Interviewer: When a person files bankruptcy do they have to give up their property, like their car or their home?
Marilyn Minger: It, again, depends on the debtor’s circumstances. In theory when a debtor files a chapter 7, all of their property becomes property of the United States trustee. Again, in theory, the trustee sells all of the property and uses the proceeds to pay the debtor’s creditors, except before doing that the trustee returns to the debtor that property which was exempt. In practice, however, when the debtor does not have any property that is not exempt, the debtor’s property remains with the debtor.
There is a list of federal exemptions, but each state is allowed to use the federal exemptions, or to create their own exemption scheme. California does not use the federal exemptions, but has two different exemption schemes, one of which closely parallels the federal scheme. One California scheme usually is used by people who have significant equity in their residence. The other generally is used by those who don’t. Under the first California scheme, a debtor can exempt from $75,000 to $175,000 equity in their home, depending on their circumstances. Under the other scheme, the debtor can exempt over $25,000 of any property under the “wild card” exemption. Under either scheme there are other exemptions for specific property, such as a vehicle, household goods and furnishings, clothes, jewelry, tools of the trade, retirement plans, health aids, and more. The amount allowed for each type of property generally depends on whether the one scheme or the other is chosen.
Also, if there is property that the debtor has that secures a debt, if the debtor wants to keep that property he or she must make sure that payments are current at the time of filing and continue to make payments after filing. If the debtor is behind in payments at the time of filing, a chapter 13 probably is the better way to go, but the current payments still need to be made.
Interviewer: Is the filing of a bankruptcy public information?
Marilyn Minger: Yes it is. Anyone can look at the filings in a bankruptcy court. Notice of a bankruptcy filing is given to anyone to whom the debtor owes money, but additionally, there are services that report the filers each day to the credit bureaus and the large creditors. The fact of a bankruptcy filing is not necessarily sent to friends or employers if the debtor does not owe them money, but the information is publically available. An employer may find out about a filing if the debtor is having wages garnished and one of the purposes of the filing is to stop the garnishment.
Interviewer: What are the costs associated with filing for either bankruptcy? How much would it cost someone to file for a chapter 7 versus chapter 13?
Marilyn Minger: Currently the filing fee for a chapter 7 is $335, for a chapter 13 is $310, and for a chapter 11 is $1,717. Attorney fees vary by chapter and jurisdiction. Fees for an individual’s chapter 7 can vary from $499 to over $3000. An attorney can charge $4800 for a chapter 13 consisting of consumer debts in the Oakland Division of the Northern District of California, and more with court approval, though only $2000 of that can be charged up front, while the rest is paid through the plan. Fees for a chapter 11 generally are by the hour, and though they require court approval before being paid, can be in the tens of thousands of dollars.
We are a debt relief agency helping people file for bankruptcy relief under the Bankruptcy Code.