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Most people who truly need to file for personal bankruptcy do qualify for Chapter 7 or Chapter 13 bankruptcy relief.

Bankruptcy: A Fresh Start

Bankruptcy can help you get back on your feet by stopping collection actions and wiping out your debt, while allowing you to keep most or all of your property.

New Bankruptcy Law

While the new bankruptcy law that went into effect on October 17, 2005, brought tremendous changes to the bankruptcy system, most people will still be able to file a Chapter 7 bankruptcy. Click on our contact page to schedule an Appointment, and find out how you can set up a free consultation.


This is the type of bankruptcy most people think they want to file—and in 90% of the cases, they’re right.  A chapter 7 proceeding is over roughly 100 days after it’s started.  For all practical purposes, in the vast majority of Chapter 7 cases, debts are essentially wiped-out the day the bankruptcy case is filed.  After that, there are a couple of follow-up items but basically you just let the process run its course. 

That’s not to say there isn’t a fair amount of work to do to get the petition filed because there is.  From start to finish the process starts with a phone call from a potential client.  A qualified lawyer at the firm take the calls, not a paralegal.  We need information in three (3) areas so that we can tell the potential client what their options are and what it would cost for us to handle their matter, as follows: income (joint income with spouse if married), the nature and amount of their debt and, third, the value of property that they own outright or that they have an equity interest in. 

If the matter is unusually complex, we’ll let the potential client know that they need an extended consultation.  The typical extended consultation lasts between 1 and 1.5 hours.  The goal is to get the additional information needed in complex cases so that we can then provide the client with their options and costs.  Only 1 in 10 of the cases that we handle require an extended consultation. In 90% of our cases-- in 20 minutes we can provide the potential client with their options and what each of those options would cost.  Two situations typically trigger the need for an extended consultation: the client makes too much money (more than the “State Median”) or, second, they have property that is not exempt and could be seized by the trustee if the bankruptcy were filed. 

Next, let’s look a bit closer at why we need information in these critically important three areas.



You can’t file under Chapter 7 if you make too much money.  The question becomes this: over the past 6 months, have you grossed more, or less, than what we refer to as the “state median” for your family size?  If it’s just you, the state median is roughly $48,000. It’s roughly $65,000 for a family of two, and $70,000 for a family of three.

If you make more than the state median, you may still qualify to file under Chapter 7.  But you have to pass what is known as “the means test.” 

Earlier, I pointed out that in 10% of our cases an extended consultation is required.  In almost all of those cases the extended consultation is required to determine if the client does or does not pass the means test. 

The means test, frankly, can be pretty arbitrary.  A family of the same size with the same income can fail the test and end up in a Chapter 13 for 5 years while another family of the same size with the same income will pass and can file under Chapter 7.  That’s because the means test is a creation of the political process. 

(To get the median income figures for your state, go to the United States Trustee's website,, and click "Means Testing Information.")




Here’s a brief list of documents to assist you in your petition to file under Chapter 7):

1.    A car payment;

2.    A  health insurance plan;

3.    Term life insurance;

4.    A history of documentable charitable contributions;

5.    Child care expenses;

6.    Alimony or child support payments;

7.    Late payment notices on your house or car;

8.    Disability insurance;

9.    A health savings account;

10. A big house payment;

11. Union dues; and,

12. Private school tuition for a child under 18. 

If you pass the means test, or if your income is below the “State Median” to begin with, then the firm will discuss the second issue in your case, the nature and amount of your debts.


Nature and amount of debt.

There are different categories of debt in a bankruptcy.  There’s debt you can wipe-out. Debt you can’t wipe out.  And debt you may want to keep.

The most common types of debt that you can’t wipe out includes: student loans (except in “hardship” cases), debt arising out of a marital settlement or divorce agreement that is owed to your former spouse, child and spousal support obligations, and money owed to a governmental agency (most commonly, back taxes). 

Debt you want to keep: many want to keep their car payment or house payment, assuming they can afford it and the property’s not way upside-down.

So the rest is debt you can wipe-out.  But some debt doesn’t fall so neatly into one category or another. The most common type of debt here is credit card debt incurred 90 days or less prior to filing the bankruptcy action.  What can you do here?  First, wait 90 days, then file! And at least give yourself a fighting chance. Second, you can argue that the debt wasn’t incurred without the intent to pay, that it was for everyday necessities and then see what happens. 


Property the client owns outright or has equity in.

If you own too much stuff, the trustee can take some of it to pay-off part of what you owe to your creditors.  But for different categories of property, California allows you to keep up to a certain amount of property even if you file bankruptcy. In legal terms if all of your property is covered by an exemption, we say that all of your property is “exempt” or fully covered by the applicable “exemptions.”


The process is pretty simple: The law firm will go through with the client what they owe, category by category.  Typically it’s as simple a process as asking this: “Excluding your retirement plan, your furniture and furnishings, clothing and everyday jewelry, if everything else that you own was sold at a quick sale, would it sell for more or less than $25,000?”  If the answer is “less,” then everything the client owns is exempt and they keep it all even if they file bankruptcy.


Can one spouse file and leave the other out?

Yes.  It makes sense where the couple are recently married and all the debt is in one spouse’s name.  It also makes sense in longer term marriages where the credit cards or business debts were incurred by just one spouse.

But the longer the marriage the greater the risk that the other spouse will be responsible for the debt even if the credit card or debt is only in the name of the one spouse.  That’s because under California’s community property laws, both spouses are responsible for the debt even if only one spouse’s name is on the debt if the debt was incurred for community purposes.

Fortunately, few creditors go after the other spouse even in long-term marriage type situations if the other spouse’s name isn’t associated with the debt.  So filing solo is a viable option even in long-term marriages, though, as noted, there is some risk.


Will filing bankruptcy stop a wage garnishment and can I get any of that money back?

Yes, filing bankruptcy puts a complete stop to any wage garnishment.  And yes you can actually force the creditor to give you back any wages garnished within 90 days of filing bankruptcy.  Getting the garnished wages back requires that you file a motion in the bankruptcy court which costs about $500 so if the amount garnished is more than the cost to file you come out ahead. 


Steps in a Chapter 7 case?

The process takes about 100 days from start to finish and typically comprises the following:

1.    Initial, free telephone conference.

2.    Initial attorney/client meeting. Takes between 1 and 2 hours.  At our firm, the meeting is with an attorney whose job is to go over every facet of a client’s bankruptcy case and make sure that we have every issue identified.  By the end of the meeting we can typically tell the client how their case will most likely proceed from there. 

3.    Prepare and file the petition and supporting documentation.

a.    Client must take a credit counseling class before they can file.

i.    Done on-line.  Takes about 30       

     minutes.(For a list of approved agencies, go to the Trustee's website at and click "Credit Counseling and Debtor Education.")

b.    Supporting documentation: court requires that certain statements in the petition itself be supported by back-up documentation.  Standard supporting documentation items include proof of income, pay-off amounts on a car or home, most recent tax return, proof of the value of a car or home, and proof of insurance on a vehicle or home. 

c.    Prepare a draft of the petition and provide it to the client for review.

4.    File the petition and supporting documentation.  The petition is filed over the internet, electronically, which means the petition can be submitted evenings or over the weekend, if necessary.   

5.    Creditor meeting.

a.    Held at an office building in downtown San Diego. 

b.    In most cases, lasts about 2-5 minutes.

c.    Trustee basically just wants to hear from the client that the petition is accurate and lists all of the client’s debts and assets.

6.    Second creditor counseling class.  This class can also be done on-line, takes about 1.5 hours and costs between $10 and $35 depending on which on-line school the client uses. 

7.    Reaffirmation Agreement.  If the client has a car and a car payment that they want to reaffirm, a separate agreement has to be prepared and filed with the court.  The client typically comes into the office, we review the agreement with them and after they sign, we send the Reaffirmation Agreement back to the creditor who then files it with the court. 

8.    Wait for the court to process the final discharge paperwork.


Chapter 13 

The basic steps involved in a typical Chapter 13 bankruptcy case.


Chapter 13 bankruptcy, sometimes called reorganization bankruptcy, is quite different from Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, most of your debts are wiped out; in exchange, you must relinquish any property that isn't exempt from seizure by your creditors. In a Chapter 13 bankruptcy, you don't have to hand over any property, but you must use your income to pay some or all of what you owe to your creditors over time -- from three to five years, depending on the size of your debts and income.


Chapter 13 Eligibility


Chapter 13 bankruptcy isn't for everyone. Because Chapter 13 requires you to use your income to repay some or all of your debt, you'll have to prove to the court that you can afford to meet your payment obligations. If your income is irregular or too low, the court might not allow you to file for Chapter 13.


If your total debt burden is too high, you are also ineligible. Your secured debts cannot exceed $1,010,650, and your unsecured debts cannot be more than $336,900. A "secured debt" is one that gives a creditor the right to take a specific item of property (such as your house or car) if you don't pay the debt. An "unsecured debt" (such as a credit card or medical bill) doesn't give the creditor this right.


The Chapter 13 Process


Before you can file for bankruptcy, you must receive credit counseling from an agency approved by the United States Trustee's office. (For a list of approved agencies, go to the Trustee's website at and click "Credit Counseling and Debtor Education.") These agencies are allowed to charge a fee for their services, but they must provide counseling for free or at reduced rates if you cannot afford to pay.


In addition, you'll have to pay the filing fee, which is currently $274, and file numerous forms. For line-by-line instructions on filling out the required bankruptcy forms, see Chapter 13 Bankruptcy: Repay Your Debts, by Stephen Elias & Robin Leonard.


The Chapter 13 Repayment Plan


The most important part of your Chapter 13 paperwork will be a repayment plan. Your repayment plan will describe in detail how (and how much) you will pay each of your debts. There is no official form for the plan, but many courts have designed their own forms.


How Much You Must Pay


Your Chapter 13 plan must pay certain debts in full. These debts are called "priority debts," because they're considered sufficiently important to jump to the head of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax obligations.


In addition, your plan must include your regular payments on secured debts, such as a car loan or mortgage, as well as repayment of any arrearages on the debts (the amount by which you've fallen behind in your payments).


The plan must show that any disposable income you have left after making these required payments will go towards repaying your unsecured debts, such as credit card or medical bills. You don't have to repay these debts in full (or at all, in some cases). You just have to show that you are putting any remaining income towards their repayment.


How Long Your Repayment Plan Will Last?


The length of your repayment plan depends on how much you earn and how much you owe. If your average monthly income over the six months prior to the date you filed for bankruptcy is more than the median income for your state, you'll have to propose a five-year plan. If your income is lower than the median, you may propose a three-year plan. (To get the median income figures for your state, go to the United States Trustee's website,, and click "Means Testing Information.")


No matter how much you earn, your plan will end if you repay all of your debts in full, even if you have not yet reached the three- or five-year mark.


If You Can't Make Plan Payments?


If for some reason you cannot finish a Chapter 13 repayment plan -- for example, you lose your job six months into the plan and can't keep up the payments -- the bankruptcy trustee may modify your plan, or the court might let you discharge your debts on the basis of hardship. Examples of hardship would be a sudden plant closing in a one-factory town or a debilitating illness.


If the bankruptcy court won't let you modify your plan or give you a hardship discharge, you might be able to convert to a Chapter 7 bankruptcy or ask the bankruptcy court to dismiss your Chapter 13 bankruptcy case (you would still owe your debts, plus any interest creditors did not charge while your Chapter 13 case was pending


How a Chapter 13 Case Ends?


Once you complete your repayment plan, all remaining debts that are eligible for discharge will be wiped out. Before you can receive a discharge, you must show the court that you are current on your child support and/or alimony obligations and that you have completed a budget counseling course with an agency approved by the United States Trustee.


EGAL DISCLAIMER/TERMS OF USE: The information at this web site is for advertising and general information purposes. This information is not intended to be legal advice for you to rely on nor does your use of this site create an attorney client relationship.  We recommend you contact the firm for specific questions.

LEGAL DISCLAIMER/TERMS OF USE: The information at this web site is for advertising and general information purposes. This information is not intended to be legal advice for you to rely on nor does your use of this site create an attorney client relationship.  We recommend you contact the firm for specific questions.



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