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The Bankruptcy Process
Bankruptcy is a process available to individuals and corporations for redefining the legal relationship between a debtor and their creditors. The debtor becomes a bankruptcy petitioner, who is requesting relief from creditors in the form of a discharge. Sometimes this is conditional on a payment plan.
The government has ordered the federal court to issue an order for discharge when the debtor has complied with all conditions and procedures. The debtor demonstrates this with good faith, accurate and truthful declarations as to the debtor's property, income, expenses, and debts using the required forms.
Congress has established a Bankruptcy Court in your county to rule on bankruptcy cases. The Department of Justice has been ordered to create an Office of the United States Trustee in your county, and that office supervises Bankruptcy Trustees. All these authorities will review your paperwork to make sure it conforms with requirements set by Congress and the courts for a bankruptcy discharge.
You've already taken the first step in consulting with an attorney. Stephen Hosford has over thirty years experience with bankruptcy in Southern California. You'll get the benefit of his experience as to what the Court will require and what exceptions it may tolerate.
So the second step is to provide Steve with a complete picture of your financial situation. For that, we have the questionnaire and the requested documents mentioned in the retainer.
The questionnaire is modeled on the actual petition. You should list your name as you sign it, and then, give any contractions you may have used. The first name you list will be the one the Court uses on paperwork, and the one the Court will expect you to use as a signature.
Example: "John R. Doe, aka John Doe, aka JR Doe, aka John Roy Doe". The Court would expect Mr. Doe to sign all documents "John R Doe" and might reject any other signature.
You must provide the Court with your actual street address, although you can have mail sent to another location. Your social security number will appear masked on the petition, except for one document so guarded that we can't get a copy after we file it!
If you have ever filed a bankruptcy, or had one filed against you, or a company you owned, please list as much information as possible about that case. If you know the year and what county and what state it was filed in, we can probably recover the case number.
You'll be required to declare if you own stockpiles of chemicals, industrial materials, or other hazards that should be monitored whoever owns or manages the property in your bankruptcy.
If you have any lawsuits pending, we'll need to write the names of the plaintiff, the court jurisdiction, the case number, and the status of the case. If you provide us with a summons that will have the information we need.
You'll be asked to list your property in detail. When you file a bankruptcy petition, your property and debts and income are considered part of a bankruptcy estate. The trustee has authority over the estate. The point of listing all the property here is to help Steve protect as much property as possible by exempting it from the estate—that is, denying the trustee power to sell the property to pay off creditors.
You should be accurate and truthful in filling out the list of property. You should remember that large assets such as houses and vehicles are professionally valued and your estimate should be reasonably in-line with expert opinion. We'll use the BlueBook value for cars and trucks.
Also bear in mind that the trustee is looking at the resale value of personal property, not its replacement value. For example, car tires are hundreds of dollars to replace, but nobody makes much money reselling their used tires. When listing your clothing, used electronics, sports gear, boats, pets, etc., you should list the price you'd expect to get for them if you sold them as-is. That is what the Trustee would do with surplus property.
The value of money accounts such as checking accounts, IRAs, and cash-out insurance policies is the amount of money in them. Please be sure to list what you have and consult with Steve for advice before withdrawing from accounts.
When you turn in the questionnaire Steve will apply the exemptions established by law to cover as much of the equity in your property as is possible. Steve will confer with you if you have more property with equity than can be exempted, to claim exemptions what you consider most valuable. Most clients are able to exempt all equity in their personal property.
Steve will run a credit report with three agencies. We'll list all the creditors on that report. If you dispute the presence of these creditors on your report—if you don't recognize that you owe them money, Steve advises the best course is usually to leave them on the petition but mark the debt as "disputed". That way, they are discharged with the others without trying to get them removed from your credit report.
If you have bills or statements from creditors, they will help us list everybody. It's important that all your creditors are listed with their addresses. A creditor must stop collections once notified of your bankruptcy, but you have to prove they were notified.
Some creditors are secured creditors – they have an agreement with you that grants them an interest in certain property to secure debt. A mortgage is secured debt. So is a car loan. Secured creditors are entitled to the value of their security. You will have to declare what you intend to do about their debt: surrender the property, reaffirm the existing loan, or try to modify the terms. If you reaffirm the loan, the creditor will be sending us a reaffirmation agreement to review and sign.
If you have lease agreements, such as an apartment rental, let us know. If you would rather not inform your landlord of bankruptcy, let Steve know.
A cosigner is someone who gave a guarantee with you on a security agreement. This usually happens one of two ways: you signed for property used by somebody else; or, a friend or relative signed with you to help you get property that you use. Please list that person and the property involved. Your bankruptcy discharge will end your obligation to that creditor, but not the obligation by your cosigner. You should inform Steve of any such arrangement you have, so he can advise you.
Let Steve know where you currently work, and how long you've been there. If there's another adult living in your household who provides you with income, let Steve know. Please provide paystubs or proofs of income for the past six months. The trustee will expect copies of the actual proofs with a copy of your petition. If you know that you will have changes in the income, be sure to make a note of it.
When listing your expenses, please be thorough. If you have an expense that occurs every few months or once or twice a year, average it for a monthly expense.
What Are All These Questions?
The Statement of Affairs is a list of 25 fairly detailed questions. This is designed to give the Trustee a thorough idea of your financial situation. You will swear on penalty of perjury to your answers being true and complete.
Example: People have tried to pay off a large "debt" to a relative, file bankruptcy, and then "borrow" the money back from their relative. This is fraud. Fraud is a reason to dismiss a bankruptcy petition or, revoke a bankruptcy discharge already granted. The questions on this Statement put the obligation on the petitioner to disclose such arrangements to the Trustee.
Sometimes people are intimidated by this questionnaire. It's actually fairly straightforward. Most of the questions may not apply to you. When answering these questions, please do not just check "None" unless you truly have had no such transaction in the time indicated. Most of us earned some income over the past three years, and you must give the Trustee paystubs and tax returns, and the income information is there. And most probably you paid Steve a retainer that should be listed on Question 9.
The questions are specific as to what time and what transaction. If the true answer is None, please put none. If you did have such a transaction in that time, please let Steve know the details as listed. If you think an explanation is necessary, list that too. Steve will confer with you before we file anything. We can type the explanation in the answer if Steve recommends we do so.
Question 18 asks if you have operated a business in the last six years. If you have not, you will answer "None" to questions 19-25.
Here's The Questionnaire Back, Now What?
We'll put the information into Bestcase to draft the petition. Steve will assign exemptions, and verify the means test has been passed. If Steve needs further answers or has options to provide you, you may be called in for an appointment before a signing appointment. Or, you may get a call asking for a signing appointment to review and sign the petition.
Meanwhile, please make sure to obtain the tax returns and paystubs, and take the Credit Counseling Course. The case will run smoother if we do not file the petition unless we have a credit counseling certificate to attach to it.
If you have any questions about the answers on the petition please feel free to call us. You'll get to read the petition through before signing and you'll get a copy to take home.
With the petition you'll sign forms declaring what support payments you owe, or that you owe no domestic support. You'll sign the statement of social security numbers. You'll also sign a form that says your electronic signature will be valid, so we can file this petition online.
Once filed, the case will be assigned to a judge and a trustee. A date for a mandatory meeting of creditors will be assigned. You will be required to appear in person for this meeting, with photo ID, and office-issued Social Security card. Steve will plan on being with you, or if he is called into court that hour, he knows an associate attorney in your county who can appear with you. Unfortunately, we cannot know the date of the hearing until the petition is filed. It is usually not less than four weeks from the day of filing.
You will be assigned a case number. The Court will mail a notice of bankruptcy to all listed creditors. Steve will also mail a letter to all creditors with a copy of the court notice of bankruptcy.
When you have your case number, you can take the second required course, the Financial Management Course. The court will mail you notice of your Meeting of Creditors and a blank Form 23. You should fill out Form 23 after you have your certificate with the second course. Send both the certificate and the Form 23 to Steve and we'll file them online.
I'm Filing a Chapter 13
A Chapter 13 bankruptcy involves a long-term repayment plan. The plan will run between three and five years.
When you hand back your questionnaire and tax returns and paystubs, Steve will calculate a payment plan along with the petition. The plan will use most of your disposable income. Steve will confer with you as to what you can reasonably afford to spend, what will be paid inside the plan, and what will be paid outside the plan.
The plan will be filed and mailed with the petition. Usually the Plan will be reviewed by the Trustee at the Meeting of Creditors. If it is sound, the plan will be approved at that meeting and you will not have to attend a second, Confirmation Hearing. If you are asked to make changes before the Confirmation Hearing, you will be expected to return for that Hearing.
Before attending the Meeting of Creditors you must file declarations regarding payments on secured debts since you filed the petition. Please have either cashier's checks or copies of bank statements showing the payments. We will call you to schedule an appointment to sign these declarations.
Plan payments must be made each month by cashier's check to the trustee at the address provided when he is assigned. Direct withdrawal may be available.
It is vital to understand that the Plan payment is an absolute commitment. If you cannot make a timely plan payment, please tell Steve before it is due. If your circumstances require an amended Plan, let Steve know. If you are totally unable to continue with the Plan, let Steve know. There are ways of ending a 13, or converting the bankruptcy, that will not cause you to lose protections that are forfeit if the Trustee has your Chapter 13 bankruptcy dismissed.
How Long Will This Take?
A Chapter 13 bankruptcy will run the life of the plan. The plan is supposed to last between 3 to 5 years.
A Chapter 7 bankruptcy discharge is not supposed to be granted before 60 days after the date of filing. The Meeting of Creditors is usually 30 to 35 days after the date of filing. You have 45 days after that date to file the Form 23 and second course certificate. If you declared your intent to reaffirm secured debt, the case may take longer if the agreement is not speedily filed.
The Central District of California is one of the busiest in the nation for bankruptcy filings. Once all your documents are in and the trustee submits a final report, we are waiting for the overworked courthouse staff to process the petition. They have a backlog of a month or more at most courthouses.
Steve has observed that if the Trustee calls for corrections to a petition at the Meeting of Creditors, the case may be delayed another month. If creditors circulate a reaffirmation agreement, that may take more time. Also, a creditor may assert that their debt is really secured, not unsecured. The best way to reduce the length of time in bankruptcy is to be accurate and complete in our petition documents and supporting paperwork.
If all your documents are complete and accepted at the first Meeting, then that should be your last court appearance. You enjoy bankruptcy protection from collections from the date of filing to the date of discharge. The discharge is usually granted within five months.
During this time, if you have questions about Steve's counsel regarding your finances while you are in bankruptcy, or your circumstances change, or you have any questions, please feel free to call us.
Contact Our Tustin, California Offices
Our office is conveniently located one mile from the 55 and Garden Grove freeways. We are available to meet with you to discuss your consumer debt management options during regular business hours and evenings by appointment.
Contact us by calling 714-730-8202 or on-line to schedule an initial consultation.
Hosford & Hosford, Inc., A Law Corporation
17821 East 17th Street, Suite 295
Tustin, CA 92780-2163
Telephone: 714-730-8202| Fax: 714-730-1959
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At the Orange County, California law offices of Hosford & Hosford, A.L.C., we provide experienced consumer bankruptcy representation to clients in cities including: Tustin, Irvine, Orange, Anaheim and Santa Ana.
|Orange County Bankruptcy Attorneys - Chapter 7 Bankruptcy, Chapter 11 Bankruptcy, Chapter 13 Bankruptcy
The information you obtain at this site is not legal advice. For legal advice, consult an attorney for advice regarding your own situation.
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