What is Bankruptcy?

You have probably heard a lot of stories about bankruptcy, or are worried about what might happen if you file for bankruptcy. Actually, bankruptcy is designed to help you! If you have debts that you can’t pay, bankruptcy can help you find relief. We understand that sometimes there are circumstances beyond your control.

Bankruptcy can wipe out your debt. It helps you find a way to pay back your creditors, with a payment plan. You will have to pay back some of them in full, some partially, and some not at all, depending on your situation.

Help! I’m getting calls all the time from bill collectors, demanding that I pay them! What do I do?

As soon as you file for bankruptcy, we can help you get an “automatic stay” from the court. This STOPS creditors from calling you immediately.

What else can an “automatic stay” help me with?

  1. -Keep your utilities from being disconnected
  2. -Temporarily stop a foreclosure
  3. -Temporarily stop an eviction
  4. -Stop wage garnishment

Are there any debts that are not discharged (wiped out) in a bankruptcy?

Yes. Student loans, money borrowed to pay taxes, debts incurred using fraud, certain purchases and cash advances in the 90 days prior to bankruptcy, and acts caused by a willful and malicious injury are not discharged.

Also non-dischargeable are debts relating to death or personal injury involving a vehicle where the debtor was intoxicated (drugs or alcohol).

Most debts incurred pursuant to a divorce or separation agreement are not dischargeable in a Chapter 7. Child and spousal support are not dischargeable although they may be paid in a Chapter 13.

Can I discharge taxes?

Sometimes. Income taxes (Form 1040) can be discharged if

  1. -The tax return was due more than 3 years ago
  2. -The tax return was filed more than 2 years ago
  3. -The tax was assessed more than 240 days ago
  4. -The return was not fraudulent
  5. -The debtor did not willfully attempt to evade or defeat the tax

My house was foreclosed.  Do I have to file bankruptcy?

It depends.  If the only deed of trust on the property was a first deed of trust, then you have no liability.  If the second deed of trust was purchase money, that is, used to buy the house and not refinance it, then you have no personal liability in an ordinary foreclosure.

Keep in mind that if you do bad things to the house (i.e. remove copper wire), you have liability for that.

Will I lose my stuff if I file bankruptcy?

It depends on the kind of bankruptcy you file. If you file a Chapter 7 bankruptcy, you can likely keep your assets. If you file a Chapter 13 bankruptcy, your assets will be liquidated to pay your debts. Some assets are exempt.

Will bankruptcy hurt my credit?

After you file bankruptcy, it can stay on your credit report for up to ten years.

Which kind of bankruptcy should I file?

You can file a Chapter 7 or a Chapter 13 Bankruptcy.

A Chapter 7 Bankruptcy can be filed by an individual or a business. It involves a liquidation of assets, meaning property is sold by the trustee to pay your debts. Some property is exempt

A Chapter 13 Bankruptcy involves your debt being “reorganized”, meaning that you then make payments over the next few years to pay your debt.

What is the difference between secured and unsecured debt?

Secured debt is when the creditor to whom you owe the money has a claim on a particular item, like a car loan or a house mortgage. Unsecured debt means there is no particular piece of property tied to the loan.

If I’ve filed bankruptcy before, can I still file bankruptcy again?

Yes, it depends on when you have filed and what kind of bankruptcy.

~ If you filed a Chapter 7 more than 8 years ago, you can file again.

~ If you filed a Chapter 7 more than 4 years ago, but less than 8, you can file a Chapter 13 and get a discharge.

If I file bankruptcy, does my spouse have to file with me?

No. However, if one spouse files bankruptcy, all community property is an asset of the bankruptcy. Your spouse’s income “counts” for the Means Test.

What is a “Means Test”?

There are certain standards for monthly income. The Means Test uses those standards compared to your income and expenses to determine whether you can file bankruptcy.

When I file bankruptcy, do I need to list all of my creditors (the people I owe money to)?

Yes. You can continue to pay those creditors that you want to pay, but you still have to list every creditor, including the ones you are not currently paying.

Am I responsible if I have co-signed a loan with someone?

Yes, you are. You are responsible for the debt and must list it on your bankruptcy.

When I file for bankruptcy and I list my assets, what happens if I forget to list something?

There are a number of possibilities, none of them good but some a lot worse than others.


It is necessary to file an amendment to add the asset.  This does require a fee.

Loss of Credibility

If a trustee doesn’t believe you, he looks harder.  Even if there is nothing to find, it still  involves time, effort and stress that could be avoided.

Loss of the Asset

If you recklessly or intentionally fail to list an asset, you may lose your right to exempt (keep) the asset.

Denial of Discharge

If you conceal an asset from the trustee, your discharge can be denied.  A denial of discharge means your debts are not wiped out and the creditors can still collect their debts.  It also means the trustee still gets to sell your non-exempt assets.

Federal Prison

Concealment of an asset is a federal crime.  Prosecution is rare but it does happen.

Obviously, if you file bankruptcy in January and don’t think you are going to get a tax refund and amend your bankruptcy to show a tax refund, no one is going to think it is fraudulent.  If you “forgot” you gave a Porsche to your brother, there is a reason to worry.

What if I discover a new debt?

Your lawyer can amend your application to include the new debt.

Do I have to go to the meeting of creditors?

Yes.  You need to appear at the scheduled meeting of creditors and answer the questions that the trustee asks you.

If there are extraordinary circumstances (you are in the hospital, your spouse is in the hospital, if you live in Lake Isabella and the Canyon is closed) it is possible to get a continuance.  Failure to appear without an extraordinary circumstance might mean your case is dismissed.

Who goes to the meeting of creditors with me?

Patrick Kavanagh.  I do not use appearance attorneys.  In the last 10 years, there was only one occasion in which I had to be out of Bakersfield.  Other than that, I have appeared at all of the meetings of creditors on the cases that I filed.