What is the difference between Chapter 7 and Chapter 13?
The two most common kinds of bankrutpcy are referred to by the Bankruptcy Code chapters that govern them. Chapter 7, also called a "liquidation" or "fresh start" bankruptcy, is a fast, streamlined process that a qualified debtor to wipe out much or all of their debt, often in as little as 90 days.
Chapter 13 is a longer (typically three to five year) process that involves working out a debt repayment plan. Each approach has distinct advantages and disadvantages, so you should consult with an experienced bankruptcy attorney before deciding which (if any) path is right for you.
What about Chapters 11 and 12?
These two chapters primarily involve "reorganizations" of businesses. Chapter 11 is designed to allow most businesses to continue operating (under the supervision of a trustee) while repaying their debt in accordance with a repayment plan approved by the trustee. Creditors also get a say in whether the plan is approved, often making this a complicated and difficult process. Nonetheless, it is usually the only bankruptcy option available to corporations, partnerships, and those individuals whose debts exceed the limits of Chapter 13.
Chapter 12 is a streamlined version of Chapter 11 that is available to family farmers and fishermen. Unlike Chapter 11, which is primarily designed to accomodate the needs of larger corporations, and Chapter 13, which was designed with regular wage-earners in mind, Chapter 12 is specifically designed to accomodate the income patterns and debt sizes of family farming and fishing operations.
I heard that the 2005 changes to the Bankruptcy law made it impossible to file. Is this true?
No. In 2005, Congress amended the Bankruptcy Code in an attempt to minimize perceived abuses of the system. As a result, a new set of limitations was imposed on filing, particularly with regard to Chapter 7 bankruptcies. These new limits don't make it impossible to file, but they do require debtors to qualify. Debtors can qualify either by showing that their income is below the median for their state, or by passing a "means test", which compares a debtors income to their debts in order to see if it is reasonable for them to be forced to file a Chapter 13 bankruptcy instead.
I've heard about an "automatic stay." What does that mean?
The moment your file for bankruptcy, almost all current legal proceedings against you are "stayed" (paused). This happens automatically, with no need for you to file additional paperwork or get a court order. If someone wishes to continue with a claim against you, they have to get the bankruptcy court's permission to do so.
This means that bankruptcy can provide immediate protection from a foreclosure, eviction, utility cutoff, or wage garnishment. The protection you get might be only temporary - landlords, for example, can usually get the court's permission to continue relatively easily - but it can give you a vital few days or even weeks to gather your resources and work out a solution. Note that not all proceedings are stopped - criminal proceedings, certain tax actions, and support proceedings (for example) are not stopped by the stay. A bankruptcy attorney can help you decide if the stay will provide you the relief you need.
Will I have to go all the way to Sacramento for court hearings?
The federal court system in California (including the bankruptcy courts) is divided into four districts. The Central Valley falls within the Eastern District, which is based in Sacramento. However, the Eastern District has bankruptcy courts in Sacramento, Fresno, and Modesto. The court responsible for your case is determined by the county you file in.
Cases filed in Stanislaus, Calaveras, and Tuolumne counties are decided by the bankruptcy court in Modesto, while cases filed in Merced, Mariposa, Madera, Fresno, Kings, Tulare, Inyo, and Kern counties are heard in Fresno. Cases for the rest of the valley (including San Joaquin county) are heard in Sacramento.
Additionally, if you are filing a Chapter 7 bankruptcy, it is likely that the only formal appearance in your case will be a "Meeting of the Creditors," also called a "341 Meeting." 341 Meetings are held in Sacramento, Modesto, Redding, Fresno and Bakersfield.
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