What does a Chapter 7 bankruptcy mean to you? Is it bad for you or is it bad for your creditors?

1) Chapter 7 bankruptcy usually better than a chapter 13- You may have heard that a chapter 7 bankruptcy is called a “straight bankruptcy” or that it has been called the “bad” bankruptcy.  This would put the chapter 13 in the position of being “good”.  But the  question is who is it good for?

Usually a chapter 13 is better for the creditors than a chapter 7 bankruptcy because they get paid back part or all of their debts.  There are times when a chapter 13 will benefit you if you can strip off a second mortgage or “cram down” an asset in the bankruptcy.  But those issues impact relatively few people in my opinion and for most people a chapter 7 bankruptcy is a better choice.  So a chapter 7 is usually better for you!

2) You keep your property- Chapter 7 bankruptcy is often the solution that is good for you when you have debts you cannot pay.  Most people qualify for chapter 7 bankruptcy.  Most people can keep most of their property in a chapter 7.   Many people think that they can’t keep their cars and houses in a chapter 7 bankruptcy though usually they can keep these assets and more.  The reality is that there are many generous bankruptcy exemptions in California that allow you to usually keep most of what you currently own.

3) Chapter 7 wipes out most debts – Most people can have their debts discharged or wiped out in a chapter 7 bankruptcy.  A chapter 7 allows you to usually get rid of all credit cards debts, personal loans, auto loans, and auto deficiency balances.  A deficiency balance is the amount left over after a creditor repossesses your financed car or other personal property.  The entire deficiency balance on repossessed personal property (including cars) is dischargeable in a chapter 7 bankruptcy.

Medical debts are also fully dishargeable in a chapter 7 bankruptcy as are three-year old income tax debts.  Student loans and child support are not dischargeable in bankruptcy but when people get rid of the dischargeable debts then usually they can afford to pay for the non-dischargeable ones.

4) Chapter 7 is over quickly and it is inexpensive- Chapter 7 bankruptcies are over quickly too.  After filing you get a hearing date in 30 days and the case closes 60 days after that.  The whole process ends in 90 days.  The cost is affordable with most cases being under $2000 complete and with some costing closer to $1000.

5) It is easy to rebuild credit after a chapter 7- After the chapter 7 bankruptcy process is over then it is easy to begin to rebuild your credit.  Most people have better credit score a few years after bankruptcy than they would if they continue to carry large debt loads and pay their monthly payments late every month.  This is because once the debts are discharged in bankruptcy then you don’t legally owe them any longer.  These debts therefore don’t continue to report negatively to your credit.  After the discharge it is easy to get new credit and use it to increase you score a little each month.

So for you chapter 7 bankruptcy means that you eliminate your debts, keep your property, improve your credit, and get a fresh start in life free of the weight of all that debt which puts you in a kind of prison.  So celebrate chapter 7 bankruptcy.  It’s good for you so use it to liberate you from your debt trap!

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What to consider when hiring a bankruptcy attorney in San Diego (or anywhere else)

(See my update on choosing a San Diego Bankruptcy attorney)

Are you looking to hire a bankruptcy attorney in San Diego or anywhere else?  Be sure to look at that attorney (or law firm) carefully so that you get an attorney that serves your needs.  Beware of the different concerns of the differing kinds of attorneys and bankruptcy law firms.  In my opinion there are several main issues to consider when you are examining the different bankruptcy lawyers in San Diego and deciding which one to choose to handle your bankruptcy:  (See here for an article on why you need an attorney and why you can’t go it alone)

1) Part-time bankruptcy lawyers –  There are numerous bankruptcy lawyers in San Diego.  Some of these bankruptcy lawyers only practice bankruptcy law part-time.  For some lawyers bankruptcy law is just a sideline that they practice along with other areas of law.  These attorneys may not be as immersed in bankruptcy as an attorney who does only bankruptcy work and nothing else.  Part-time bankruptcy attorneys can easily become distracted and lose focus as they split their time between different areas of law.

Also, every bankruptcy case is reviewed by a bankruptcy trustee after it is filed.  There are a number of these trustees in San Diego and one trustee is assigned randomly to each case.   The part-time bankruptcy attorneys may not have appeared before all of these trustees.  They also may not care as much about their reputation with those trustees as a full-time bankruptcy attorney would.

The full-time bankruptcy attorneys in San Diego would have had hearings with all of the bankruptcy trustees numerous times and they would be motivated to handle each case as thoroughly and correctly as possible as they could be meeting up with that trustee again in the near future.  A full-time bankruptcy attorney’s livelihood depends upon (among other things) his good relationship with those bankruptcy trustees.

Further, the full-time bankruptcy attorney probably has done and is doing a much greater volume of bankruptcies in San Diego than a part-time bankruptcy attorney.  These full-time San Diego bankruptcy attorneys therefore probably have more practice in the field of bankruptcy and they have probably perfected their skills in practicing bankruptcy law.

I received some great advice from an experienced San Diego bankruptcy attorney when I first passed the bar and I attended a seminar on bankruptcy law at the San Diego bar association.  This  San Diego bankruptcy attorney advised us not to “dabble” in bankruptcy law.  In the many years since then I have seen that this is very good advice.  Bankruptcy law is nothing to “dabble” in.  It requires our full-time attention to keep up with the changes that occur often in it.

2) New bankruptcy lawyers – There are many law schools in San Diego and many future attorneys who come from all over the country to attend law school in San Diego.  These attorneys often want to stay in San Diego after they complete law school and pass the bar.  After seeing how good the weather is in San Diego they often don’t want to return to some other colder part of the country.  This leads to a lot of new attorneys setting up practice in San Diego each year and a percentage of these new lawyers end up in bankruptcy law.

Also some attorneys in San Diego switched over from other practice areas to the practice of bankruptcy law when the recession hit a year or two ago.  One attorney I know recently told me that bankruptcy law practice is the standard area now for sole practitioners to transfer into as their respective areas of law have slowed down because of the recession.

The attorneys that recently switched into practicing bankruptcy law may only have a year or two of experience in it.  They may have only worked on a few bankruptcy cases.  They would therefore probably not have put in the time necessary to understand the nuances of bankruptcy law just like the part-time attorney.

If a bankruptcy attorney in San Diego is new to bankruptcy law then he or she probably would not have faced a very great variety of bankruptcy related issues.  This could lead them to not know what to do if an issue arises in your case that is out of the ordinary or difficult to handle.  There are numerous legal issues that affect bankruptcy law and it takes a great deal of time for a bankruptcy attorney to master them.  Bankruptcy law is like any other profession and it takes time to become proficient at it.

Brian Tracy, the success coach, says it takes 10,000 hours and seven years to master your field, whatever it is.  A bankruptcy attorney in San Diego who only has a year or two experience in the practice of bankruptcy law just does not have the time invested in the field yet for him or her to have mastered the intricacies of bankruptcy law.

3) Bankruptcy attorneys at large firms –Not all bankruptcy lawyers are the same in San Diego or anywhere else.  There are many large law firms in San Diego and some of them do bankruptcy work.  Large bankruptcy firms usually have large staffs firms of paralegals, legal secretaries and other support personnel.  All of these people are hired by the bankruptcy law firm to free up more time for the attorney.  The problem with this for you, if you hire one of these firms, is that you may find yourself interacting with the support staff instead of an attorney.

Clients have told me of previous dealings with bankruptcy attorneys in large firms in San Diego.  Sometimes they will talk to only to the staff.  One client I know who went to large firm spoke to an attorney on the phone but then interacted with only the staff in the office.  Many larger firms hire new attorneys fresh out of law school and they give small (individual) bankruptcy cases to them as the more experienced attorneys work on bigger corporate bankruptcy cases.  So even if you speak to a bankruptcy attorney at one of these firms, that attorney may have little bankruptcy experience.

Most my San Diego clients would much rather talk to a bankruptcy attorney (with experience) than non-attorney support staff because most clients are smart enough to know that the bankruptcy attorney invariably can answer their questions and deal with their case better than a non-attorney.  If these large firms have this large staff of support personnel then you will probably have less access to the attorney who you hired.  When you deal with the large bankruptcy law firm you will probably deal with the staff and not the bankruptcy lawyer.

4) Any bankruptcy attorney that you meet for the first time at the 341 hearing –I often go to a bankruptcy 341 hearing in San Diego with a client and another bankruptcy lawyer is calling out a name of a client.  This is because that particular bankruptcy lawyer has never met the client and is meeting them for the first time at the hearing.  I have also had people come up to me in the San Diego hearing waiting room and ask me if I am their bankruptcy attorney.  These clients obviously have no idea who their bankruptcy attorney is.

This is because the bankruptcy lawyer that goes to the hearings is just the lawyer that the firm sends out to attend the bankruptcy hearings in San Diego.  They have really done very little else for the client.  That client has undoubtably dealt with other lawyers in the firm or possibly just other paralegals or other staff.  The client is now faced with attending the 341 hearing with a total stranger who may not be very well acquainted with his of her case and who certainly does not know the client at all.

The point is that I wonder how this attorney can address the needs of the client that naturally come up at the 341 hearing if they have never met with them and they don’t know them?  I meet with a client several times before the hearing and I speak with them usually several other times.  They sign the bankruptcy petition and schedules in my office and I explain everything that is going to happen at the hearing and then I attend the hearing with them.  I believe that this puts my clients at ease in a situation where they are naturally nervous.

So please be aware of these different types of lawyers when you are choosing a bankruptcy attorney in San Diego or anywhere else so you insure that you choose an attorney that meets your needs.  If you call me you will get me and I’m a full-time, experienced bankruptcy attorney in San Diego (with no support staff) so you will always deal with me during your entire bankruptcy.