Bankruptcy FAQ

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 bankruptcy is the most common type of bankruptcy. It is designed to eliminate most unsecured debts, such as credit cards, medical bills, and personal loans. Eligibility is largely based on your household income. For example, to qualify for Chapter 7 with a household of 4 the combined gross household income before taxes would need to be less than $135,505.

In Chapter 7, a trustee reviews your case and determines whether any assets are not protected by exemptions. In most cases, clients keep all of their property because it is protected under California’s exemption laws.

Chapter 13 bankruptcy involves a repayment plan lasting 3–5 years. Instead of eliminating debts immediately, you repay a portion of them based on your income and assets. Chapter 13 is often used by people who:

• Are behind on their mortgage or car payments
• Earn too much to qualify for Chapter 7
• Want to protect valuable assets

📞 Not sure which option is right for you? We can review your situation and explain your options during a consultation. (916) 780-7005

Will I lose my home, car, or other property if I file bankruptcy?

In most cases, no. Bankruptcy laws allow you to protect property through California exemptions.

California provides two main exemption systems:

703 Exemptions

Often used by people who do not own a home. These include a $38,700 wildcard exemption that can be applied to protect any property you choose. The car exemption protects equity up to $8625.

704 Exemptions

Typically used by homeowners. These exemptions protect $361,076- $722,507 of home equity, depending on your county of residence. The car exemption protects equity up to $8625.

If an asset exceeds the exemption amount, the trustee will often allow you to set up a payment plan to buy back the non-exempt equity, allowing you to keep the property.

Will filing bankruptcy ruin my credit?

Bankruptcy will lower your credit score, often by 150 points or more. However, many people are surprised at how quickly they can begin rebuilding their credit.

After bankruptcy:

• You may start receiving credit offers fairly quickly
• Opening a $500 or so secured credit card can help rebuild your score safely
• Many people qualify for a mortgage within 2–3 years

For many clients, bankruptcy actually improves their financial future by eliminating overwhelming debt.

What debts can bankruptcy eliminate?

General unsecured debt
Debts like:

• Credit cards
• Medical bills
• Payday loans
• Personal loans

In Chapter 7, most general unsecured debts are fully discharged.

In Chapter 13, unsecured debts are addressed through the repayment plan, and any remaining eligible balance is discharged when the plan is completed.

What happens to my mortgage or car loan?

Bankruptcy usually does not change your mortgage, unless you are behind on payments and file Chapter 13. In that case, past-due payments can be rolled into your repayment plan.

For car loans:

• In Chapter 13, the loan may be paid through the plan.
• In Chapter 7, to keep your vehicle, you need to keep paying your car loan. If you decide you no longer want the vehicle, you can stop paying and allow the lender to repossess it without further financial liability.

Can I lose my job if I file bankruptcy?

No. Federal law prohibits employers from firing someone for filing bankruptcy.

In most situations, your employer will not even know you filed unless they run a credit check.

A bankruptcy filing will remain on your credit report for up to 10 years, but many people rebuild their credit much sooner.

Can bankruptcy get rid of student loans?

Student loans are very difficult to discharge, requiring proof that you have no realistic ability to repay the debt, often due to severe hardship or disability.

In Chapter 13, student loans can be included in the repayment plan, but any remaining balance is still owed after the bankruptcy ends.

Will I have to go to court?

Most clients only attend one required meeting, called the Meeting of Creditors (341 Meeting).

This meeting is typically held over Zoom with the trustee and your attorney. Creditors are allowed to attend, but it is very rare that they do.

The meeting usually takes 5–60 minutes, depending on the schedule that day. In most cases, this is the only appearance required.

Still have questions?

Bankruptcy can feel complicated, but you don’t have to go through it alone. Our goal is to make the process clear, straightforward, and manageable.

📞 Contact our office today to schedule a consultation and learn how bankruptcy may help you get a fresh financial start. (916) 780-7005