www.usdoj.gov/ust/eo/bapcpa/meanstesting.htm
If your income is less than the median income then you are not considered ineligible to file a Chapter 7 bankruptcy - no Step 2.
But if your income is more than the median income then you have to go to Step 2. In Step 2, is a procedure called "Means Testing". Means Testing involves subtracting expenses from your income to see if you have anything left. If you have any more than a few dollars left over you are presumed to be ineligible to file a Chapter 7 bankruptcy. This is called a "presumption of abuse."
You might be thinking "That's no problem. I can show plenty of expenses." But for certain expenses (such as housing and transportation) you aren't allowed to deduct your actual expenses. For these expenses you are only allowed to deduct the expenses the government thinks you should have.
Check out the following link to see how much you are allowed to deduct for housing, transportation, etc.
http://www.usdoj.gov/ust/eo/bapcpa/20080317/meanstesting.htm
Q: I'd like to check to see how I do on the Means Test before I meet with an attorney. Is there any way to do this?
A: There are various sites on the internet that allow you to do this. Here's a link to one:
http://www.legalconsumer.com/bankruptcy/bankruptcy-means-test.php?ZIP=92024&ST=CA&CBSA=41740&FEDCT=CAS&CITY=Encinitas&METRO=San+Diego-Carlsbad-San+Marcos
Q: Does my spouse have to file for bankruptcy too?
A: In California it may be possible to avoid having your spouse file for bankruptcy. The bankruptcy prevents creditors from moving against community property of both spouses acquired after the filing of the bankruptcy petition. But your spouse’s income will be considered when determining if you are exempt from the means test and for the application of the means test if you are not exempt.
Q: Can I just discharge some of my debts? I like my dentist and I want to pay her.
A: No the bankruptcy discharges all your debts except for the debts that the law says you can not discharge. The law says you can not discharge student loans (except in unusual circumstances) and many taxes. But you can not pick and choose which debts are discharged.
Many of my clients go ahead and pay one or more of their debts even though the debt has been discharged. The dentist might be one example. Another example might be the bank that lent you the money to buy your car. If you keep making those monthly payments the bank will not repossess your car. Keep in mind that a security interest, such as mortgage on your home, or security interest in your car is not affected by the bankruptcy. The bank can and will foreclose if you stop paying even though you have declared bankruptcy.
Q: What happens if I leave a creditor off my petition?
A: Most of the cases I file are "no asset cases". This means that all of my client’s property is exempt so that my client doesn’t have to hand any of it over to the court for distribution to the creditors. In these "no asset cases" the debt is still discharged even if you did not list the creditor on the petition. But the rule is that you are supposed to list all creditors. You could be penalized if you fail to make a good faith effort to do so.
Q: Will I have to go to court?
A: In most cases you do not actually go before a judge in court. But you do have to appear before the bankruptcy trustee and answer questions. I will prepare you and be there at the hearing. This hearing is called the "Meeting of Creditors". It is also called the 341(a) meeting.
Q: What happens at the hearing?
A: The hearing is something like going to court before a judge. But it is usually in an office building instead of the court. Instead of a judge you will appear before the Trustee. At the hearing you must be prepared to go over the facts and figures with the Trustee. I (or another attorney from my office) will be there with you to assist.
Before this hearing we must supply the Trustee with backup documents showing that the facts and figures in the petition are accurate.
Q: Do I need credit counseling?
A: Yes you must be counseled before and then again after the filing of the petition.
Q: I've decided to file for bankruptcy. Should I stop using my credit cards?
A: You need to be careful about this. There are pitfalls. For example, consumer debts totaling $500 or more to a single creditor for "luxury goods or services" incurred within 90 days before filing are presumed to be non dischargable. Cash advances totaling more than $750 within 70 days before filling are presumed to be non dischargable. You could find yourself in court defending your purchases.
