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Bankruptcy – “A New Opportunity in Life”
Bankruptcy “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.”
The United States Supreme Court in Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).

When your debts have become too much for you to handle - when you hate answering the phone, because so many calls are from debt collectors - when you are afraid of losing your house, your car or other possessions, because you are past due and cannot afford to make the monthly payments - take comfort in knowing that you do have options.  There is nothing to be ashamed of.  The law understands that sometimes your debts can get out of hand for reasons beyond your control.  In such cases, The Law Offices of John P. Skowronski is here to help you decide if bankruptcy is the right option for you.  If it is, JPS can help you with all aspects of your bankruptcy case, from counseling you on the entire process to filing the petition to attending the Creditors’ Meeting to responding to any motions that may be filed to assisting with the final discharge
The purpose of bankruptcy is to provide a means of safeguarding the rights of both the debtor and the creditors.  What this means is that bankruptcy tries to find a way to allow the debtor to keep enough property and money in order to maintain a reasonable standard of living, while also requiring the debtor to repay the creditors as much as he/she can.  Obviously, often there simply is not enough money to pay the creditors in full.  Generally speaking, in such cases, around the time that the bankruptcy case is completed, the debtor’s remaining qualifying debts are automatically discharged.  Upon discharge, the debtor is no longer legally required to repay these debts.  Please note, though, that not all debts are dischargeable.
Commencing the Bankruptcy Case - Filing the Petition
The debtor’s bankruptcy case is commenced by the filing of a Petition with the Bankruptcy Court in the appropriate district and division.  In the Bay Area, we are in the Northern District of California.  Debtors in San Francisco County, San Mateo County and (for the time being) Marin County, file in the San Francisco Division.  Debtors in the East Bay file in the Oakland Division.  Debtors in South Bay file in the San Jose Division, and debtors north of Marin file in the Santa Rosa Division.

The petition is filed with the Bankruptcy Court together with appropriate schedules and other supporting documentation.  A trustee will be assigned to the case, and the debtor must provide the trustee with certain documentation to assist him/her with the administration of the debtor’s case.
Section 341 Creditors’ Meeting
Because bankruptcy aims at protecting the interests of both the debtor and that debtor’s creditors, the bankruptcy laws require that there be a meeting where the creditors can offer any objections to the bankruptcy case.  This meeting is usually scheduled to occur approximately 30 days after filing of the bankruptcy petition.  This meeting is mandatory for the debtor and the trustee, however, creditors can decide whether or not to attend.  This is known as the 341 Meeting, the Section 341 Meeting, the Meeting of Creditors, or the Creditors’ Meeting, even though, often, where the debtor has no real assets, no creditors will actually attend.  Where creditors object to the plan or wish to make a claim on certain assets, this meeting can become contentious.  Your attorney should accompany you to this meeting.  At JPS, we always accompany our clients to these meetings.
Chapter 7 versus Chapter 13
The two most important chapters of bankruptcy for consumers are Chapter 7 and Chapter 13. 

Chapter 7 is sometimes called the “Fresh Start” bankruptcy chapter.  Generally speaking, a Chapter 7 bankruptcy case is very quick and provides for the liquidation of a debtor’s assets to repay the debtor’s creditors.  Most Chapter 7 bankruptcy debtors do not own their house or have significant assets and are considered “no asset” cases, so this chapter can provide quick and effective relief.  For more details on this chapter of bankruptcy, please see Chapter 7 – Fresh Start.

 Chapter 13 does not provide for immediate liquidation of the debtor’s assets.  Instead, it allows the debtor to reorganize debts so that they are more manageable.  Generally speaking, Chapter 13 is more involved, can take 3 – 5 years, provides for the restructuring of debt, requires the submission and approval by the court of a plan for the restructuring of debt, and also provides for the discharge of qualifying debt at the end of the bankruptcy case.   For more details on this chapter of bankruptcy, please see  Chapter 13 – Reorganization.
In order to file bankruptcy, you must be eligible for the particular chapter you wish to file under.  Chapter 7 has strict eligibility requirements, where the debtor must prove that his/her monthly gross income is not greater than a certain amount for the region in which he/she lives. For more details on eligibility under this chapter of bankruptcy, please see Chapter 7 – Fresh Start

The eligibility requirements for Chapter 13 are less strict than Chapter 7, however there are limitations on how much secured and unsecured debt the debtor may have, and the debtor must prove that he/she has enough income to make the payments under the Chapter 13 plan.  The chapter that you might qualify for will depend on your particular financial situation.  For more details on this chapter of bankruptcy, please see  Chapter 13 – Reorganization.
For people considering bankruptcy, two of their main concerns are (1) how does discharge work and (2) what debts can be discharged?  Generally speaking, unless a creditor sues to prevent a discharge, at or near the end of the debtor’s bankruptcy case, any remaining dischargeable debt will automatically be discharged.  This means that the debtor will be relieved from any legal obligation to pay these debts.  The creditors will have no legal right to demand payment for these debts.

Not all debts are dischargeable in bankruptcy.  In determining whether to file bankruptcy, a debtor should determine which debts will or will not be dischargeable.  Chapter 13 provides for more categories of dischargeable debt than Chapter 7, but, generally speaking, the courts have determined, for public policy reasons, that certain categories of debt will not be dischargeable.  Although, there are exceptions to this rule (i.e. if the debtor can show undue hardship), unless otherwise noted, the following categories of debt are automatically not dischargeable in bankruptcy:

  • debts not set forth by the debtor on the lists and schedules the debtor must file with the court (this is why it is very important to fully complete the bankruptcy forms and list all creditors and debts)
  • certain types of tax claims
  • debts for spousal or child support or alimony
  • debts arising from property settlements in divorce or separation proceedings (dischargeable in Chapter 13)
  • debts for willful and malicious injuries to person or property (creditor must request that these not be discharged; dischargeable in Chapter 13)
  • debts to governmental units for fines and penalties (dischargeable in Chapter 13)
  • debts for most government funded or guaranteed educational loans or benefit overpayments
  • debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated
  • debts owed to certain tax-advantaged retirement plans
  • debts for certain condominium or cooperative housing fees
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  Chapter 7 - Fresh Start
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  Bankruptcy Basics
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Resource Center
United States Courts − Bankruptcy
A brief overview of the structure and function of bankruptcy courts.
United States Courts − Bankruptcy
Chapter 7Liquidation Under the Bankruptcy Code.
United States Courts − Bankruptcy
Chapter 13Individual Debt Adjustment
HUD − Loan Modification Frequently Asked Questions
FHA Loan Articles − What You Should Know About Obama Loan Modification
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