A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

(Excerpt from US Bankrtupcy Court website)

If you are married, a key question arises as to whether it makes sense to file a Joint petition (both you and your spouse), or a separate petition just on your behalf.  One of the most common questions our office receives is whether there is a way to “SAVE” one spouse’s credit, while eliminating all debts by filing bankruptcy for only one spouse.  Because each case is unique, we always evaluate these scenarios carefully, to determine whether it makes more sense to file a joint petition as husband and wife, or whether it is indeed unnecessary to file a joint petition, thereby saving one spouse’s credit standing.

Here are the key considerations in making the evaluation above:

1. GENERAL LIABILITY ISSUES – The key consideration is whether the spouse of the Debtor will be exposed to liability for the debtor’s debts.  If the spouse is also liable for the debts--as a co-obligor or under community property law-- it may be advisable to file for both spouses. Otherwise, the nonfiling spouse may remain liable despite the debtor spouse's bankruptcy discharge. On the other hand, if the spouse's assets are all separate property that would not be liable for the client's debts, it may be unnecessary to file for the spouse.

2. COMMUNITY PROPERTY – California is community property state.  That means that generally speaking, all debts and assets incurred and gathered, respectively, DURING marriage, are community property and BOTH spouses are liable for the community debts, and have claims to the community assets.  However, if debts and assets are clearly separate property of the filing spouse, then it may be unnecessary to file for both.  Determining if debts or assets are indeed separate property depends on a variety of factors such as:  how the debts were incurred, who benefited from the debt, were certain assets gifted as separate property to only one spouse, etc.

3. DISCHARGE OF COMMUNITY CLAIMS – In a community property state (as in California), a discharge in the filing spouse’s bankruptcy petition may be all the protection the other spouse needs in order to be absolved from future liability and claims from creditors.  With some exceptions, a bankruptcy discharge bars action on account of a "community claim" (a prepetition debt for which community property of the bankruptcy estate is liable), against community property acquired after commencement of a bankruptcy case.  However, the non-debtor (non-filing) spouse may still be liable for certain community debts such as “necessities of life.”  If such “necessities of life” debts are significant, it might make sense to file a joint petition in order for the spouse to protect his or her separate property.

4. BENEFITS OF FILING A JOINT PETITION – Filing a joint petition may offer the “umbrella” protection that many debtors may need.  Once a bankruptcy discharge is obtained on a joint petition, both community property and separate property should enjoy the protections post-bankruptcy discharge.  In addition, filing a joint petition only requires one filing fee.  Once a separate petition is filed, it cannot be amended to a joint petition.  The only other remedy would be for the other spouse to file as well, and seek consolidation for joint administration.

A large portion of calls our firm receives comes from callers wanting to know whether DEBT SETTLEMENT is a better option than BANKRUPTCY.  Most callers have seen advertisements that claim that 90% of your debt can be wiped out through debt settlement programs without declaring bankruptcy.  Furthermore, these advertisements also claim that you can make low monthly payments to settle these debts over 2-4 years.  Wow – that all sounds great, but what is the TRUTH regarding these so-called debt settlement programs?

What is Debt Settlement?

Simply put, Debt Settlement is the process of settling your debt (primarily unsecured credit card debts) for LESS than the amount you owe.  For example, if you owe $20,000 in credit card debt, you are seeking to SETTLE that debt for LESS than that amount, usually for much less.  So, for instance, if you settle $20,000 for $10,000, you have settled that debt for 50% of what you owe, and if done properly, the remaining 50% is forgiven, or wiped out.

QUESTION:  I WANT TO RENT A PRIVATE HOUSE OR CONDO, BUT I HEARD THERE ARE MANY SCAMS OUT THERE – HOW CAN I PROTECT MYSELF AS A RENTER?

Many home and condo owners these days are trying to rent-out their properties, NOT because they want to keep it as an investment, but because they are not able to sell it and have no other choice.  In fact, many homes and condos for rent may seem like great deals, but renters BEWARE – they may be scams.

I want to share with you a recent event that occurred to a friend of mine that illustrates the importance of investigating the property you are planning on renting, including its owner(s).  To protect my friend’s privacy, we’ll call him Mr. Lee.  Mr. Lee, his wife and children were looking to rent a house in La Canada, a great suburb just north of Koreatown - an area where crime rate is very low, and an area where one would expect no real estate related scams.

QUESTION:  I WANT TO DECLARE BANKRUPTCY TO ELIMINATE ALL MY DEBT.  DOES DECLARING BANKRUPTCY AUTOMATICALLY ELIMINATE ALL MY DEBT, OR DO I STILL NEED TO PAY BACK SOME OF IT?

This is a very common question we receive from members of the Korean community. The short answer to this question is:  DEPENDS ON YOUR INCOME.  In essence, by filing for bankruptcy protection, you are saying that you simply cannot afford to pay back all your debt, and that you need help in either eliminating it entirely, or coming to some sort of manageable payment plan.  Prior to the bankruptcy law changes of 2005, generally, people had a choice of either filing bankruptcy under either Chapter 7 or 13, and it was exactly that – it was the choice of the debtor.  Post October 2005, the new bankruptcy laws make it a little more stringent on whether you can completely eliminate all your debt, without having to ever pay it back.  The essence of the new bankruptcy laws revolves around the idea that if you have regular income and you can pay SOME of your creditors back, you should be made to.