Certified Bankruptcy Specialist
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Bankruptcy’s Most Asked Questions

With a negative stigma surrounding bankruptcy, it isn’t given the proper chance it deserves. Many people see bankruptcy as a last resort method of fixing their financial problems but aren’t aware of the benefits it can provide. We are here to help dispel myths and rumors about the bankruptcy process, as well as answer some of consumers’ most common questions.

How Long Does Bankruptcy Take?

The length of the bankruptcy process depends on which chapter you file for. The time frames are as follows:

  • Chapter 7: 4-6 months
  • Chapter 13: 3-5 years
  • Chapter 11: 6 months-2 years depending on how complicated the case is

Is There a Debt Limit?

There is no limit to how much debt you can have to be able to file for bankruptcy, but there are limitations based on income for Chapter 7.

Potential filers of Chapter 7 must take the bankruptcy Means Test to evaluate their expenses and income to determine whether they qualify for the chapter. If their income is too high, they may be advised to file for a different chapter, most likely Chapter 13.

How Much Does it Cost to File?

The costs of filing for bankruptcy vary slightly between each chapter, and can even be waived if you make below 150% of the federal poverty guidelines. The costs for filing are:

  • Chapter 7: $338
  • Chapter 13: $313
  • Chapter 11: $1,738

You are also responsible to attend credit counseling, which tends to run between $10-$50, which can also be waived if your income is below 150% of the federal poverty guidelines.

Will I Lose My Home in Bankruptcy?

One of the most common concerns when it comes to bankruptcy deals with the risk of losing one’s home due to bankruptcy. There are times in which a house is liquidated in order to discharge debts, but with the new homestead exemption law, it is now much less likely you will have to forfeit your home.

With the equity limit significantly raised in the new law, it will be much harder for creditors to take your home, one of creditors’ biggest payouts.

Can Bankruptcy Take My Social Security Benefits?

No, federal laws are in place that protect Social Security funds from being liquidated in the event you need to file bankruptcy.
Do I Have to Be Employed to File Bankruptcy?
You do not need to be employed in order to file for bankruptcy, although it may have an effect on the success of a Chapter 13 bankruptcy.

What Happens to My Credit Score?

Though bankruptcy does make an impact on your credit score, it isn’t quite as severe as many people assume. The impact on your score is also determined by the type of bankruptcy you file for.

After filing for Chapter 7 bankruptcy, your credit score will become available 90-120 days after a discharge. The average credit score tends to initially go down about 100 points 2-3 months after filing for Chapter 7, and will hover around 500-550 for most filers.

After filing for Chapter 13 bankruptcy, your score will also be available 90-120 days after a discharge and following the 3-5 year plan. There will be a dip in your credit score, but it will not be as severe as that of Chapter 7.

Even with a slight drop in score, here are some crucial post-bankruptcy statistics to keep in mind:

  • Within one year of filing, 43% of filers had a credit score of 640 or higher
  • Within two years of filing, 65% of filers had a score above 640

Contact Our California Bankruptcy Team Today

We understand the stress that can come with a troubling financial situation. We are committed to providing personalized services to find the best and most cost-effective solution to help you gain the financial independence you deserve.

If you believe bankruptcy is the right decision for you, do not hesitate to contact us today through our website or give us a call at (310) 846-8454 to schedule your free consultation!