I spent years dedicated to helping honest consumers get a fresh start in life by utilizing bankruptcy laws that were designed to achieve that purpose. I found that most bankruptcy attorneys focus on getting a potential client in the door rather than taking the opportunity of an initial telephone conversation to discuss some of the important and basic details of bankruptcy law which may be pertinent to an individual’s situation.

The information below should answer some of the basic details about bankruptcy law which most people may have.  It is not meant as legal advice, but as a resource to help you become more informed about the laws and process.  It is focused on the bankruptcy courts in California, but as bankruptcy law is primarily governed by federal law, the majority of the information is applicable to throughout the country.


Just as in most legal actions, an attorney is not necessary to file bankruptcy. However, it is a good idea to consult with an experienced attorney because such an attorney will have the practical training and knowledge to utilize bankruptcy laws to a debtor’s full advantage and will not make errors that can cost time and additional expense.
Bankruptcy usually starts with the filing of a document called a Voluntary Petition. A bankruptcy can be forced on a person or entity through the filing of an Involuntary Petition, however, the focus of this information will be on a voluntary bankruptcy filing. Once a person files a bankruptcy petition, the person is officially referred to as a “Debtor”. Federal Law controls bankruptcy courts, laws and procedures. All documents necessary for filing for bankruptcy can be found at:

California is divided into 4 federal court districts. The Federal Bankruptcy Courts for Northern District of California have jurisdiction over counties from Del Norte to Monterey. The Northern District is divided into 4 divisions with courts located in Santa Rosa, San Francisco, Oakland, and San Jose. See the following link for the division covering your county:

The place where a debtor files bankruptcy is called venue. The proper venue is mandated by federal law which states that a bankruptcy case should be commenced in the district in which the debtor has been domiciled, resides, or has a principal place of business in the United States, 180 days prior to the commencement of the bankruptcy case. Simply put, the proper venue is the district for the county where a debtor has lived for at least 180 days prior to filing.

2005 amendments to bankruptcy law require that a debtor must take a court approved credit counseling class 180 days prior to filing a Voluntary Petition. Bankruptcy law also requires a post-filing debtor education course. These courses can be completed on-line and/or over the telephone. Basically, the courses make a debtor list out all assets, liabilities, income and expenses, and provides the debtor with an overall picture of their finances and informs the debtor on money management. Bankruptcy attorneys normally have credit counseling programs which they work with and can enroll a client as part of their services.


A big question on the minds of anyone filing bankruptcy is how much it will cost. There are three main costs involved in filing bankruptcy: Court filing fees, Debtor education class fees, and Attorney fees.

Filing Fees:

Filing fee information can be found at:

A debtor can file for a waiver of the filing fee if they qualify as being under a particular income.

Debtor Education Fees:

These fees vary according to which provider you use.  An example can be found at:

Attorney fees for a Chapter 13
Chapter 13 case attorney fees are normally set by court guidelines. An example of those guideline fees can be found at:   Each Division will usually have it’s on guideline fees.  Normally, the attorney would be paid a portion of the fee prior to filing, and the balance would be paid off through the Chapter 13 plan discussed below.

Attorney Fees for a Chapter 7
There is no Northern District court guideline set for attorney fees in Chapter 7 cases, therefore, attorneys can charge just about anything they want. The normal fees for a simple Chapter 7 will range between $900 to $1200. However, the range will be higher when there are more complications to the case such as: owning a business, tax debts, etc.

Chapter 7 Bankruptcy is the favorable form of bankruptcy for debtors who do not have much, if any, assets. Assets are the Debtor’s real or personal property which have monetary value. However, a person can file a Chapter 7 bankruptcy, get rid of most debts, and still keep a house or car…as long as the creditors agree. A Chapter 7 can only be filed every 8 years, so it is important get rid of as many debts as possible in the process. If a debtor reaffirms a debt, such as a car, in the bankruptcy process, the debtor would be liable for that debt and all other cost associated with the debt.

The limitations for who may file a Chapter 7 is set by the Department of Justice using Census Bureau data and  form B22A must be filed with the bankruptcy court stating that that a proposed debtor qualifies for bankruptcy protecting under the “means test.”  A “means test” is basically an income cap for debtors which corresponds to the median income levels for different household sizes in a particular census area. The means test numbers can be found for each state at:

The income limits change fairly often but usually not dramatically. The incomes limitations are net numbers, which means that even if a debtor makes a gross of more than the limitation, it may be possible that the debtor could still qualify for a Chapter 7. If a debtor makes more than the limitations after netting there is a “presumption of abuse” of the bankruptcy laws and a Chapter 7 filing would not be allowed.

The Automatic Stay (applies to all bankruptcy filings)
One of the most basic protections of a bankruptcy filing is the Automatic Stay of section 362 of the bankruptcy code. The automatic stay stops most collection actions, including foreclosure proceedings, and allows the debtor some “breathing room” in order to get financial affairs in order. The Automatic Stay, as the name implies, occurs automatically upon the filing of the Voluntary Petition. Creditors who do not abide by the Automatic Stay can be subject to sanctions from the bankruptcy court.

Immediately upon filing the Voluntary Petition, all assets of the debtor are basically under the control of the Court and the court appointed trustee who will oversee that the debtor has been truthful in the filing, that the debtor qualifies for a Chapter 7, that the debtor has properly claimed exemptions, that creditors are protected, and that debts to creditors that can be discharged through bankruptcy are properly filed.

Exemptions (applies to all bankruptcy filings)
Exemptions are another important basic protections under the Bankruptcy Code. Exemptions are the amount of personal or real property a debtor can keep though the bankruptcy process. The Bankruptcy Code contains an exemption scheme but allows individual States to opt-out of the federal exemption scheme. California has opted out and has its own exemption scheme in place under the California Code of Civil Procedure sections 703 and 704 et seq. Properly exempting property is very important because if property is not properly exempted it opens the door to losing that property through the bankruptcy process.

A Chapter 13 bankruptcy is basically a repayment plan for the debts a person has at the time of filing. The Chapter 13 plan does not involve debts incurred after filing. A Chapter 13 plan normally runs for 5 years, but can last 3 years, depending on the circumstances of the particular case. Chapter 13 Debtors must have a regular source of income. A Chapter 13 bankruptcy is usually utilized when a Debtor has fallen behind on paying creditors, the Debtor wants to keep most or all of their property, and/or the Debtor does not qualify for Chapter 7 bankruptcy protection. As of December 2014, any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $383,175 and secured debts are less than $1,149,525. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. You can check on the current amounts at:  and clicking on “Chapter 13 Eligibility.”

The Chapter 13 Plan
A successful Chapter 13 bankruptcy requires a “feasible” plan approved by the court. “Feasible” is a term of art in bankruptcy, and basically means that the Chapter 13 plan must be likely to succeed. Simplistically put, for a plan to be likely to succeed, it must show that the Debtor has a steady source of income, that back payments owed on secured debts which the Debtor wants to keep are paid, that future payments on secured debt would be paid, that non-dischargeable priority arrearages and future payments are paid, that the Debtor has enough to pay living expenses, and that any remaining amount is paid to unsecured creditors.

There are generally three categories of debts in a chapter 7 or 13 bankruptcy; secured debt, unsecured debt, and priority unsecured debt. I also address student loan debts and taxes because these debts are treated specially in the bankruptcy context.
Secured Debt
Secured debt is debt that is secured by property or collateral. The most common types of secured debt involve debt owed on a home or a car. In a Chapter 13 bankruptcy, if a debtor wants to keep secured debt property, the debtor must pay all arrearages (missed payments) and pay the regular monthly payments going forward.
Unsecured Debt
Unsecured debt is debt that is not secured by property or collateral. Most commonly, unsecured debts include credit card bills, medical bills, and utility bills. In a Chapter 7 bankruptcy, unsecured debts are usually discharged entirely. In a Chapter 13 bankruptcy, the amount paid to unsecured creditors can be anywhere between 0-100%. The percentage that unsecured creditors would receive depends upon the financial situation of the Debtor and how that situation affects the Chapter 13 Plan.
Priority Unsecured Debt
Priority unsecured debt is debt that, while not secured by property or collateral, must usually be paid in full because laws have been passed to ensure that bankruptcy will not discharge the debt due to public policy reasons. Priority unsecured debts include most taxes, domestic support obligations, fines, most student loans, and claims for death or injury while Debtor was intoxicated.
Student Loans
Student loans are listed as unsecured debts in a Bankruptcy Petition; however, student loans are treated more like priority unsecured debt. It is possible to have all or a portion of student loan debt discharged, but the standard is very high. There is a three part test as articulated in In re Pena, 155 F.3d 1108 (9th Cir. 1998 which adopted In re Brunner, 46 B.R. 752, 753 (S.D.N.Y. 1985). Under this test a Debtor must establish that he or she: 1) Cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her dependents if forced to repay the loans; 2) the debtor must show that “additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans and; 3) The debtor must have made “good faith efforts to repay the loans.” Most people do not pass all three parts of the test.
In a Chapter 13 bankruptcy taxes must be paid as evidenced by a proper and valid proof of claim submitted by the appropriate governmental agency. The advantage of paying taxes in a Chapter 13 comes from establishing a fixed payment plan for the tax arrearages and stopping the accrual of penalty fees. In a Chapter 7, there is a possibility that federal taxes can be discharged if all of the following conditions are satisfied:
1. The IRS has not recorded a tax lien against your property. (If all other conditions are met, the taxes may be discharged, but even after your bankruptcy, the lien remains against all property you own, effectively giving the IRS a way to collect.)
2. You didn’t file a fraudulent return or try to evade paying taxes.
3. The liability is for a tax return (not a Substitute or Return) actually filed at least two years before you file for bankruptcy.
4. The tax return was due at least three years before the time of filing.
5. The taxes were assessed (you received a notice of assessment of federal taxes from the IRS) at least 240 days (eight months) before you file for bankruptcy. (11 U.S.C. §§ 523(a)(1) and (7).)
Lien Stripping (Getting rid of a second mortgage)
One of the unique and beneficial aspects of filing a Chapter 13 bankruptcy is the possibility of getting rid of a second mortgage. If the value of a home falls below the amount owed on the first mortgage secured by the value of the home (the home is “underwater”), a Debtor can move the court to “strip” the second lien. If the motion is granted, and the Debtor fulfills all obligations under the Chapter 13 Plan, then the second mortgage becomes a general unsecured debt which is paid in proportion to what other unsecured creditors receive under the Chapter 13 plan. At the end of fulfilling the Chapter 13 Plan (3-5 years) the Debtor would own the home owing only the first mortgage. While there can be complications in the motion to “strip” a second lien, such as valuation battles with the creditor, it remains one of the biggest advantages of filing a Chapter 13.



The following is information from form B 201(a) which is a form which must be signed and filed with a voluntary petition.  It contains necessary and useful information regarding bankruptcy. 

In accordance with § 342(b) of the Bankruptcy Code, this notice to individuals with primarily consumer
debts: (1) Describes briefly the services available from credit counseling services; (2) Describes briefly the
purposes, benefits and costs of the four types of bankruptcy proceedings you may commence; and (3) Informs you
about bankruptcy crimes and notifies you that the Attorney General may examine all information you supply in
connection with a bankruptcy case.

You are cautioned that bankruptcy law is complicated and not easily described. Thus, you may wish to seek
the advice of an attorney to learn of your rights and responsibilities should you decide to file a petition. Court
employees cannot give you legal advice.

Notices from the bankruptcy court are sent to the mailing address you list on your bankruptcy petition. In
order to ensure that you receive information about events concerning your case, Bankruptcy Rule 4002 requires that
you notify the court of any changes in your address. If you are filing a joint case (a single bankruptcy case for two
individuals married to each other), and each spouse lists the same mailing address on the bankruptcy petition, you
and your spouse will generally receive a single copy of each notice mailed from the bankruptcy court in a jointly- addressed envelope, unless you file a statement with the court requesting that each spouse receive a separate copy of
all notices.

1. Services Available from Credit Counseling Agencies
With limited exceptions, § 109(h) of the Bankruptcy Code requires that all individual debtors who file
for bankruptcy relief on or after October 17, 2005, receive a briefing that outlines the available opportunities
for credit counseling and provides assistance in performing a budget analysis. The briefing must be given
within 180 days before the bankruptcy filing. The briefing may be provided individually or in a group (including
briefings conducted by telephone or on the Internet) and must be provided by a nonprofit budget and credit
counseling agency approved by the United States trustee or bankruptcy administrator. The clerk of the bankruptcy
court has a list that you may consult of the approved budget and credit counseling agencies. Each debtor in a joint
case must complete the briefing.

In addition, after filing a bankruptcy case, an individual debtor generally must complete a financial
management instructional course before he or she can receive a discharge. The clerk also has a list of approved
financial management instructional courses. Each debtor in a joint case must complete the course.

2. The Four Chapters of the Bankruptcy Code Available to Individual Consumer Debtors
Chapter 7: Liquidation ($245 filing fee, $46 administrative fee, $15 trustee surcharge: Total fee $306)
Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing
debts. Debtors whose debts are primarily consumer debts are subject to a “means test” designed to determine
whether the case should be permitted to proceed under chapter 7. If your income is greater than the median income
for your state of residence and family size, in some cases, the United States trustee (or bankruptcy administrator), the trustee, or creditors have the right to file a motion requesting that the court dismiss your case under § 707(b) of the Code. It is up to the court to decide whether the case should be dismissed.

Under chapter 7, you may claim certain of your property as exempt under governing law. A trustee may
have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to
pay your creditors.

The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If, however, you are
found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.

Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore,
you may still be responsible for most taxes and student loans; debts incurred to pay nondischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs. Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

Chapter 13: Repayment of All or Part of the Debts of an Individual with Regular Income ($235 filing
fee, $46 administrative fee: Total fee $281)

Chapter 13 is designed for individuals with regular income who would like to pay all or part of
their debts in installments over a period of time. You are only eligible for chapter 13 if your debts do not exceed
certain dollar amounts set forth in the Bankruptcy Code.

Under chapter 13, you must file with the court a plan to repay your creditors all or part of the money that you
owe them, using your future earnings. The period allowed by the court to repay your debts may be three years or
five years, depending upon your income and other factors. The court must approve your plan before it can take

After completing the payments under your plan, your debts are generally discharged except for domestic
support obligations; most student loans; certain taxes; most criminal fines and restitution obligations; certain debts
which are not properly listed in your bankruptcy papers; certain debts for acts that caused death or personal injury;
and certain long term secured obligations.

Chapter 11: Reorganization ($1,167 filing fee, $46 administrative fee: Total fee $1,213)
Chapter 11 is designed for the reorganization of a business but is also available to consumer debtors. Its
provisions are quite complicated, and any decision by an individual to file a chapter 11 petition should be reviewed
with an attorney.

Chapter 12: Family Farmer or Fisherman ($200 filing fee, $46 administrative fee: Total fee $246)
Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a period of time from
future earnings and is similar to chapter 13. The eligibility requirements are restrictive, limiting its use to those
whose income arises primarily from a family-owned farm or commercial fishing operation.

3. Bankruptcy Crimes and Availability of Bankruptcy Papers to Law Enforcement Officials
A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty
of perjury, either orally or in writing, in connection with a bankruptcy case is subject to a fine, imprisonment, or
both. All information supplied by a debtor in connection with a bankruptcy case is subject to examination by the
Attorney General acting through the Office of the United States Trustee, the Office of the United States Attorney,
and other components and employees of the Department of Justice.

WARNING: Section 521(a)(1) of the Bankruptcy Code requires that you promptly file detailed information regarding your creditors, assets, liabilities, income, expenses and general financial condition. Your bankruptcy case may be dismissed if this information is not filed with the court within the time deadlines set by the Bankruptcy Code, the Bankruptcy Rules, and the local rules of the court. The documents and the deadlines for filing them are listed on Form B200, which is posted at


Notice Mandated By Section 527(a)(2) of the Bankruptcy Code:
You are notified as follows:
1. All information that you are required to provide with the filing of your case and thereafter, while your case is pending, must be complete, accurate and truthful.
2. All your assets and all your liabilities must be completely and accurately disclosed in the documents filed to commence your case.
3. Some places in the bankruptcy code require you to determine and list the replacement value of an asset, as for instance a car, or furniture. When replacement value is required, it means the replacement value, it means the replacement value, established after reasonable inquiry, as of the date of the filing of your bankruptcy case, without deductions for costs of sale or marketing. With respect to property acquired for personal, family or household purposes, replacement value means the price retail merchant would charge for “used” property of that kind considering the age and condition of the property.
4. Before your case can be filed, it is subject to what is called “Means Testing”. The Means Test was designed to determine whether or not you qualify to file a case under Chapter 7 of the Bankruptcy Code and if not, how much you need to pay your unsecured creditors in a Chapter 13 case. For purposes of means test, you must state, after reasonable inquiry, your total current monthly income, the amount of all expenses as specified and allowed pursuant to Section 707(b)(2) of the Bankruptcy Code, and if the plan is to file you a Chapter 13 case, you must state, again after reasonable inquiry, your disposable income, as the term is defined.
5. Information you provide during your case may be audited pursuant to the provisions of the Bankruptcy Code. Your failure to provide complete, accurate and truthful information may result in the dismissal of your case or other sanctions, including criminal sanctions.
established after means the price retail merchant would charge for “used” property of that kind considering the age and condition of the property.


Notice Mandated By Section 527(b) of the Bankruptcy Code
If you decide to seek bankruptcy relief, you can represent yourself, you can hire an attorney to represent you, or you can get help in some localities from a bankruptcy petition preparer who is not an attorney. THE LAW REQUIRES AN ATTORNEY OR BANKRUPTCY PETITION PREPARE TO GIVE YOU A WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY PETITION PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST. Ask to see the contract before you hire anymore. The following information helps you understand what must be done in a routine bankruptcy case to help you evaluate how much service you need. Although bankruptcy can be complex, many cases are routine.

Before filing a bankruptcy case, either you or your attorney should analyze your eligibility for different forms of debt relief available under the Bankruptcy Code and which form of relief is most likely to be beneficial for you. be sure you understand the relief you can obtain and its limitations. To file a bankruptcy case, documents called a Petition, Schedule and Statement of Financial Affairs, as well as in some cases a Statement of Intention need to be prepared correctly and filed with the Bankruptcy Court. You will have to pay a filing fee to the Bankruptcy Court. Once your case starts, you will have to attend the required first meeting of creditors where you may be questioned by a Court official called a “trustee” and by creditors.

If you choose to file a Chapter 7 case, you may be asked by a creditor to reaffirm a debt. You may want help deciding whether to do so. A creditor is not permitted to coerce you into reaffirming your debts. it may not be in your best interest to reaffirm a debt.

If you choose to file a Chapter 13 case, in which you repay your creditors what you can afford over 3 to 5 years, you may also want help preparing your Chapter 13 plan and with confirmation hearing on your plan which, if help, will be before a bankruptcy Judge.

If you select another type of relief under the Bankruptcy Code other than Chapter 7 or Chapter 13, you will want to find out what should be done from someone familiar with that type of relief. However, please be advised that in most cases, you will only be concerned with Chapter 7 or Chapter 13.

Your bankruptcy case may also involve litigation. You are generally permitted to represent yourself in litigation in the Bankruptcy Court, but only attorney, not bankruptcy petition preparers, can give you legal advice.
Notice Mandated By Section 342(b)(2) of the Bankruptcy Code

If you decide to file bankruptcy, it is important that you understand the following:
1. Some or all of the information you provide in connection with your bankruptcy will be filed with the Bankruptcy Court on forms or documents that you will be required to sign and declare true under penalty of perjury.
2. A person who knowingly and fraudulently conceals assets or makes false oath or statement under penalty of perjury in connection with a bankruptcy case shall be subject to fine, imprisonment, or both.


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