Automatic Stay Stops Most Collections

The automatic stay forbids almost all of your creditors (there are a few exceptions) from doing anything to collect a debt from you.  Creditors can’t ask you to make a payment on your account.  They can’t call or write you about a debt, repossess your property, send you any bills or draft your bank account. Wage garnishments must be stopped.  If a creditor knows about the stay and ignores it, the creditor may be held in contempt of court.  Any personal property that is repossessed after the stay comes into existence must be returned to you.  If you have filed for Chapter 13, co-debtors on consumer debts are also protected by the automatic stay.

The purpose of the stay is to give you time to reorganize your finances through the bankruptcy process; it lasts until your bankruptcy is over or the item of property is no longer part of the bankruptcy.  However, a judge can lift the stay as to a specific item at the request of a creditor, and this “relief from stay” will then allow the creditor to take the item back.

How the Automatic Stay Affects Your Residence

Bankruptcy has special rules that dictate how the automatic stay will affect your residence:

Foreclosure:  If you have filed Chapter 7, the automatic stay will delay foreclosure on your home; in San Diego this will be for anywhere from two to four months, on average.  However, Chapter 7 does not allow you to make up missed payments, so if you are behind, the foreclosure will proceed either after the mortgage lender seeks a relief from stay, or if no relief is sought, then when your bankruptcy is over.  If you have filed Chapter 13 bankruptcy, the automatic stay stops the foreclosure proceeding.  You can then make up the past-due payments on your first mortgage over a reasonable period of time, and the court will likely agree to a bankruptcy plan that will dramatically reduce or eliminate any second and third mortgages.

Eviction:  If you are a renter who has fallen behind on your rent, and your landlord has obtained a court order for possession of the property, the automatic stay will not stop the eviction.  If the eviction proceeding is underway but no judgment of possession has been entered, the bankruptcy court will usually lift the stay to allow the eviction to proceed.  Also, the automatic stay does not apply in cases where the eviction is occurring due to damage to the property by the tenant, or drug use by the tenant.

Utility Disconnects:  If you are behind on utility payments, the automatic stay will stop the immediate disconnection of your water, electric, gas, and telephone.  However, the utility has the right to an “adequate assurance of payment,” which usually means that a deposit totaling twice your average monthly bill must be paid to the utility within 20 days after your bankruptcy filing. If you cannot pay a deposit that high, your lawyer can ask the bankruptcy court to reduce the deposit amount; it may or may not agree to this.  If the deposit is not paid, then the utility can disconnect your service.

Exceptions to the Automatic Stay

There are some types of proceedings that are not stopped by the automatic stay:

• Tax audits, tax deficiency, tax assessments, request for tax returns:  the IRS can still proceed with these.  However, while you are in bankruptcy, it cannot issue a tax lien or seize your property or income.
• Criminal prosecutions: for violating criminal or motor vehicle laws.  However, immediate collection of any criminal proceeding fines is stopped by the automatic stay.  You will remain responsible for paying these fines.  Some traffic civil infraction fines (such as parking tickets) may be categorized as unsecured debts and paid off as part of a Chapter 13 bankruptcy plan, but they must be paid in full under Chapter 7 bankruptcy.
• Divorce, child support and spousal support:  Divorce actions and lawsuits to establish, modify, or collect child and spousal support can still proceed.  Paternity lawsuits can also proceed. However, division of community property between spouses must be approved by the bankruptcy court.
• Loan from pension/IRA:  Funds can be withheld from your income to repay a loan you have taken out from an IRA or job-related pension.

Effect of Stay after Bankruptcy is Over

At the end of the bankruptcy, pre-filing debts which were reduced or eliminated in bankruptcy, and most other pre-filing debts where the creditor received notice of the bankruptcy, can no longer be collected. Instead, the automatic stay is replaced by a permanent injunction that forbids creditors from collecting your pre-filing debts.

Contact San Diego Law Firm for Bankruptcy Help

San Diego Law Firm’s experienced bankruptcy lawyers can help you get your finances back on track through the protections of bankruptcy and the automatic stay.  Please call us for an appointment to evaluate your debt and finances and find out what options would be most helpful to you in regaining your financial security.  We provide fixed-fee estimates for all of our bankruptcy services once we know what your situation requires, and we offer evening hours so you can see us without taking time off from work. For a no-charge, no-pressure bankruptcy consultation, please call San Diego Law Firm today at (619) 794-0243.  We are here to help you.

Most Retirement Plan Accounts Protected

In Chapter 7, the “fresh start” bankruptcy, most retirement plan savings are not counted as part of your assets and so cannot be used by the trustee to pay any of your creditors.  In Chapter 13, in which you keep your assets but make a once-a-month payment for three to five years to reduce or eliminate most debts, most retirement plan savings are not taken into account when the court calculates how much money you have available to pay creditors each month.  These rules only apply to the money which stays in your plan.  There are different rules for payouts you receive from your retirement plan.

There is also an exception in Chapter 7 bankruptcy for any amounts you paid into a retirement plan when you were insolvent.  These amounts will generally be taken back out by the trustee and counted as part of your assets available to repay creditors.

Types of Retirement Plans Protected in Bankruptcy

These types of retirement plans are protected from bankruptcy creditors without limit:

1.  ERISA-qualified retirement accounts, 457 deferred compensation plans, and 403(b) tax deferred annuities, and certain retirement plans or trusts which are not controlled by you and which contain an “anti-alienation clause” (no-transfer clause) enforceable by state law.

2.  Retirement funds that are in an account exempt from tax under sections 401, 403, 408, 408, 408A, 414, 457, or 501(a) of the tax code.  These sections include most pension plans, profit sharing plans, stock bonus plans, employee annuities, and a few others. 

For a traditional or Roth IRA, the total amount exempt from creditors’ claims in Chapter 7 is currently limited to $1,171,650 per person; this amount is readjusted every three years. If the total of all assets in your traditional or Roth IRA plans is worth more than the cap, the excess can be taken by Chapter 7 trustee to pay back your creditors. 

Although the law on traditional and Roth IRA’s is not as clear in Chapter 13 bankruptcies, it appears that debtors cannot be required to make non-mandatory withdrawals from these accounts to increase the income that can be used for monthly payments under Chapter 13.  However, some legal cases suggest that a Chapter 13 payment plan may lack the “good faith” required for court approval when the debtor is old enough to withdraw from the IRA and it contains an amount (say, $1,000,000) that far outweighs the proposed payments to the unsecured creditors (say, $1,000 each for 5 creditors).  A skilled bankruptcy attorney can advise you what to do in this situation. 

Retirement Plan Payouts and Chapter 7

In Chapter 7, you can choose between two systems of exemptions, which are lists of money and assets that your creditors cannot touch. 

In System 1, retirement plan payouts you receive are exempt from creditors to this extent:

1. Payouts on pensions of county employees, firefighters, & peace officers – all exempt.
2. Payment of public retirement benefits of public employees – all exempt.
3. Payouts on private business retirement benefits (such as 401K’s) – all exempt.
4. Payouts of self-employed retirement benefits – Keogh, SEP-IRA, IRA: exempt to the extent necessary for the support of you and your dependents.

In system 2, only payouts from ERISA-qualified plans are exempt from creditors, and only up to the amount you need for your support. 

Once your Chapter 7 bankruptcy is over – which usually takes no more than 6 months to 1 year – ALL future retirement plan payouts are yours to keep.

Retirement Plan Payouts and Chapter 13

In Chapter 13, all the money you receive from any source, including retirement plan payouts, is used by the court to calculate how much disposable income you can put towards a single monthly payment to all creditors.  If you have borrowed from your retirement account, your loan repayments are not included in determining your disposable income if you file for bankruptcy in California.  Even worse, you will owe tax on however much you do not repay.  For this reason, it is extremely important to never cash out or borrow against a retirement plan to pay debts if there is ANY possibility that you will eventually need to file for bankruptcy.

Tax Liens and Retirement Plans in Bankruptcy

Unfortunately, existing tax liens on retirement accounts generally are not affected by bankruptcy.  It may be possible, though, to negotiate for the release of tax liens; for more information about your particular situation, talk to an experienced bankruptcy attorney.

Contact San Diego Law Firm for Bankruptcy Retirement Plan Protection

San Diego Law Firm’s experienced bankruptcy lawyers can protect your retirement plan savings in bankruptcy and advise you how to handle any difficult or questionable situations with creditors, retirement account loans, tax liens on retirement accounts, and more.  Please call us for an appointment to evaluate your debt and finances and find out what options would be most helpful to you in regaining financial security. For a no-charge, no-pressure bankruptcy consultation, please call San Diego Law Firm today at (619) 794-0243.  We are here to help you.

Debt Negotiation for Unsecured Debt

A creditor must file a collection lawsuit and obtain a court award to collect unsecured debts like credit card bills, payday loans, and medical bills.  If you can come up with the funds to pay a significant part of this debt by saving up for a few months, taking funds from your retirement plan, or selling unessential assets, you are a good candidate for debt negotiation.  An experienced attorney will typically be able to obtain a settlement that reduces your debt by 30-50% or more in return for a one-time payment by you.  The cancelled debt will then be marked as “settled” on your credit record, which will enable you to start rebuilding a good credit rating faster than if the debt is marked as “charged off” by the creditor.

Federal Programs for First Mortgages

Chapter 13 bankruptcy allows the court to eliminate second and third mortgages by making them into “unsecured debt” on which the debtor typically must pay little or nothing.  First mortgages are in a different category:  they cannot be reduced or eliminated in bankruptcy.  However, there are several federal programs under which qualified homeowners with underwater mortgages may be able to refinance their homes and obtain lower payments.  These include:

:  The federal Home Affordable Refinance Program (“HARP”), which allows homeowners to refinance mortgages for up to 125% of a home’s value with no cash back;

:  FHA Refinance for Borrowers in Negative Equity (“FHA Short Refinance”), which allows homeowners with loans insured or guaranteed by the FHA to refinance homes whose value is lower than the mortgage balance, and

:  The Principal Reduction Alternative SM (PRA),  which allows homeowners who have a significant hardship and are behind on their mortgage payments to reduce the principal balance on their mortgage. 

Details on all of these government programs are available at http://www.makinghomeaffordable.gov/programs/fallen-value-help/Pages/default.aspx .

Debt Negotiation for Tax Debts

Tax debts related to tax returns due at least three years before the taxpayer filed for bankruptcy can be eliminated or reduced in Chapter 7 or Chapter 13 bankruptcy if all tax returns were filed, no tax lien on property was filed, and various other requirements are met. 

However, for tax debt that does not meet bankruptcy criteria, an alternative is an “Offer in Compromise” where the IRS and a taxpayer agree that the IRS will accept less than full payment of the tax debt.  To qualify, the back taxes must be significantly more than the current value of your assets, and must exceed your current ability to pay.  This is often the case where the taxpayer holds an underwater mortgage.  The IRS typically only accepts about 25% of these offers.  Despite TV advertising that suggests otherwise, Offers in Compromise are not simple, and the assistance of a skilled attorney who is knowledgeable about tax law and negotiating strategies can make the difference in whether your Offer in Compromise to resolve tax debt is accepted or not.

Contact San Diego Law Firm for Debt Negotiation

San Diego Law Firm’s experienced bankruptcy and debt negotiation lawyers can help you with debt negotiation instead of, or in addition to, Chapter 7 bankruptcy and Chapter 13 bankruptcy.  Please call us for an appointment to evaluate your debt and finances and to learn what options are available to help you regain financial stability. For a no-charge, no-pressure bankruptcy consultation, please call San Diego Law Firm today at (619) 794-0243.  We are here to help you.

There are two types of bankruptcy (Chapter 13 and Chapter 7), two types of car payments (loans and leases), and choices to be made in each situation. Each of these plays a role in whether and how you keep your car.

Cars and Chapter 13 (Payment Plan) Bankruptcy

If you have enough income to make a single, affordable monthly payment, Chapter 13 will usually allow you to reduce many of your debts and pay the balance over three to five years.  If you’ve fallen behind on your payments, filing Chapter 13 will temporarily stop car repossession. 

In Chapter 13, if you have no loan or other lien, you can keep your car, no matter what the value. If you have a car loan, what happens depends on when you took out your car loan.

If your loan is less than 910 days old, you will likely have to repay your car loan over three to five years, but the interest and payment amount will be reduced. If it is more than 910 days old, the court will reduce (“cram down”) your car loan to match your car’s current resale value.  So if your car’s resale value is $5,000, but your loan balance is $8,000, your loan will be knocked down to $5,000, the interest owed will be reduced, and you’ll have three to five years to pay the new balance off.

Leases, as opposed to loans, are not treated as favorably in Chapter 13.  You can either keep the car and lease and make payments as usual, or turn your car over to the lease holder, who will sell it.  The sale proceeds will reduce the balance you owe under the lease, and you’ll pay this balance, typically at just pennies on the dollar, over the three to five year term of your bankruptcy.  However, many people find that it is unnecessary to relinquish their car, because Chapter 13 reduces the amount they are paying their other creditors enough that they can afford to make their car lease payments.

Cars and Chapter 7 (Straight) Bankruptcy

If you qualify, Chapter 7 bankruptcy lets you get rid of most debts in about 3 to 6 months, while keeping much of your personal property.  If you’ve fallen behind on your payments, filing Chapter 7 will temporarily halt car repossession.  However, you do not have as many favorable car options in Chapter 7 as you do in Chapter 13.

If you have a car loan, you can keep your car if you have no equity (no value after loan is subtracted) or equity below the exemption amount, which is $2,725  for all vehicles under Asset Exemption System 1, and $3,525 in equity for one vehicle under System 2.   You have to keep making car payments, but you and your lawyer can try to renegotiate your car loan amount and car payments downwards.  Many lenders will agree to these reductions rather than take the car back.

If your car equity, but not the resale value, is worth more than the exemption amount, the judge may let you keep it and keep paying the loan.  If your car equity and the resale value are both significantly more than the exemption amount, the court will probably order your car sold to pay off your other creditors. So if you are a former real estate agent with $50,000 in equity in a Mercedes worth $40,000, and a loan of $2,000, you probably will not get to keep this car if you file Chapter 7, even if you are willing to reaffirm the loan and keep making payments.

As an alternative, the court can reduce your car loan to the current value of your car if you can come up with enough money to pay off that amount in a single payment.  You can then keep your car if the total equity is less than the allowable amount under the Asset Exemption System you have chosen.

If you have a car lease and file Chapter 7, and want to keep your car, you must keep making lease payments to avoid repossession.  Most leased cars have no equity and are entirely exempt from the bankruptcy.  You have the opportunity to renegotiate the lease amount and payments, as many lenders will agree to these reductions rather than take the car back.  Car payments will continue after your Chapter 7 bankruptcy ends.

Finally, whether you have either a car loan or a car lease, in Chapter 7 you can simply turn over your car to the lender, and owe nothing more. 

Contact San Diego Law Firm’s Bankruptcy Attorneys

San Diego Law Firm’s experienced bankruptcy attorneys can guide you through each step of bankruptcy so that you can gain relief from bill collectors and unmanageable debt.  Once we review your finances and personal situation with you, we can tell you if you qualify for Chapter 7 or Chapter 13 bankruptcy, and provide you with all the information you need to make the decision that is right for you. For a no-charge, no-pressure bankruptcy consultation, please call San Diego Law Firm today at (619) 794-0243.  We are here to help you.

1.  Proving “undue hardship” to eliminate loans

Although there are very few circumstances in which this applies, Chapter 7 bankruptcy law allows student loan debt to be eliminated if the debtor proves “undue hardship.”  This requires you to prove that:

• At present, you can’t maintain a minimum standard of living for yourself and your dependents and repay your student loans; AND

• Your bad financial situation is likely to continue; AND

• You’ve made an honest effort to pay off your student loan debt.  That usually means you have been regularly paying at least some amount towards your student loans.

Most student loan elimination on the grounds of “undue hardship” occurs because the debtor has become permanently disabled. This does not require a 100% disability, but it is usually a disability that makes it unlikely you will ever be able to earn enough to repay your student loans. 

2.  Combining a student loan consolidation program with bankruptcy.

This is usually the most feasible way to go if student loan consolidation is available to you. 

First, there are several different student loan programs which require you to make monthly student loan payments for a set period of time – either 10 years or 25 years, depending on the program – after which the balance of the loans are forgiven.  It is usually best to apply for these programs before filing bankruptcy.

Second, if you have extensive unsecured debt – such as credit card bills, a car loan, or medical bills – a Chapter 7 or Chapter 13 bankruptcy can eliminate or reduce this debt, freeing up income to make the student loan payments.  

Third, if you have a steady source of income that leaves you with at least some disposable income, you may be able to qualify for Chapter 13, a three-to-five year debt repayment plan.  You can use an objection against the lender’s student loan claim to get the court to make a binding, final determination as to your exact loan balance, which can eliminate any improper charges.  Then, your Chapter 13 plan can be used to reduce the amount of each monthly student loan payment AND the interest rate on your loan for the entire three to five years you are in Chapter 13.  During that time, more of each payment you make will go to principal, reducing the total student loan balance. Some bankruptcy judges will also allow you to pay more towards your student loan debt, and less towards other debts.  If your student loans have been consolidated under a student loan program with a loan-forgiveness option, Chapter 13 will bring you closer to the date your total loan payments will be forgiven.

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Even overwhelming student loan debt can sometimes be made more manageable with the help of an experienced bankruptcy attorney.  Call the experienced bankruptcy attorneys at San Diego Law Firm at (619) 794-0243 to find out if you qualify for Chapter 7 “fresh start” bankruptcy or Chapter 13 “payment plan” bankruptcy.  Let us know when you call if your main debt is student loans, and if you have applied for any student loan consolidation and forgiveness programs.  We can help you get your finances back on track.  Please call us today at (619) 794-0243 for an appointment.

However, if you are facing a high amount of debt and are struggling to pay bills, it’s important to think about the best long-term solution to deal with your finances. The unemployment rate in California currently stands at 12.1%. It can often take an extended period of time to find employment. If you subsidize your income by borrowing from your retirement accounts during your job search, you can drain your savings and subject yourself to big tax penalties for retirement account withdrawals you then can’t promptly repay.

However, your retirement account – such as an employer-sponsored pension plan or a 401k account – is generally going to be “exempt” under California bankruptcy law. This means the account will be protected from creditors in a Chapter 7 “liquidation” bankruptcy, where certain assets are sold to pay creditors, and most remaining debts (with some exceptions) are then forgiven. In most situations, you can file for Chapter 7 bankruptcy and keep all your retirement savings for your eventual retirement. In a Chapter 13 “repayment plan” bankruptcy, you will not have to sell or cash out any assets to repay creditors, and, again, many of your remaining debts will be forgiven once your repayment plan period ends. It may be more beneficial to file bankruptcy than to burn through your retirement accounts and the rest of your assets trying to stay afloat.

Before dipping into your retirement accounts, it’s a good idea to speak with a bankruptcy attorney to find out if your retirement savings are protected under the bankruptcy code. You don’t want to use retirement savings to pay unsecured creditors, and then find yourself years later ready to retire with no savings. The bankruptcy attorneys at San Diego Law Firm are highly experienced in filing both Chapter 7 and Chapter 13 bankruptcy cases in California and can advise which and how much of your assets would be protected from creditors if you filed for bankruptcy. Please call San Diego Law Firm today at 619-794-0243 to set up a no-cost consultation.

Purchase Money Loans

A purchase money loan on a residence is a loan taken out to buy the home that you live in. The most common example of a purchase money loan is a first mortgage.  Generally, a purchase money loan is not a home equity line of credit or a home equity loan.  A refinanced loan can qualify only if it maintains its “purchase money character,” which is not always the situation.

Non-Recourse Loans and Owner-Occupied Dwellings

The purchase money loan is labeled a “non-recourse loan,” meaning that the only thing the lender can recover from a borrower upon foreclosure is the property itself, without further “recourse” to the buyer’s own funds.  This particular law only protects homeowners, not real estate investors, meaning that the law only applies to an owner-occupied dwelling.  The loan must be secured by a residence with no more than four units.  

Judicial v. Non-Judicial Foreclosure

Another important factor in determining whether anti-deficiency law will protect you is the type of foreclosure proceedings by the mortgage lender. In California, there are two types of foreclosure proceedings: judicial and non-judicial.

Judicial Foreclosure

For a judicial foreclosure, the lender must file a complaint and lis pendens (a recorded document that notifies the public of a pending foreclosure) with the Superior Court in the county where the property is located.  The court then issues a final judgment of foreclosure, and the property is sold at a publicly noticed sale.  Typically, a lender will seek a judicial foreclosure when a deed of trust does not contain a “power of sale” clause allowing a trustee to sell the property to pay off a mortgage after the property owner has defaulted on the mortgage.  This situation does not commonly occur with home loans.

Non-Judicial Foreclosure

Non-judicial foreclosures are the most common type of foreclosures in California.  Deeds of trust that contain a “power of sale” clause permit a trustee to act as a representative of the lender and sell the property in order to pay off the defaulted loan. Typically, title companies serve as trustees who handle foreclosures in California.

In California, if the lender sells a home in a non-judicial foreclosure, and the sale proceeds are not enough to pay off the purchase-money mortgage, the lender cannot sue the homeowner for the balance remaining. This is known as the “one action” rule in California.

Call San Diego Law Firm for Bankruptcy and Foreclosure Help for Homeowners

Overall, the anti-deficiency statutes are a very complex area of the law, and homeowners should not allow their homes to go into foreclosure with the assumption that the law will protect them from any further obligation to pay the mortgage loan.  An experienced bankruptcy or real estate attorney can determine whether the law applies to you, or whether a lender can obtain a court judgment against you for the balance owed on your mortgage loan.  Please contact one of our experienced bankruptcy or real estate attorneys at San Diego Law Firm today to help you with your bankruptcy and real estate needs.  Call us at (619) 794-0243 to schedule an appointment. We look forward to hearing from you.

If you are having problems with a debt collector, contact San Diego Law Firm for help.  We can stop any illegal conduct and, at no charge to you, seek compensation for you from the debt collector, who must also pay your attorney fees if their collection efforts were illegal.  If you are simply feeling overwhelmed with debt, we can evaluate your financial situation in a no-charge consultation, and you can find out whether Chapter 13 or Chapter 7 bankruptcy could be a good choice for you.

Step 1:  KNOW YOUR RIGHTS WITH DEBT COLLECTORS

Federal and California laws protect you from harassing calls by debt collectors over personal, family, or household debt. There is a long list of things debt collectors can’t do, but some of the most important ones are:

 1.  Calling you before 8 a.m. or after 9 p.m

 2.  Threatening you with a lawsuit or arrest if you don’t pay a bill

3.  Insulting, swearing, or yelling at you

4.  Leaving nasty (abusive) phone messages

5.  Calling your family (except your spouse) or any other person to collect a bill you owe

6.  Calling you at work after you tell them not to call you there.

7.  Lying to you, refusing information about the bill, or harassing you in any other way.

If a debt collector does any of these things, you may be entitled to receive money for your distress, and the debt collector has to pay your lawyer’s fees and court fees.   

Step 3:  KEEP A WRITTEN RECORD of all debt collection contacts.

A written record helps to prove the harassment or illegal conduct. The record should include the date and time of the call, the name of the caller, and what was said. Also, keep a copy of anything you mail to the debt collector.  Your record can help our attorneys settle your case against an abusive debt collector quickly, giving you compensation right away.

Step 4:  ASK FOR ALL CONTACT TO BE IN WRITING

You can and should tell the debt collector both on the phone and by a short letter to only contact you in writing, and not to contact anyone else since the debt collector already knows where you are.

Step 5:  CONTACT AN EXPERIENCED ATTORNEY FOR HELP

If you think you may have been illegally harassed by a debt collector, please call us at San Diego Law Firm for a consultation.  If you are a victim, we can seek compensation for you, and our fees will be paid by the debt collector.  And remember, even overwhelming debt can usually be handled with the help of an experienced bankruptcy attorney.  Call San Diego Law Firm at (619) 794-0243 to find out if you qualify for Chapter 7 “fresh start” bankruptcy or Chapter 13 “payment plan” bankruptcy.  We can help you take the first step toward financial freedom now.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is for individuals or married spouses with a small amount of valuable property, and either no steady income, or income that is very low when compared to their essential living expenses.  If you plan to file Chapter 7, then once you’ve bought food and medicine, you should still keep paying on:

1.  A car loan, if you have a low-value car and intend to keep it

2.  A mortgage on a mobile home, condo, or low-value home that you intend to keep

3.  Utility bills on your current address

4.  Child support

5.  Student loans

If you stop paying on your car loan or mortgage, you can expect to lose those items by repossession (for the car) or foreclosure (for the home) after a short delay that will take place after your Chapter 7 bankruptcy papers are filed.  If you stop paying utility bills, your electricity and gas will be shut off, and bankruptcy will not restart them. Child support and student loans cannot be eliminated by any bankruptcy, so it is better to keep paying those debts than to pay credit card bills or payday loans.  Tax liens are also not eliminated in Chapter 7.

You can safely stop paying on the bills likely to be eliminated in Chapter 7:   medical bills, credit card debt, payday loans, and any other “unsecured” debt.  Secured debts on furniture and appliances are likely to be reduced by the court to the current value of the item, so if you have already paid more than these items are worth, you will generally be able to keep them if they are not repossessed before you file for Chapter 7 bankruptcy. 

Chapter 13 Bankruptcy

You may be eligible to file Chapter 13 bankruptcy if you have a steady income and can make a single, affordable monthly payment for several years.  Until you file, you should definitely keep paying:

1.  Child support

2.  Your first mortgage, if you want to keep your home

3.  Your car loan, if you want to keep your car

4.  Utility bills on your current address

You should discuss with your bankruptcy attorney which of your bills are likely to be reduced or eliminated in a Chapter 13 bankruptcy.  Chapter 13 rules are complicated, and the result depends on your situation.  In general, if your home is worth less than the amount you owe on your first mortgage, the court will wipe out your second and third mortgage.  If your car is worth less than the car loan, the court will likely reduce the amount of the loan to the value of the car.  Credit card bills and medical bills will be put in the category of “unsecured debt” and any amounts remaining after you complete your Chapter 13 payment plan will be eliminated by the bankruptcy court.  If a debt such as a student loan cannot be wiped out in bankruptcy, the court may still be willing to order that a reduced payment on that loan be made as part of your single, monthly payment.

Call San Diego Law Firm for Bankruptcy Help

The bankruptcy attorneys at San Diego Law Firm can carefully evaluate your situation and advise you on whether you qualify for bankruptcy, and if so, what type.  We’ll explain bankruptcy benefits and drawbacks, the timetables, and the costs, and we’ll help you evaluate any bankruptcy alternatives that may be open to you.  If you decide to seek relief from your debts by filing bankruptcy, we will prepare and file all the necessary paperwork, attend all court hearing, and be available to answer your questions and return your phone calls throughout the process.  We offer flexible payment schedules and a no-charge initial consultation.  Please call San Diego Law Firm today at (619) 794-0243 to schedule your appointment.

But filing bankruptcy does not make sense for everyone.  Some debts get wiped out, while other debts stick with you.  Debts that usually stick with you after Chapter 7 bankruptcy include:

• Most Taxes:  Generally, taxes that are due close to the date of filing for bankruptcy stick with you.  Income taxes that are more than three years old may be wiped out.  But last year’s income taxes and all property taxes are probably going to stick with you.
• Government fines (e.g. unpaid traffic tickets)
• Student loan debt (public and private):  Student loan debt can be wiped out in rare situations where there is what is called “undue hardship.”  If you can prove that you will never be able to pay back your student loan debt, then it may be dischargeable.  Undue hardship is very tough to prove, but may exist in some situations – for example, where the school was fraudulent, or you have developed long-term health problems, or you have unexpected, enduring expenses, such as the need to care for a severely disabled child.
• A car loan on a car that you have decided to keep;
• A mortgage on a home that you have decided to keep;
• Court awards against you based on your bad behavior:   If you embezzled money, caused an accident while driving drunk, intentionally harmed someone, or vandalized a car or property, then that court award likely cannot be wiped out.
• Spousal support (alimony) and child support.

The bankruptcy attorneys at San Diego Law Firm can review your debts to determine which debts would be forgiven and which balances would remain following Chapter 7 bankruptcy.  If bankruptcy would be helpful to you, we can prepare and file your bankruptcy papers, attend all court hearings, and present all evidence and arguments that may help establish that your non-dischargeable debt falls within an exception and as a result should be wiped out.  We may also be able to negotiate a reduction in some of the debts which are left behind after your bankruptcy, such as tax debt and court awards.  If you are considering filing bankruptcy, please schedule a consultation with a bankruptcy attorney at San Diego Law Firm today by calling (619) 794-0243.