Thomas B. Hjerpe, Esq.
Kenneth J. Collins, Esq.
Jocelyn M. Godniho, Esq.
Catherine M. Koshkin, Esq.
350 E Street, First Floor
Eureka, CA 95501
Telephone: 707 442-7262
We are a debt relief agency. We help people to file for bankruptcy relief under the Bankruptcy Code
A Chapter 7 Bankruptcy is the most common type of bankruptcy for consumers. It is also referred to as a “liquidation” bankruptcy. Despite the reference to liquidation, most individuals retain all assets in a Chapter 7 Bankruptcy.
Filing a Chapter 7 Bankruptcy will immediately stop virtually all collections actions and will allow you to eliminate most unsecured debt [credit cards, medical debts, etc.]. This is called the Automatic Stay and acts like a restraining order prohibiting collection efforts during the bankruptcy. Creditors cannot continue with litigation. They must stop any wage garnishments and cannot levy on bank accounts. This is the case whether or not the particular claim will be eliminated in the bankruptcy. There are very few exceptions to this rule. Generally speaking, no creditor can take collection efforts after a bankruptcy case has been filed without the permission of the Bankruptcy Court. At the end of the Chapter 7 Bankruptcy case the Court enters an order that eliminates [discharges] your liability for certain debts. The creditors holding claims that have been discharged cannot take collection efforts in the future for debts that have been eliminated in bankruptcy.
With secured debts such as mortgage loans or vehicle loans, if you want to keep the property that is collateral for the loan you must maintain your regular monthly payments. If you are willing to surrender the collateral the bankruptcy will allow you to eliminate any remaining debt owing after the collateral is taken and sold by the lender. Because a Chapter 7 Bankruptcy does not allow you to adjust secured debts in any way, it is not an effective tool for dealing with a foreclosure. The automatic stay will temporarily delay a foreclosure but when the automatic stay ends – either at the end of the case or earlier if the creditor asks for permission – the lender will resume and conclude the foreclosure.
There are some debts that cannot be eliminated in a bankruptcy, such as child support and alimony debts, court fines [in criminal matters], damages for injuries resulting from driving under the influence, or debts based on fraud or willful and malicious injury.
There are some debts that can sometimes be eliminated in a bankruptcy, such as taxes or student loans. For example, income taxes can be eliminated if the tax return was filed and if the tax has been due for more than three years. Payroll tax liability can never be eliminated in a bankruptcy. Student loans and child support/alimony debts will not be eliminated. With student loans it is possible to ask the Bankruptcy Court to eliminate the student loans. This requires the filing of a separate lawsuit within the bankruptcy against the student loan company and the student loans will only be eliminated where the borrower has suffered some hardship that left him or her in a position where they will never be able to repay the student loans.
All other debts will be eliminated. This includes credit card debts, unsecured bank loans, overdraft accounts, medical debts, personal loans with family or friends, business debts, etc..
The Bankruptcy Court will also look at assets. If there is equity in property [such as the value in a house that exceeds the balance owing on the mortgage], the Court allows certain protections for assets. If there are assets that cannot be protected, the Court assigns a Trustee who takes the unprotected asset, sells it and distributes the proceeds among your creditors. In most cases all assets fall within the available protections.