Frequently Asked Questions
Frequently Asked Questions (FAQs)
Bankruptcy, Family Law, Business & Employment Law
Got legal concerns in California? Our Santa Rosa bankruptcy attorneys at Provencher & Flatt LLP can help. Read through our answers to frequently asked questions on bankruptcy, family law, business and employment law.
Frequently Asked Questions
Do You Need a Bankruptcy Lawyer?
There are several signals indicated you may need to consult with a bankruptcy lawyer. They are the following:
Living paycheck to paycheck
Zero cash flow
Unable to pay bills
In danger of losing property
Constant phone calls from debt collectors and creditors
Wages are being garnished
If your situation matches any of these descriptions, it is in your best interest to consider bankruptcy. If you can no longer keep up with the payments on your credit cards, it may be the time to consider filing bankruptcy. If your wages are garnished after a judgment, it may be time to consider a bankruptcy. If you are in foreclosure and behind on your mortgage payments, it may be time to consider filing bankruptcy. If you have overwhelming debt of any kind and it just does not look like there is any way to pay, it may be time to consider bankruptcy. If any of these describe your current situation, it would be helpful to contact us and let us help you assess if filing bankruptcy is the best answer for you. Life is full of surprises and curve balls and nobody has “filing bankruptcy” on their bucket list, but our attorneys are here to help you understand your options and navigate the journey of bankruptcy if it’s right for you.
The first option is Chapter 7, usually filed individually and when a person cannot repay their debt over a period of time. A Chapter 7 allows you to commence a fresh financial start and probably keep all of your property.
If you are able to repay your debt but require a little more time, your best option would be to file Chapter 13 bankruptcy. From there, our attorneys can help negotiate a payment plan and settle your debt with creditors.
For businesses who are struggling to pay off your debt, you may want to consider filing Chapter 11,where our lawyers can help restructure your debts and reorganize your company. Nonetheless, if you are planning to close operations in the future, Chapter 7 may be your best option.
What Should I Expect from Filing?
Your debt will either be dramatically lowered, erased, or reorganized in an amount you will be able to pay.
What is the Bankruptcy Process?
The first step in a bankruptcy is to meet with a qualified bankruptcy attorney. You should provide to your attorney a list of all of property and all of your debts.
The attorney will ask for a list of documents related to your financial condition. For example, your last two years tax returns; 6 months of paystubs or evidence of income from whatever source; an appraisal or valuation on any property or real estate that you own; list of the name and address with approximate amount owed to any creditors; statements from bank accounts, stock accounts or other investment accounts; statements on 401K, pension or retirement plans; spouse’s paystubs or evidence of income; life insurance statements; and mortgage payment statements or car payment statements. These are a general listing of items that should be provided, but everyone’s situation varies so more information may be needed depending on the individual situation.
After meeting with you and obtaining all of your financial information, the attorney may prepare the bankruptcy paperwork.
The filing of a bankruptcy petition is now done electronically. The bankruptcy court has mandatory electronic.
After the filing of the bankruptcy petition, a notice from the court is sent out which is called “Notice of Commencement of Case. ” This notice is sent out to all creditors to whom you owe money. All of these creditors are stopped by the automatic stay from suing or pursuing the debtor in any way. The form contains the case number and the date, time and place for the 341a meeting of creditors. This 341a meeting is the initial hearing in the bankruptcy case where the debtor and the attorney go and meet with the court appointed trustee to review the petition and take testimony as to the accuracy of the petition and other financial issues related to the debtor’s financial affairs. Any creditors of the individual in the bankruptcy have the right to appear and question the debto
After this 341a meeting, creditors or the trustee have 60 days within which to file a complaint objecting to the discharge of the debtor. A creditor or the trustee may object to the bankruptcy filing for certain limited reasons. If no one objects within these 60 days, the debtor will receive a discharge. The discharge is the final order entered by the court that wipes out the outstanding debt of the individual filing the bankruptcy.
These are some general steps involved in a Chapter 7 bankruptcy. If other legal issues or problems that arise the process of the case could go forward in a much different way. There are also additional and more complicated steps in Chapter 11, Chapter 13 and Chapter 12 Bankruptcies.
The place to start when you are considering filing for bankruptcy is to turn to Douglas Provencher. He understands that life is unpredictable. He understands that things don’t always go as planned and financial obligations can grow out of control. He recognizes that filing for bankruptcy probably wasn’t in your plans when you started out, but you are here and now you need help.
The representation you choose to help you navigate this difficult decision can make all the difference in the world as to how things turn out. We are committed to helping you solve today’s challenges in a way that best sets you and your family up for the future. We want you to understand that while filing for bankruptcy may be the best way for you to move forward, knowing how to file bankruptcy and which type of bankruptcy is best for you is critical.
We will educate you on all the options, listen to you carefully so we understand your situation, and then be committed to ensuring that you know what is happening every step of the way. One of our goals is to make sure that when you leave our offices you feel better than you did when you walked in. We know that filing for bankruptcy is disruptive and difficult, and we want to get you back on the path to financial peace as quickly as possible.
Am I Eligible for Bankruptcy?
For any business or individual, the crucial decision to file for bankruptcy isn’t one to be taken lightly. Filing bankruptcy is an important step, and one you should make while receiving expert counsel with those who clearly understand the opportunities and options that await you. We understand the types of hardships and struggles that would cause you to consider filing bankruptcy.
We invite you to contact us at 707-596-6641 today and let us help you take a step towards finding debt relief and the peace of mind you need.
What May I Keep if I file a Bankruptcy?
The possibility of losing property scares people thinking about bankruptcy. In California, most people will keep all of their personal property.If a debtor does not own a home, they are allowed to keep over $28,000 in possessions.If a debtor owns a home where he or she or they live, the equity in the property may be protected up to $175,000.
Process – Bankruptcy Basics
Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.
The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.
There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.
The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.
A debtor’s involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.
A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:
[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.
Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded.
Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, each of which is discussed in this publication. The cases are traditionally given the names of the chapters that describe them.
Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.
Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, much like a reorganization under chapter 11. Only a “municipality” may file under chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.
Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.
Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee’s disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.
Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.
The purpose of Chapter 15, entitled Ancillary and Other Cross-Border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.
In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers’ Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.
This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act (“SIPA”). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer’s property is protected, up to $500,000 per customer.
The bankruptcy process is complex and relies on legal concepts like the “automatic stay,” “discharge,” “exemptions,” and “assume.” Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman’s terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.
New California Homestead
As of January 1, 2021, homeowners will receive increased protection for the equity in their residence.
The newly enacted California Code of Civil Procedure 704.730 does away with the three layers of homestead protection depending on the family relation, age or health of the home owners.
The new law provides a minimum $300,000 homestead in the amount of $300,000, and in counties where the median sale price of homes is more than $300,000, an exemption of the median price of a home, not to exceed $600,000.
The new homestead provision in CCP 704.7430 reads:704.730.
(a) The amount of the homestead exemption is the greater of the following:
- The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
- Three hundred thousand dollars ($300,000).
(b) The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.
The definition of a homestead is unchanged, It is the principal dwelling of a judgment debtor or the judgment debtor’s spouse. So, homestead protection for the home in which only one spouse lives is preserved.
But a spouse is excluded as a “spouse” is if there is a judgment of legal separation.A person living in the house is protected, regardless of who else lives there.
What impact does this have on existing creditors. It depends.
For unsecured creditors, the new amount impacts them. See CCP 703.060. Unsecured creditors have no vested right to the benefit of a law that’s been superseded. San Diego White Truck Co. v. Swift, 96 Cal.App.3d 88 (Cal. Ct. App. 1979)
But, if a creditor has a recorded judgment lien. The homestead increase is not effective against a creditor with a lien recorded before the effective date of an amendment to CCP 704.730. See CCP 704.965. See In re Morgan, 157 B.R. 467 (Bankr. C.D. Cal. 1993)
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