Frequently Asked Questions

Answers from a Valencia Bankruptcy Attorney

What exactly is bankruptcy? - Bankruptcy is a means of debt relief that is utilized by individuals or businesses who are no longer able to cope with their increasing financial obligations. The end result of the process is a person or business that is rid of their financial liabilities and free to start over.

Are there different types of bankruptcy? - There are three main bankruptcy types, each one designed for specific financial situations and/or debt loads. Chapter 7 is most often employed by those who do not possess assets that they are concerned about protecting (like a vehicle or home). Chapter 11 is focused towards businesses, partnerships, corporations, or individuals with significant debt loads. Chapter 13 is designed for individuals who do possess significant assets, and are intended on protecting them from liquidation in order to repay creditors. They are entered into a payment program that allows them to pay their creditors over time.

Can a person eliminate 100% of their debt in a bankruptcy? - It depends on what type of debt the person possesses, and when that debt was incurred. Debt incurred after one has filed for bankruptcy is ineligible. Tax debts (both federal and state), student loans, and alimony are also usually ineligible. For further information on which of your debts can be discharged in a bankruptcy, it is advised that you contact a Valencia bankruptcy attorney right away.

Can anyone file for bankruptcy? - There are qualification restrictions for all methods of bankruptcy. Chapter 7 requires that one take a means test prior to filing, which determines whether or not the person is actually in need of Chapter 7 protection. One intent on filing for Chapter 13 must possess an income that allows them to fund a payment plan, and must also possess a debt load that does not exceed a specific dollar amount.