Bankruptcy attorneys in California

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Find attorneys and lawyers in California who specialize in bankruptcy cases

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The top 4 questions an attorney gets regarding bankruptcy

1. What are the main purposes of bankruptcy for those who cannot pay their debts?

For individuals who cannot pay their debts—called “debtors”—bankruptcy has two main purposes. First, bankruptcy operates to give the people who are owed money—the creditors—a fair share of the money that the debtors can afford to pay back. Second, bankruptcy operates to give the debtors a fresh start, by canceling many of their debts, through an order of the court called a “discharge.”
 

2. How does bankruptcy accomplish these purposes?

There are two different ways in which bankruptcy can provide for payments to creditors and a discharge for debtors—chapter 7 and chapter 13.

3. How does chapter 7 work?

In a chapter 7 bankruptcy, debtors give up certain property that they own at the time they file the bankruptcy case. This property is sold by a trustee, who uses the proceeds to pay creditors. The debtors receive their discharge shortly after the case is filed. In this way, chapter 7 debtors are allowed to keep the money that they earn after filing the bankruptcy case, as well as most other property that they obtain after the filing.

4. What property do debtors have to give up in chapter 7? What about tax refunds and lawsuits?

Debtors in chapter 7 are required to give up "nonexempt" property that they own at the time of the filing; they are allowed to keep both "exempt" property that they own at the time of filing and any property that they receive a right to own after the bankruptcy filing. Exempt property is property that, according to the law, is necessary for the debtors’ support and the support of their dependents. The law that determines what property is exempt varies from state to state. If all of a debtor’s property is exempt, then the debtor does not have to give up any property in chapter 7, but may still obtain a discharge.

 

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