Bankruptcy: Myths vs. Facts

Many people misunderstand bankruptcy based on myths and misconceptions. Let's clarify some common misunderstandings about the bankruptcy process.

Written and reviewed by Michael R. Totaro and Maureen J. Shanahan, bankruptcy attorneys at Totaro & Shanahan, LLP, practicing before the U.S. Bankruptcy Court for the Central District of California.

Bankruptcy by the Numbers

$338 — current Chapter 7 court filing fee; $313 for Chapter 13 (U.S. Courts fee schedule, 28 U.S.C. §1930).
21–40 days — window between filing and the §341(a) meeting of creditors (11 U.S.C. §341; Fed. R. Bankr. P. 2003).
60–90 days — typical time from the §341(a) meeting to a Chapter 7 discharge when no objections are filed.
10 years / 7 years — how long a Chapter 7 and a Chapter 13 stay on a credit report (Fair Credit Reporting Act, 15 U.S.C. §1681c).
$300,000–$600,000 — California homestead exemption range, indexed annually for inflation (Cal. Code Civ. Proc. §704.730).
8 years — required gap between successive Chapter 7 discharges (11 U.S.C. §727(a)(8)).

What we see in Los Angeles cases: most of our clients file after a medical event, a job loss, or a small-business downturn — not overspending. Because Los Angeles home values often exceed the federal exemption, choosing California's §704 exemption set instead of §703 is frequently the single decision that determines whether a homeowner keeps their equity in Chapter 7.