Bankruptcy Q&A: What Assets are Protected and How Much Do Bankruptcy Lawyers Cost?
January 28, 2010 · Filed under Bankruptcy, Podcasts
Here is a written version of our podcast #2 on the subject of bankruptcies in California
Q. What is protected in bankruptcy in California
A. Most people do not lose any of their belongings and necessities in bankruptcy. The end goal of bankruptcy is to get you back on your feet financially. Therefore, your basic necessities such as furniture, clothing, etc. are protected in bankruptcy, so as to help you re-establish yourself. The equity in your home and car, and most of your personal belongings will, in all likelihood, be protected in bankruptcy.
Having said that, the actual bankruptcy statutes that protects your assets in bankruptcy are very complicated. In California, there are two sets of exemption statute a person can choose from depends on the type of assets and amount of equity in question, you should consult an attorney to maximize the protection that you are afforded under Bankruptcy Law.
Q. How much does working with a lawyer cost?
A. The cost of working with an attorney varies by the attorney. My fees for a Chapter 7 case range between $1,200 to $2,500 depending on complexity and the amount of assets involved. My fees for a Chapter 13 case range between $2,800 to $3,300 and also depends on complexity. It’s important to work with an attorney who not only know how to complete the paperwork, but also someone who understands the law so that your case does not get delayed or dismissed because mistakes are challenged by the creditors or the bankruptcy trustee. So I would caution anyone who considers price as the determining factor in hiring counsel.
Q. Do you have to work with a lawyer in order to declare bankruptcy? Why might I choose counsel?
A. No, you don’t have to work with a lawyer to declare bankruptcy. However, the rules and laws that govern bankruptcy are extremely complicated, so I would not recommend filing for bankruptcy as a do-it-yourself project.
Q. Everyone who wants to declare can’t. Who decides?
A. There are income and eligibility requirements for Chapter 7 and Chapter 13 cases. Those who are not eligible to file neither Chapter 7 nor Chapter 13 can file Chapter 11 bankruptcy. But each person’s family and financial circumstances are unique, so it’s important to consult with an experienced bankruptcy attorney to determine which bankruptcy option you are eligible for. Certainly, in a particularly difficult case where the income and eligibility requirements are debatable, then a bankruptcy court judge will ultimately decide on the issue.
Q. If you file Chapter 7 or 13 Bankruptcy can the creditors take your income tax refund?
A. In almost all of the cases I have handled, income tax refund are sheltered by the bankruptcy exemption statutes, but it is considered an asset if the refunds has not yet been received by the debtors.
Q. How long will bankruptcy stay on a credit report?
A. Bankruptcy will stay on your credit report for up to 10 years, but if you have a decent income, you will still find credit. With over a million people a year filing bankruptcy, banks that have previously shunned customers who have filed for bankruptcy are now designing financial products specifically catered to customers who have filed for bankruptcy because a) there is a huge market of people who have filed for bankruptcy, and b) those who have filed for bankruptcy are starting over with a clean slate and are not burdened with debts that would cause them to default on new obligations.
Be sure to check out the rest of our podcasts on a variety of legal subjects courtesy of the Law Office of Cecilia Chen.
