[COLUMN] What are the common questions about bankruptcy? Here are some answers —

Is there a constitutional right to file for bankruptcy?

Yes there is. The US Constitution adopted 250 years ago provides for the establishment of bankruptcy courts and the power to administer them. Our Founding Fathers believed that people should have the chance to make a new start in life to become productive again without accumulating debt. Before the adoption of the Constitution, we followed the concept of having prisons for debtors as was the practice in England. Debtors who could not pay their debts were imprisoned until they paid their debts. So if you lived before the constitution was passed and defaulted on your credit card debt, you would end up in jail just like a criminal.

However, with the passage of the Constitution of the United States on September 17, 1787 at Independence Hall in Philadelphia, forging a new government for the United States, debtors who cannot pay their debts do not have to go to court. jail. Instead, they can start their lives over without accumulating debt, making them productive again, while still being able to keep most if not all of their assets. Our founding fathers believed that allowing debtors to get rid of their debts would be good for society.

How many kinds of bankruptcies are there? Chapter 7 of the Bankruptcy Code gives debtors a fresh start by paying off most of the accumulated debt. Chapter 13 of the Bankruptcy Code offers debtors a financial reorganization by allowing partial payment of the accumulated debt. Chapter 13 is sometimes referred to as an “employee reorganization plan” because the payment plan is funded by the debtor’s regular salary or business income. There are also the Chapter 11 and Chapter 12 options. There is also the Chapter 20 Urban Legend. This makes Chapter 13 after Chapter 7 in certain circumstances.

Can you keep your assets if you file for bankruptcy?

Yes, debtors are able to keep most if not all of their assets while getting rid of their debt by claiming “waivers”. “Exemptions” keep an asset out of the bankruptcy estate and out of the jurisdiction of the bankruptcy trustee.

For example, the CA property exemption under 704.730 of the CA Civil Procedure Code is $ 75,000, $ 100,000 and $ 175,000 in home equity depending on the applicable circumstances of the debtor. So if you are a 65 year old and your home, which has a current fair market value of $ 600,000, has a mortgage balance of $ 425,000, your home equity of $ 175,000 is fully exempt. . You keep your house in Chapter 7. For example, you owe $ 100,000 in credit cards. You can file Chapter 7 to get rid of the $ 100,000 of credit cards while you “exempt” your house, that is, you keep your house even if you get rid of your $ 100,000 of cards. credit. You also keep your $ 200,000 retirement account by waiving it. Let’s say your 401k is $ 350,000, can you still exempt it? Sure you can. Even if you had a 401K or IRA retirement account or some other type of ERISA qualified retirement account like 403 or whatever $ 1.0 million, you can exempt the entire $ 1.0 million, exempt your $ 600,000 home while offloading your $ 100,000 in credit cards.

Is there a minimum debt requirement for Chapter 7? No. No minimum debt is required. With $ 1,000 or $ 1 billion, it makes no difference. So you can owe $ 1 billion in credit cards and other debts and have them written off, while still keeping your $ 1.0 million of 401,000? Absolutely.

How often can you file for Chapter 7?

Every eight years.

Can you keep your cars in bankruptcy?

Absolutely. Suppose you have a $ 25,000 car loan on your 2013 Tesla-S and a lease on your 2017 M-Benz c-300, and you want to keep both of them even when you file Chapter 7 to pay off 50,000. $ credit cards. and other debts. You must continue the monthly payments on the Tesla and M-Benz as before filing for bankruptcy. You don’t get the cars for free. Most of the time, you can just continue with the payments. Sometimes the creditor will require you to sign a “reaffirmation” agreement. This means that you recognize that the car loan or rental survives bankruptcy.

If you don’t want to keep the car, you can give it away and you won’t have the voluntary return deficit. For example, you flip the Tesla. The creditor sells the Tesla for $ 15,000. Without bankruptcy, you will still owe Elon Musk $ 10,000 in underperformance. With bankruptcy, you owe Musk zero.

How quickly can you rebuild your credit after bankruptcy?

Quite fast. Right after bankruptcy, you can go to a Toyota car dealership and buy a new car. However, the interest on the car loan will be higher. You could end up with 10% instead of 4% with good credit. And, there are creditors who specialize in providing credit cards to people who have just completed bankruptcy. After two years, you can get a mortgage to buy a house, but your interest will be higher. After two years, your credit score will be around 600 to 620. After three to five years, your credit score will be around 650 to 700, depending on how you handle new credit. Between six and seven years, your credit score will be around 730 to 750. In the tenth year after filing for bankruptcy, there is no record of your filing for bankruptcy in any credit report. You’ve come back to over 800 or perfect credit.

Is income tax dischargeable in bankruptcy? Yes, they are provided on condition that you meet qualifying criteria. For example, the tax due must be at least three years old. An appraisal must have been done at least 260 days ago and there is no fraud involved. For example, you owe the IRS $ 300,000 in income taxes for 2014. Chapter 7 will pay the $ 300,000 and you will no longer owe the IRS provided all of the qualifying factors for release are met. .

Who are the now successful famous people who filed for Chapter 7?

Walt Disney has filed Chapter 7 twice. Today, Disney’s business is global and worth several billion dollars. Disney has theme parks in China, Japan, France, etc. Milton Hershey filed for Chapter 7. Today, Hershey Chocolates is possibly the largest multi-billion dollar chocolate company in the world.

Will you be the next Walt Disney or Milton Hershey if you file for bankruptcy?

Who knows, maybe? But surely, if you don’t get rid of your accumulated debt now, you will never be productive again. You will remain a debt slave forever. As you know, being a slave will not get you anywhere in life because slaves cannot do much for themselves. Slaves work for their masters.

Whatever you become, debt slave, free man, and successful entrepreneur, it really depends on you. Decide and choose a productive life again or remain a debt slave until you die.

If you need debt relief, call to make an appointment. I will analyze your case personally. You will not regret it.

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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.

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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.

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