Orange County FAQs – Frequently Asked Questions

Q. If I file for bankruptcy, will it ruin my credit?

A. Filing for bankruptcy does not ruin your credit – chances are, if you need to file for bankruptcy, you have financial difficulties that will damage your credit regardless. By filing for bankruptcy now, you can give yourself a fresh start, and have the chance to rebuild your credit. Once your debts are discharged and you’ve had time to reestablish your solid payment history, your credit may end up better than it was before the bankruptcy.

Q. If I file for bankruptcy, will I owe taxes on the discharged debt?

A. No – filing for bankruptcy discharges debt, and you will not pay debt forgiveness taxes on what you owe. However, if you sell your home via a short sale, or return the property to the bank via a deed in lieu, you may have to pay taxes on the difference between your balance owed and the amount accepted by the bank.

Q. Can I be fired for filing for bankruptcy?

A. Absolutely not, and if your employer does fire you due to your bankruptcy filing, you may be entitled to damages under the law. It is illegal for any employer to fire an employee because he or she needs to file for bankruptcy. However, having too much debt can cause you to lose your job if you work in a field that requires security clearance or other special provisions such as handling large amounts of money.

Q. Will I lose all of my possessions if I file for bankruptcy?

A. California provides for two different exemption laws when you file for bankruptcy, so at least some of your property will be protected from liquidation. Depending upon your financial circumstances, you may be able to keep most, or even all of your property if you file for bankruptcy, and still have your debts discharged.

Q. What about foreclosure – can filing for bankruptcy really help?

A. Yes. Filing for bankruptcy will put a halt to the foreclosure process, and can give you a chance to work things out with your mortgage lender. Under the new laws being enacted due to the housing crisis, you may be able to ask the judge to adjust your mortgage so that it reflects the current housing market, and gives you a fair, reasonable payment that you can afford.

Q. Do I have to have an attorney to file for bankruptcy?

A. It’s not required to have an attorney file your bankruptcy case, however, there are many benefits to doing so. Aside from the obvious benefit of having a legal expert who is familiar with Orange County bankruptcy law, getting legal representation means that you will have someone who can assist you if your case gets complicated. Additionally, having an attorney who is knowledgeable and experienced when it comes to Orange County Bankruptcy Law means that you will have peace of mind when dealing with not only your bankruptcy, but creditors and other legal concerns as well.