FAQ’s About Chapter 7 Bankruptcy

When Will the Collection Agencies Stop Calling and Sending Collection Notices?

Once your bankruptcy case is filed with the court, the “Automatic Stay” of bankruptcy law springs into effect. The Automatic Stay immediately prevents your creditors from pursuing any collection action! This means the harassing calls stop…immediately. If they don’t, you have the right to sue the offending creditor for violating the stay. How’s that for putting a little leverage on your side? Suddenly you have the upper hand, and are free from those obnoxious calls and collection notices.

I am Making My Minimum Payments Most of the Time and Just Getting by. Why Should I Think About Bankruptcy?

You can stop sweating the small stuff’. Bankruptcy can wipe out your current debt load, and free you from the negative spiral of making minimum payments that would continue for years and years. Stop living your life like a hamster on one of those spinning wheels – running as hard as you can and getting nowhere. Bankruptcy will allow you to focus on the future; the truly big stuff, like paying for housing, transportation, food and health care for you and your family.

What Effect Will Bankruptcy Have on My Credit Rating?

Odds are that if you are considering bankruptcy, it’s because you have a crushing load of debt you can’t afford to pay it off. You have probably missed some payments; maybe you skipped the payment to a creditor one month so that you can pay another. Maybe you are constantly transferring credit card balances to avoid making the monthly payment. Maybe you have skipped credit card payments because of unplanned expenses like car repairs. Your credit is probably far from perfect. One of the components of a credit rating is the amount of debt that you have in relation to your income level. By clearing out the ‘dead wood’ and wiping out these balances, you can reduce your debt load. Reducing your debt load can improve your overall creditworthiness going forward.

Will I Lose Any of My Property?

In 99% of all Chapter 7 bankruptcy cases, the person filing bankruptcy does not lose any property or assets. The attorney will discuss your assets and property with you in great detail to ensure that you will know how your property will be treated in a Chapter 7 Bankruptcy.

Does Bankruptcy Eliminate All of My Debts?

Chapter 7 bankruptcy wipes out all ‘unsecured’ debts. An unsecured debt is one where there is no specific collateral for the debt, such as a credit card, medical bill, etc. For debts where there is specific collateral that the lender can take if the payments are not made (house loan, car loan, some purchases from big box stores like Circuit City, Best Buy, etc), you will keep the property if you agree to keep making the payments.

Once the case is filed, you will be eligible for your ‘discharge’ after about 90 days. Remember though, your creditors have to stop trying to collect from you the day that the case is filed, so you benefit from day one.

Will I be Able to Get New Credit After Filing for Bankruptcy?

Most of my clients report that they receive offers for new credit cards after filing bankruptcy. This makes sense to the banks. They know that once you file Chapter 7 bankruptcy, you cannot have another Chapter 7 discharge for 8 years. The key here is to use new credit wisely. You will be surprised how quickly your credit scores will improve if you use credit wisely after filing bankruptcy. We offer every client an action guide for improving their credit ratings after filing bankruptcy.

Will I Have to go to Court?

You will not have to go in front of a judge because that is what your lawyer is for. You will have to go to a brief meeting with a person called a ‘trustee’ which happens about 30 days after your case is filed. You will not have to go alone, your attorney will be with you. The meeting with the Trustee is usually very short, with most meetings being over in less than five minutes.

I Have Car Payments. Will I Lose My Car? How Will Bankruptcy Affect My Car Loan or Lease?

Chapter 7 bankruptcy gives you the option to decide what will happen with your car. If you want to keep your car, and continue to make the payments, you can do this. The process is called ‘reaffirmation’ and it means that you are agreeing to continue to be liable on the car loan just like you were before you filed for bankruptcy. If you are behind on your payments, you will have to make up the missing payments relatively quickly. You can also ’surrender’ your vehicle if you don’t want it anymore, or you don’t want to continue with the loan or lease. Surrendering your car ends the loan or lease, even if the payoff is a lot more than what the car is worth.

I am Renting the Place Where I Live. Will Bankruptcy Affect My House or Apartment Lease?

No. As long as you are current with your rent payments, the bankruptcy will not terminate your rental agreement.

Will Bankruptcy Affect My Job? I Don’t Want My Employer to Find Out About This.

Your workplace will not be notified of your bankruptcy.

Does Chapter 7 Bankruptcy Stop Foreclosure?

A Chapter 7 case will only temporarily stop a foreclosure process. What bankruptcy will do for you in this situation is to ensure that there will be no adverse tax or deficiency issues following the foreclosure. There is no sugar-coating this situation, your credit rating will take a huge hit because of the missed house payments and foreclosure. What you can do to make the best of this situation is to fold all of your other credit card debts, medical bills, and other miscellaneous debt into the bankruptcy so that you can focus on the bills that are absolutely essential – housing, transportation, food and health care. Your fresh start will free you from worries about losing the house and all the crushing debt that was dragging you down.

Does Chapter 7 Bankruptcy Stop Wage Garnishments?

Yes. Creditors cannot garnish wages during a Chapter 7 case.

I am Ryan Davies and I provide bankruptcy services for the southern California communities of Lake Forest, Rancho Santa Margarita, Laguna Niguel, Laguna Beach, Laguna Woods, Aliso Viejo, Mission Viejo, San Clemente, Irvine, Costa Mesa, Newport Beach, Tustin, and Santa Ana.