Los Angeles and celebrities go hand in hand. Whether it’s the bright lights of Hollywood, the booming music scene, or the surrounding natural beauty, celebrities have been coming to Los Angeles for decades. Another thing that goes with a celebrity? Money.
Unfortunately, money can be a significant problem for all of us, whether we’re rich and famous or not. If you are famous, you may be struggling to know where all your money is going, feeling like you earn a lot of money, but it seems to be leaking out somewhere. If this is the case, you may be considering bankruptcy.
Most of us understand bankruptcy as something we “declare” when we have no money to pay our bills. While this is partially true, it isn’t the whole truth. Bankruptcy is a serious decision to make that has financial and legal outcomes. Importantly, bankruptcy does not have to mean that you cannot pay off your creditors – it may instead mean you are looking for a legal way to restructure and pay back your debts.
Welcome to Los Angeles Bankruptcy Attorney. Located in Los Angeles, we work with clients across the greater Los Angeles region and we are no stranger to celebrities who seek bankruptcy and other financial aids. As experts on bankruptcy in California, we can help you determine whether bankruptcy is right for you – and exactly which type (chapter) to file. We are also skilled at other, non-bankruptcy options, depending on your situation. As a celebrity, you may be concerned about your privacy. Lucky for you, we are consummate professionals that many others have relied upon – as such, we value privacy and we never share information about clients unless legally necessary, which is rare.
Because bankruptcy can bring up a lot of emotions, from embarrassment to ignorance to guilt, we put together this guide to bankruptcy in California. Understanding your options is the first step in choosing a healthy financial lifestyle.
What is Bankruptcy?
Despite all the drama and guilty feelings around it, bankruptcy is a legal process wherein you (the debtor) seeks relief from the debt you may owe (to one or a number of creditors) because you are unable to pay it. In the U.S., bankruptcy usually follows two paths: either discharging or dispensing on your debt altogether by meeting certain legal guidelines or by restructuring your debt and how you’ll pay it off.
Bankruptcy is a federal process, where bankruptcy cases are filed in the U.S. Bankruptcy Court, which is affiliated with the U.S. District Courts. There are different types of bankruptcy (often known as chapters), which are mandated by federal law. However, bankruptcy cases are often based on state laws, so that states may have different exemptions, which are the assets you may be able to keep despite filing for bankruptcy.
When a person says “I’m filing for bankruptcy”, it does not mean one single thing, but it can include a variety of situations.
How Does California Treat Bankruptcy?
Bankruptcies in California comply with federal laws governing the financial and legal process, but the State of California some unique conditions, including the following:
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California provides two lists of assets that you can choose to protect (exempt), which means you actually do not lose all your property when filing for bankruptcy, a common misconception. As a debtor who opts to file bankruptcy, you can choose between the two lists (you cannot mix and match), but a bankruptcy expert can help you determine which is best for your assets and situation.
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If you have properties that don’t qualify for protection (exemption), you can still use your trustee in Chapter 7 bankruptcy who sells the property for a benefit.
As California is one of the largest states in the U.S. with a population exceeding 40 million people, it sees a significant number of bankruptcy cases. As such, the U.S. Bankruptcy Court has four districts that serve the State of California:
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The S. Bankruptcy Court, Northern District of California hears bankruptcy cases from the northern part of the state, with physical court locations in San Francisco, Oakland, San Jose, and Santa Rosa.
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The S. Bankruptcy Court, Eastern District of California represents the California capital region, Central Valley, and areas east. The court has a physical presence in Sacramento, Fresno, Modesto, and Bakersfield.
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The S. Bankruptcy Court, Central District of California covers cases that span the Central Coast, the greater Los Angeles region, and areas east to the Nevada and Arizona borders. This bankruptcy court is the largest in the U.S., The court maintains physical locations are in Los Angeles, the San Fernando Valley, Santa Barbara, Riverside, and Santa Ana. If you are a Los Angeles-area celebrity with your primary residence and business activities here, you will likely be heard by this bankruptcy court.
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The S. Bankruptcy Court, Southern District of California judges on bankruptcy cases from San Diego County and Imperial County. The court is located in San Diego.
Celebrities File Bankruptcy, Too
Just because you are a celebrity, everyone assumes you are raking in the cash. Even if you are, you might have a lot of people to support: family and friends, band members, managers and publicists, and trainers and specialists who help keep you in prime shape for your talent, whether it’s your music, acting, business, or other talents. Plus, you probably have a lot of people pitching you their business and investment ideas, assuming you’re rolling in money and ready to fund their dreams. Or maybe the money just got ahead of you – a lot of us are never taught how to deal with money appropriately, spending much more now and forgetting to save for a rainy day.
Types of Bankruptcy
The United States Code, Title 11, describes the six types of bankruptcy recognized by the U.S. government:
Chapter 7
This is the most common form of bankruptcy, as Chapter 7 bankruptcy is usually the simplest and speediest type to file. This strategy applies to both individuals and businesses, and it is a basic liquidation of your assets. Liquidation is the process of selling off assets in order to pay creditors (and shareholders, typically for businesses, not individuals).
Chapter 7 bankruptcy is also known as “straight bankruptcy”.
Chapter 9
This type of bankruptcy applies to municipalities and is often known as a municipal bankruptcy. (As this type of bankruptcy likely does not apply to you, contact us directly for more information.)
Chapter 11
Another well-known type of bankruptcy, Chapter 11 is known as “corporate bankruptcy”. The name implies that this bankruptcy is primarily used by businesses with significant unpayable debts, but individuals with substantial assets and debts may also use this. As such, some celebrities filing bankruptcy seek a Chapter 11, often because they have significant assets and function as a small business, whether as a formal or de facto one, paying employees, establishing contracts, and earning significant income.
Chapter 12
Chapter 12 bankruptcy typically applies only to family fishermen and farmers, so it is less commonly known. (Similar to Chapter 9, as this type of bankruptcy, likely does not apply to you, contact us directly for more information.)
Chapter 13
Chapter 13 bankruptcy is also widely known. Instead of a liquidation of assets, typical of Chapter 7 bankruptcy, Chapter 13 is a perfect example of debt restructuring for individuals. Filing this type of bankruptcy often results in a debt repayment plan, as long as the individuals have a regular (established) source of incomes. Because it is commonly used by individuals with steady income who want to repay all or some of their debts, Chapter 13 bankruptcy is also known as “wage earner bankruptcy”.
Chapter 15
Like chapter 12, Chapter 15 bankruptcy has a very specific use in ancillary and international cases, as a way for debtors to clear foreign debts.
What’s the Difference in Chapter 7 and Chapter 13 Bankruptcy?
We hear about Chapters 7 and 13 bankruptcy the most often because they apply to individuals. If a friend or relative is seeking bankruptcy, it is likely under one of these chapters.
What is an Automatic Stay?
An automatic stay is a common term in bankruptcy cases, but what is it? Both individuals and business who owe a lot of money to their credits are experienced with all sorts of collection tactics: aggressive debt collection letters, utility and service shut-offs, wage garnishments, evictions, repossessions, and even lawsuits.
An automatic stay is a way to halt the majority of these tactics and activities. With any type of bankruptcy in the U.S., as soon as the debtor files a request for bankruptcy, an automatic stay comes into effect to pause debt collector activities.
The Process of Bankruptcy
Once you’ve decided to pursue and declare bankruptcy, you will need to follow a specific process to give yourself the best chance for an actual declaration of bankruptcy.
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Compile your financial information. Sometimes known as a “financial inventory”, you’ll need to gather all sorts of detailed information. The more, the better. If in doubt, include it. If you are married but declaring bankruptcy as a single person (not jointly), you should still include your spouse’s financial information. Some examples of records to track include:
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Income – any monies you have earned or received in the last six months, as well as future income (including salaries, unemployment compensation, retirement or pension, side jobs, investment dividends, etc.)
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Property and assets – anything you own that has value, including home and business property, savings accounts and stocks, cars, art, collectibles, etc.
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Debts – creditors, balance, interest rate, current or outdated payments, etc.
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Monthly living expenses – including mortgage or rent, utilities, food and other expenses like medical, clothing, taxes, transportation, child support or spousal support.
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Seek credit counseling. Credit agencies provide credit counseling, which usually takes a couple of hours by phone or internet, and the fee is generally under $100 per session. You must go to credit counseling with an approved agency no more than six months in advance of your petition for bankruptcy.
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Attend your 341 creditors’ meeting. This meeting may sound intimidating, but it really is a simple formality that your bankruptcy lawyer can prepare you for. However, missing or not attending the 341 meeting often results in your case being dismissed.
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Seek post-bankruptcy credit counseling. Much like Step 2, you will need to complete another session of credit counseling within 45 days of your creditors’ meeting (if filing Chapter 7) or before the day of your last payment (if filing Chapter 13). Without proof of this sent to your trustee, your bankruptcy process will not be complete and your debts cannot be discharged.
Is Bankruptcy My Only Option?
No, bankruptcy is not your only option when it comes to handling debt that is difficult or impossible to pay. Choosing bankruptcy is a serious decision, often one that is better to fully understand, with the help of a financial planner and experienced attorney, before settling on it.
Other alternatives to bankruptcy can include:
Avoiding legal bankruptcy on your own.
Many people start here or should start here. Consider your lifestyle: is there a way to reduce your expenses, like downsizing, selling some property, or living in a more affordable home? Is there a way to spend less on external purchases? Conversely, is there a way for you to make more money or otherwise increase your income, perhaps by consolidating your loans under a single interest rate?
Partnering with a credit counseling expert or agency.
Individuals specialize in the best ways to cope with your mounting debt. Often, our debt is a result of poor management of our money, perhaps because we never knew how to manage money to begin with, and then we earned more than we knew how to handle. A credit counseling agency can help educate you on ways to:
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Make a realistic budget (and stick to it – the most important part!)
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Increase income
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Decrease expenses
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Negotiation repayment plans with your creditors
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Consolidate loans
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Understand and handle aggressive collection practices
When speaking with a credit counselor or counseling agency, do beware that some agencies are actually taking advantage of clients instead of helping them. Consider the resources listed here (PDF) from the Consumer Federation of America, a federal, non-profit watchdog, and help group.
Talking with a bankruptcy attorney.
Experience bankruptcy attorneys know the ins and outs of bankruptcy laws in California, and they can give you legal advice on which options may work better for your situation than others. Remember that you do not have to initiate a legal filing for bankruptcy to get advice from a lawyer. Instead, simply meeting with a lawyer for an hour or two can be a much more affordable way to understand your options – without the hassle of declaring bankruptcy, if there are better options for you.
Filing Bankruptcy Without A Lawyer
U.S. law does allow individuals to file for personal bankruptcy under Chapter 7 or Chapter 13 without hiring an attorney to represent them. This is known as filing “pro se”. The government makes this a little easier to do by making Bankruptcy Forms available to anyone for free.
Importantly, the court who hears your bankruptcy case will expect you to comply with all processes and rules in federal court as you would under the direction of a lawyer. You’ll also be expected to understand both the federal Bankruptcy Code and the rules of your local jurisdiction.
While forgoing a lawyer may seem prudent – you will be saving on significant legal fees, after all – it is generally not recommended, especially because any type of bankruptcy has long-term effects on your financial health, plus legal consequences.
What Can A Bankruptcy Lawyer Do for Me?
Bankruptcy lawyers specialize in a range of laws that apply to bankruptcy: both federal codes and local laws that affect what items and assets are or are not included in your asset reduction. Plus, Los Angeles area lawyers understand how various bankruptcy judges may treat you, as a celebrity, with these financial difficulties, so you can be as prepared as possible for the legal and financial outcome of your case.
Specifically, bankruptcy attorneys can advise you on whether to file a petition of bankruptcy (and which type) or to opt for a different option, what debts may be able to be discharged from the case, and what assets you may be able to keep or put to the side of your bankruptcy petition. This is especially helpful to high-income earners, which you may be, as you may maintain several homes as necessary to your work, and you may employ a number of people on full- or part-time work.
Bankruptcy attorneys can also help you understand whether and which creditors it is necessary to continue paying, and how an automatic stay will apply to debt collection activity. Importantly, though often brushed aside as an afterthought, are the countless papers and forms you’ll have to complete – an experienced legal team can quickly enumerate the paperwork and help you ensure little to no errors in the documentation, helping speed up the tedious process of bankruptcy.
Hiring a Premier Celebrity Bankruptcy Attorney Near Me
Are you ready to start your bankruptcy case? Get in touch with Los Angeles Bankruptcy Attorney today. Whether you’re a celebrity or like us normal folks, sitting on a lot of wealth or not, if you’re in the greater Los Angeles area, we are ready to help you! Call us at 424-285-5525.
