Frequently Asked Questions

What is "Bankruptcy?"

• Bankruptcy is being unable to pay your obligations, expenses or long term debts.

What can you do about being bankrupt?

• You can try to make agreements with your creditors to extend or reduce payments that are due.
• You can seek the assistance of the federal bankruptcy court system.

What are the advanatages of the bankruptcy court system over creditor arrangements?

• Creditors are prevented by law from all efforts to collect debts unless they get permission of the bankruptcy court.
• You can create a repayment plan which will allow you to pay off your unsecured debts in three to five years.
• You may be able to discharge your unsecured debts without paying anything.

What are the "Chapters" in bankruptcy?

• Chapter 7 permits debtors whose net earnings are less than the State median income* and corporations to discharge unsecured debts without payment.
• Chapter 13 permits individual debtors whose net earnings are greater than the State median income and who owe less than about $350,000 in unsecured debt and less than about $1,000,000 in secured debt to make a plan to discharge the unsecured debt in three to five years and reduce some "underwater" debt secured by certain kinds of property.
• Chapter 11 permits individual debtors whose debts exceed the limits for Chapter 13 and corporations to make a plan to restructure their debts.

What kinds of debt are recognized by the bankruptcy courts?

• "Priority" debt includes obligations for federal, State and local taxes, child support and alimony and certain less common debts.
• "Secured" debt includes debts for which you have agreed to permit the creditor to seize specific property if you do not pay. Usually the security is real property or an automobile, but can include crops, securities (stocks and bonds) and money other people owe you.
• "Unsecured" debt is money you owe because of agreements with creditors that do not contain provisions to seize property if you do not pay. The most common unsecured debt is credit card debt and bills you owe service providers (doctors, hospitals, dentists, lawyers, auto mechanics, etc.).

How do I "declare bankruptcy?"

• Comply with the requirements of the U.S. Bankruptcy Code (Title 11 U.S. Code) preparatory to filing:
• Reside within the United States.
• Complete a brief course of instruction in debtors' remedies, which may be obtained from a commercial provider by telephone or on line.
• Gather information about your assets, debts, income and expenses.
• Prepare and file a Petition with the bankruptcy court where you live and pay court filing fee:

Filing Fees

• Chapter 7 $306.00
• Chapter 13 $281.00
• Chapter 11 $1,046.00 ($1,213.00 after November 21, 2012)

Prepare and file with the Petition Schedules listing assets and debts
• Schedule A - Real Property
• Schedule B - Personal Property
• Schedule C - Property Claimed as Exempt (see Cal. Code of Civil Procedure 703.140)
• Schedule D - Creditors Holding Secured Claims (deeds of trust, security agreements)
• Schedule E - Creditors Holding Unsecured Priority Claims (taxes, domestic support orders, wages and salaries payable)
• Schedule F - Creditors Holding Unsecured Nonpriority Claims (credit cards, revolving accounts, personal loans)
• Schedule G - Executory Contracts and Unexpired Leases (car and business leases, HOA dues, patent & copyright licenses, etc.)
• Schedule H - Codebtors (other than spouse )
• Schedule I - Current Income of Individual Debtors (both debtor and spouse)
• Schedule J - Current Expenditures of Individual Debtors (both debtor and spouse)
• Summary of Schedules and Declaration (under penalty of perjury) Concerning (truthfulness and completeness) Schedules
• Statement of Financial Affairs (listing bank accounts, safe deposit boxes, business interests and other financial matters)
• For Chapter 13 filers, prepare a repayment Plan, which must be filed within 10 days of the Petition.
• For Chapter 7 and 13 filers, attend a "Creditor's Meeting" presided over by an appointed bankruptcy trustee.
• For Chapter 11 filers, attend an instructional session with the U. S. Trustee on preparing monthly operating reports.
• For Chapter 11 filers, attend a Creditor's Meeting presided over by the U.S. Trustee.
• For Chapter 11 filers, prepare a repayment Plan and Disclosure Statement which must be submitted to creditors and the bankruptcy court judge for approval.
• Complete a brief course of instruction in budgeting, which may be obtained from the same provider who gave the debtors' remedies program, by telephone or on line.

What may I expect for attorneys' fees?

• For Chapter 7, $750 to $2,500, depending on whether a business and/or an owned residence with equity is involved
• For Chapter 13, $2,000 to $6,000 and more, depending on whether a business, taxes and multiple parcels of real estate are involved.
• For Chapter 11, fees range upwards of $10,000.

* The fillable form used to compute whether you may file under Chapter 7 or Chapter 13 is attached here. 2012 Cal Median Income is as follows:

Family of 1	Family of 2	Family of 3	Family of 4
$49,188	$63,481	$68,135	$77,167

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