Sean S. Hanley
Attorney at Law for Bankruptcy

San Jose, California, Bankruptcy, Foreclosure and Debt Relief Attorney at Law since 2007. In addition to bankruptcy, foreclosure and debt relief law, I specialize in real estate transaction law and general law. Call me now for a free phone consultation at 408-293-0344.

Bankruptcy laws were recently modified by U.S. Congress in recognition of America's current precarious economic situation. The intent of bankruptcy law is to allow a "fresh start" to Americans in pursuit of the American Dream (Title 11, U.S. Bankruptcy Code, pursuant to the U.S. Constitution, Article 1, Section 8).

In pursuit of Congress' intent of giving debtors a "fresh start," the bankruptcy laws were drafted so that debtors can STOP HOME FORECLOSURES, KEEP PERSONAL PROPERTY, and REMOVE ALL CREDIT CARD DEBT.

Knowing whether you will be able to keep your real or personal property depends on your individual circumstances, which mandates a comprehensive review of your financial situation by a qualified bankruptcy attorney.

Many people with a regular income will be able to retain their homes and cars with reasonable payment plans done through the bankruptcy court.

Chapter 7 Bankruptcy is a "liquidation" bankruptcy – it cancels most type of debt, but the debtor must let the bankruptcy trustee liquidate (or sell) their nonexempt property for the benefit of the debtor's creditors. 99.9% of Chapter 7 cases are classified as "no asset" cases because there are no nonexempt assets for the trustee to liquidate after all the proper exemptions have been applied to the debtor's bankruptcy petition. This means that most Chapter 7 filers get to keep all of their property.

Generally, people file for Chapter 7 Bankruptcy if they have a large amount of unsecured debt, such as credit card debt or medical expenses, that they are no longer able to pay. Unemployment, unexpected medical expenses, and/or divorce are common causes for debtors that file for Chapter 7 Bankruptcy.

Chapter 13 Bankruptcy is a wage earners plan, or "repayment plan" bankruptcy. Chapter 13 enables individuals with regular income to develop a plan to repay all or a portion of their debts over time, under the supervision of the bankruptcy court. Chapter 13 Bankruptcy allows the debtor to keep their property, while using their income to repay some or all of their debts over the course of a 3 - 5 year plan.

A Chapter 13 can be a good solution for people who need time to pay off certain debts and who have enough income to meet the Chapter 13 requirements. In Chapter 13, the debtor keeps all their property regardless of value. However, the Chapter 13 debtor will have to pay their unsecured creditors (credit card debts, medical debts, and most court judgments, etc.) the value of the property the debtor would lose if they filed for Chapter 7 Bankruptcy.

A typical Chapter 7 debtor, on the other hand, Discharges all of their unsecured debt.

When a debtor files for Chapter 13, the debtor must submit a repayment plan. The repayment plan must demonstrate that the debtor can pay their mandatory debts and perhaps a portion or all of their other debts, over a 3 - 5 year repayment period. If the debtor's current monthly income is less than the applicable state median, the plan will be for 3 years, unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan must be for 5 years. During this time, the law forbids creditors from starting or continuing collection efforts.

Chapter 13 cases (3 - 5 years) are much longer than Chapter 7 cases (typically, 3 - 4 months) and are much more complex and expensive.

A Chapter 11 Bankruptcy case is frequently referred to as a "reorganization" bankruptcy. Chapter 11 Bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities.

When a business is unable to service its debt or pay its creditors, the business or its creditors can file for protection with a federal bankruptcy court under Chapter 7 or Chapter 11.

In a Chapter 7, the business ceases operations, a trustee sells all of the business' assets, and the proceeds are then distributed to its creditors. Any residual amount is returned to the owners of the company. In a Chapter 11, the debtor remains in control of its business operations as a "debtor in possession" and is subject to oversight and jurisdiction of the court.

Chapter 11 affords the debtor in possession a number of mechanisms to restructure its business. A debtor in possession can acquire financing and loans on favorable terms by giving new lenders first priority on the business' earnings. The court may also permit the debtor in possession to reject and cancel contracts. Debtors in possession are also protected from other litigation against the business through the imposition of the automatic stay. While the automatic stay is in place, most litigation against the debtor in possession is stayed until it can be resolved in the bankruptcy court, or resumed in its original venue.

If the business' debts exceed its assets, the bankruptcy restructuring results in the company's owners being left with nothing; instead, the owners' rights and interests are ended and the company's creditors are left with ownership of the newly reorganized company.

While a Chapter 11 usually results in reorganization of the debtor's business or personal assets and debts, it can also be used as a mechanism for liquidation. Debtors may emerge from a Chapter 11 Bankruptcy within a few months or within several years, depending on the size and complexity of the bankruptcy. The Bankruptcy Code accomplishes this objective through the use of a bankruptcy plan. With some exceptions, the plan may be proposed by any party in interest. Interested creditors then vote for a plan. Upon confirmation, the plan becomes binding and identifies the treatment of debts and operations of the business for the duration of the plan.

Property you can keep after filing for Chapter 7 Bankruptcy:

In a Chapter 7 Case, debtors can keep all the property that is exempt from claims of creditors. In determining whether property is exempt, debtors must keep a few things in mind. The value of the property is not what you paid for it, but what the fair market value of it is now. The Trustee is interested in the resale value of the debtor's property, so for most personal effects, this is the "garage sale" value of the property.

Debtors need to look at the equity in the property. The attorney for the debtor will count their exemptions against the full value of the property, minus any money that the debtor owes on mortgages or liens.

Example: Assume Tommy Townhouse owns a townhome with a fair market value of $50,000. and $40,000. mortgage. Depending on what exemption system Tommy utilizes (California has two exemption systems that debtors can choose from), Tommy could exempt the $10,000. equity in the property under the "Homestead" exemption, or the "wild card" exemption. This will allow Tommy to keep the property in a Chapter 7 case, so long as Tommy remains current on his mortgage payments as exemptions don't prevent a mortgage holder or car loan creditor from taking the property to cover the debt if the debtor is behind on payments.

Once again, debtors MUST remain current on their mortgage BEFORE, DURING, and AFTER BANKRUPTCY to avoid their property being reclaimed by the lender.

What debts are "Discharged" in a Chapter 7 Bankruptcy?:

A Chapter 7 Bankruptcy not only allows the debtor to keep exempt property, but it also Discharges (or releases the debtor from personal liability) for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communication with the debtor, such as telephone calls, letters, and other personal contact.

Some of the Main Dischargeable Debts include the following:

Credit Card Debt: With a few rare exceptions for cases involving fraud or luxury purchases immediately prior to a debtor's bankruptcy, debtors can expect to get rid of all their credit card debt in a Chapter 7 Bankruptcy.

Medical Bills: Many people who file for Chapter 7 Bankruptcy got into financial turmoil because of mounting medical bills, which are often the result of unexpected medical conditions, or inadequate insurance coverage of the debtor. Some 40 million Americans have no medical insurance or other access to affordable medical health care and must rely on emergency rooms for their primary care. Many more Americans simply have inadequate insurance to cover unexpected medical issues. Luckily, filing for Chapter 7 Bankruptcy will get rid of all of a debtor's medical bills.

Lawsuit Judgments: Most civil court cases are about money. If someone wins a civil lawsuit against a debtor, the court issues a judgment ordering the debtor to pay. If the debtor does not voluntarily pay what is owed, the judgment holder is entitled to collect it by, for example, grabbing the debtor's bank account(s), levying their wages, or placing a lien on their home. Money judgments are almost always dischargeable in a bankruptcy regardless of the facts that led to the lawsuit.

Debts Arising from Car Accidents: Car accidents typically result in property damage and sometimes personal injuries. Often, the driver who is responsible has insurance that pays for the damage or injury. Sometimes, however, the driver at fault does not have insurance, or does not have enough insurance to cover the damages to the other injured party. If the accident was the result of the debtor's negligence (careless driving), the debt arising from the accident can be discharged in a Chapter 7 Bankruptcy. If, however, the accident was the result of the driver's "willful/maliciousness," or was the result of "drunk driving," then it will not be discharged in a Chapter 7 Bankruptcy.

Obligations Under Leases or Contracts: Some debtors have obligations under a contract, such as a contract to sell real estate, buy a business, deliver merchandise, or perform a specific type of activity. The other party may want to force the debtor to hold up to their end of the bargain even if the debtor does not want (or is unable) to, and sue for damages for breach of contract. Obligations and liabilities under these types of agreements can also be discharged in bankruptcy. Almost always, filing for bankruptcy will convert the debtor's lease or other contractual obligation into a dischargeable debt, unless the Trustee believes the lease or contract will produce money to pay unsecured creditors, or the court finds that the debtor is filing for bankruptcy purely to get out of a personal services contract.

Personal Loans and Promissory Notes: Money a debtor borrows in exchange for a Promissory Note (or even a handshake and an oral promise to pay money back) is almost always dischargeable in a bankruptcy.

There are certain debts that bankruptcy does not affect at all – a debtor will continue to owe them just as if they never filed for bankruptcy.

Some Non-Dischargeable Debts include:

Domestic Support Obligations: Domestic Support Obligations are child support, alimony, and any other debt that is in the nature of alimony, maintenance, or support.

Fines, Penalties, and Restitution: Debtors cannot Discharge fines, penalties, or restitution that a federal, state, or local government has imposed to punish the debtor for violating a law.

Certain Tax Debts: While regular income tax debts are dischargeable if they are old enough and meet some other requirements, other types of taxes are frequently not dischargeable, such as fraudulent income taxes, property taxes, and other taxes that are mostly business related.

Court Fees: If the debtor is a prisoner, they cannot discharge a fee imposed by a court for filing a case, motion, complaint, or appeal, or for other costs and expenses.

Intoxicated Driving Debts: If the debtor kills or injures someone while driving drunk, any debts resulting from the incident are not dischargeable.

Condominium, Cooperative, and HOA Fees: Debtors cannot discharge fees assessed after a bankruptcy filing date by a membership association for a condominium, housing cooperative, or lot in a homeownership association if the debtor or the trustee has an ownership interest in the condo, cooperative, or lot. This means that any fees that become due after the debtor files for Chapter 7 Bankruptcy will survive the bankruptcy, but fees owed prior to filing will be discharged.

Debts for Loans from a Retirement Plan: If the debtor borrowed from their 401(k) or other retirement plan that is qualified under IRS rules for tax-deferred status, the debtor will be stuck with that debt. Bankruptcy does not discharge 401(k) loans.

Special Note: There are some debts that are not dischargeable unless you can prove that an exception applies at which point, they will become dischargeable (Example: Student Loans).

In most bankruptcy cases, the debtor only has to go to a proceeding called the "Meeting of Creditors" or a "341(a) Meeting" to meet with the Bankruptcy Trustee and any creditor who chooses to come. This meeting will take place about 30-40 days after the bankruptcy filing. The Trustee is not a judge, but an individual appointed by the U.S. Trustee to oversee the debtor's case. Most of the time, the 341 Meeting is a short and simple procedure where the debtor is asked a few questions about the bankruptcy forms and the debtor's financial situation.

Occasionally, if a creditor or the Trustee files a motion or an adversary action or if the debtor chooses to dispute a debt, the debtor may have to appear before a judge at a hearing (very rare circumstances). If the debtor needs to go to court, the debtor will receive notice of the court date and time from the court and/or from the attorney representing the debtor.

There is no clear-cut answer to this question. Unfortunately, if the debtor is behind on bills, the debtor's credit has likely already been negatively impacted. Filing for bankruptcy is a one-time event that many times is less damaging to a debtor's credit than having a history of unpaid accounts.

What is a surety is that filing for bankruptcy can be reported on a debtor's credit report for 10 years after the date of filing, however, if the debtor has income, they should be more credit worthy after filling for bankruptcy since their old creditors no longer have a claim on their future income and the debtor will be in a better position to pay their current bills.

Once a bankruptcy case is complete, the balance of all the debtor's Discharged debts will be reported as "0." The history of delinquencies may be reported, however, the balance of these debts will be zero.

Negative credit history is just that... history. Banks and other financial institutions are more aware than ever of the status of the depressed economy. Filing for bankruptcy is not uncommon and doing so in no way dooms the debtor to perpetual credit rejection.

Countless Americans that have recently filed for bankruptcy have earned the highest credit ratings possible after strengthening their financial presence by saving and using credit carefully. The best way for a debtor to restore their credit and obtain new credit is to make payments on new debts on time.

Filing for bankruptcy allows debtors to take financial management courses, which helps debtors learn how to repair their credit and ensure they will never have to file for bankruptcy again.

Debtors should review their credit report after completing their bankruptcy to ensure that their old debts are noted as "Discharged" on their credit report, since it is proof that the old discharged debts are no longer legally enforceable. A free report can be obtained at Annual Credit Report.

Yes! There are several options available to debtors.

While technically not a credit card, debtors can use a bank or debit card to perform activities for which the debtor would normally use a credit card. The debtor may also be able to keep the credit card they already have if the creditor grants approval. If these options do not work, the debtor can get a secured credit card, which is backed by the debtors own bank account.

Debtors must be careful. Most debtors are inundated with credit card company offers post-bankruptcy Discharge. Credit card companies view debtors whose debts have been discharged in bankruptcy as perfect clients as their debts after discharge are "0" and debtors cannot file for bankruptcy for another 8 years.

Be careful! Debtors should not overextend themselves and sign-up for a bunch of new credit cards simply because they qualify. Debtors don't want to be in another financial catastrophe without the fallback potential of filing for bankruptcy (can only file Chapter 7 every 8 years).

Public utilities, such as electric company, cannot refuse or cut-off service because a debtor filed for bankruptcy. However, utility companies can require a deposit for future service and debtors have to continue making payments on bills that arise after the bankruptcy petition is filed.

Bankruptcy law strictly prohibits discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was Discharged in the case. The law prohibits the following forms of governmental discrimination: terminating an employee, discriminating with respect to hiring, or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely on the bankruptcy filing.

If someone has co-signed a loan with the debtor and the debtor files for bankruptcy, the co-signer will still have to pay the debt. The debtor should list the co-signer as a creditor in the bankruptcy petition since the co-signer may have a contingent claim against the debtor.

Yes, but the spouse of the debtor will still be liable for any joint debts. If a married couple files together, they will be able to double their exemptions. In some cases, where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file. If the spouses have joint debts, the fact that one spouse Discharged the debt may show on the other spouse's credit report.

It is not a court requirement to hire an attorney to file a bankruptcy, however, the legal system is a maze of complex laws, rules, and regulations that takes many years for the most competent attorneys to master. In other words, it is very easy to make mistakes and mistakes are time consuming and costly.

In addition to dealing with the stress of guiding yourself through the complex maze of the legal system, banks and credit card companies typically hire teams of aggressive attorneys to fight bankruptcy cases.

An experienced bankruptcy attorney is in a much better position to not only help you maximize the bankruptcy laws to Discharge as much debt as possible and ultimately save you money, but also to save you the time, stress, and aggravation of transacting with harassing creditors while figuring out how to weave yourself through the complex bankruptcy laws.

Yes! Once you hire the Law Offices of Sean S. Hanley to represent you, you can forward the harassing calls you receive from creditors to us.

We will work expeditiously to utilize the benefits of the bankruptcy laws, which, if successful, will "Discharge" (release) you from personal liability for many types of debts. In other words, you will no longer be legally required to pay any debts that are discharged. For millions of Americans, this translates into not having to pay thousands of dollars of outstanding credit card debt, medical bills, and many other bills and debts that a bankruptcy attorney can detail for you.

Once a debtor receives a discharge, creditors are prohibited from taking any form of collection action against them, including filing lawsuits, making harassing phone calls, reporting their debt to credit reporting bureaus, threatening them with letters and/or calls from attorneys, and other similar actions.

Debtors can always negotiate with their creditors, however, many creditors make it extremely difficult by refusing to negotiate with individual debtors, unless the debtor has legal representation and/or demanding settlement money "up front" with no payment plans.

Additionally, creditors typically will not negotiate with debtors, unless the accounts are very delinquent and, worse yet, after the debtor pays the money due, their credit will not be restored.

Paralegals and other legal document preparers cannot represent a debtor in any way, including giving you legal advice or representing you in court (only attorneys can legally represent you).

People often hire paralegals or other legal document preparers because it is cheaper. The problem - You Pay For What You Get.

Bankruptcy cases are very complicated and it takes the full attention of an experienced bankruptcy attorney to get the very best outcome for you. Hiring a non-professional will risk your case being done incorrectly and hence the protections and benefits of bankruptcy not being fully utilized, which will ultimately cost you much more than simply hiring a bankruptcy attorney.

Get it done once... Get it done right!

It depends on your situation and on the consolidation company.

You must be extremely careful when dealing with consolidation companies as many debt consolidation company plans consist of phony deals that enrich the company at your expense.

Common End Result for Debtors that Utilize Debt Consolidation Company Services: The debtor's credit will be just as bad as, or worse than, if they filed for bankruptcy. Worse yet, the debtor will still be in debt, have to pay their debts in the future (debts aren't Discharged) and the debtor will be out the money owed to the Debt Consolidation Company.

Bankruptcy is a law enacted by the U.S. Congress, called Title 11, U.S. Bankruptcy Code, pursuant to the Constitution, Article 1, Section 8, which was enacted to ensure that Americans, who are suffering difficult financial times, can get a "fresh start." It is not a gimmick or a loophole.

According to recent statistics, bankruptcy filings in California have steadily increased over the last few years. Bankruptcy filings from 2007 to 2010 in California are as follows:

Bankruptcies filed in San Jose, CA, hit an all-time high in 2010 – 13,366 people and businesses filed for bankruptcy in 2010, which was a rise of 16% from 2009.

Evidence suggests that the trend of bankruptcy filings will continue to rise in the the San Jose Division of the U.S. Northern California District Bankruptcy Court in the near future.

What these statistics show is that if you are financially maxed out with no viable alternatives other than filing for bankruptcy, you are not alone...

There is a mandatory court filing fee of $299.00 that must be made to the Federal Court.

Attorney fees vary depending on your particular circumstance.

We have payment plans available for most cases and we will work with you to come up with a fee and payment plan that you are comfortable with.

To learn more about if filing for bankruptcy will protect your home from foreclosure, see Bankruptcy - Protection From Foreclosure.

The procedure utilized by Hanley Law for our bankruptcy clients has developed over the years into an extremely automated, easy, and user-friendly process, which is geared towards and has shown to streamline the time to process the bankruptcy case and ultimately reduce stress faced by bankruptcy clients.

For a more detailed information about the bankruptcy client procedure, please see Bankruptcy - Client Procedure.

For a more detailed information about bankruptcy, please see Bankruptcy - Business Chapter 7, Bankruptcy - Client Procedure, Bankruptcy - Credit Card Debt, Bankruptcy - Discharge, Bankruptcy - Discharged Debts, Bankruptcy - Domicile Requirements, Bankruptcy - Forgiveness Of Debt, Bankruptcy - Frequently Asked Questions, Bankruptcy - Means Test, Bankruptcy - Personal Liability, Bankruptcy - Procedural Requirements, Bankruptcy - Protection From Foreclosure, Bankruptcy - Required Documents and Bankruptcy - 341 Meeting.

For a more detailed information about foreclosure, please see Foreclosure, Foreclosure - California Property, Foreclosure - Debt Relief Income, Foreclosure - Deed In Lieu, Foreclosure - FICO Score Impact, Foreclosure - Mortgage Workout, Foreclosure - New Laws, Foreclosure - Senate Bill 458, Foreclosure - Services Pricing, Foreclosure - Short Sale and Foreclosure - Walking Away.

For a more detailed information about debt relief, please see Debt Relief - Credit Reports, Debt Relief - Credit Score and Debt Relief - Debt Collection Act.

In addition to bankruptcy, foreclosure and debt relief, our firm also offers a full range of legal, real estate and loan related services including elder law, estate planning, probate, real estate exchanges, real estate loans, real estate transactions and small business matters.

If you have questions about bankruptcy, please do not hesitate to contact our San Jose bankruptcy, foreclosure and debt relief attorney today. Call us now for a free phone consultation at 408-293-0344 or contact us via e-mail by filling out the form on the Contacts page and a representative from our office will reply immediately.

More information: Contact Us, Bankruptcy - Business Chapter 7, Bankruptcy - Client Procedure, Bankruptcy - Credit Card Debt, Bankruptcy - Discharge, Bankruptcy - Discharged Debts, Bankruptcy - Domicile Requirements, Bankruptcy - Forgiveness Of Debt, Bankruptcy - Frequently Asked Questions, Bankruptcy - Means Test, Bankruptcy - Personal Liability, Bankruptcy - Procedural Requirements, Bankruptcy - Protection From Foreclosure, Bankruptcy - Required Documents, Bankruptcy - 341 Meeting, Debt Relief - Credit Reports, Debt Relief - Credit Score, Debt Relief - Debt Collection Act, Estate Planning, Estate Planning - Protecting Your Assets, Foreclosure, Foreclosure - California Property, Foreclosure - Debt Relief Income, Foreclosure - Deed In Lieu, Foreclosure - FICO Score Impact, Foreclosure - Mortgage Workout, Foreclosure - New Laws, Foreclosure - Senate Bill 458, Foreclosure - Services Pricing, Foreclosure - Short Sale, Foreclosure - Walking Away, Sean S. Hanley Biography