Filing for bankruptcy is never your first and most ideal option, but there are some situations in which bankruptcy is the best option still available. At Los Angeles Bankruptcy Attorney, we can help you better understand the laws governing bankruptcy in the state of California so you can make an informed decision on whether or not to file. We can also give you expert guidance on what type of bankruptcy best fits your financial situation and what to expect during and after bankruptcy proceedings.
It is important to understand that bankruptcy laws are intended to be a protection for those who have become buried in debt and unable to pay back their creditors. It gives those "down on their financial luck" a chance to get a fresh start and fare better in the future.
Types of Bankruptcy
There are four types of bankruptcy to consider:
- Chapter 7: This is the most straight-forward kind of bankruptcy. It requires you to surrender all property valued beyond certain pre-set limits in order to pay the proceeds to your creditors.
- Chapter 11: This type of bankruptcy allows businesses and individuals with very large debts to "reorganize" to facilitate easier payments.
- Chapter 12: This is a special category reserved only for family-owned farms
- Chapter 13: In this case, the debtor "adjusts" his debt and submits a repayment plan based on his/her current income level.
The vast majority of people who file bankruptcy fall under either Chapter 7 or Chapter 13, which works for both individuals and joint-filing couples. Keep in mind, however, that there are limits to how often you can file and that the bankruptcy will remain on your record for 10 years. Thus, bankruptcy should not be approached lightly, but sometimes it is necessary.
Why File for Bankruptcy?
If you do file for bankruptcy, it will not solve all of your financial problems, but it will solve some of them. Some of the benefits of bankruptcy are:
- All or at least most of your current debts will be discharged, letting you start afresh financially.
- Wage garnishing and debt-collection calls will likely cease.
- Foreclosure proceedings on homes can be stopped, and you may get a chance to catch up on your payments.
- Repossession efforts on automobiles and certain other types of properties can be stopped or even reversed.
- Threats of utility service termination can be neutralized, and utilities already terminated can be restored.
The Limitations of Bankruptcy
As mentioned above, despite bankruptcy's many benefits, it cannot solve every problem. Some things bankruptcy cannot do include:
- Cancel your obligations on secured loans. More specifically, while you can get the debt itself canceled, you cannot prevent collateral from being confiscated.
- Eliminate special classes of debts, including: child support, court-imposed fines, certain student loans, and certain types of taxes.
- Prevent co-signers of your debts from sharing an obligation to re-pay all or a portion of what's due.
Asset Protection During Bankruptcy
Like most states, California has a long list of "exemptions" that serve to protect some of your personal property when you file bankruptcy. The purpose of these laws is to allow you to continue to live at a reasonable standard of living. In layman's terms, even if you owe someone a million dollars, they can never "take the shirt off your back."
Some of the main California property exemptions, which designate what creditors can't touch even when you file for bankruptcy, are as follows:
- Real estate ("the homestead exemption") worth up to $75,000 for a single, healthy adult, $150,000 for a family, and even more if there are disabled people or children involved.
- Up to $1,900 in an automobile or $1,900 in auto insurance, but you cannot double this for joint filers.
- A virtually unlimited amount in small, personal property items not of high value and in appliances, furniture, clothing, and food stores.
- Up to $5,000 in jewelry, art, or family heirlooms.
- Various amounts in insurance, pension payments, social security payments, personal liability settlements, and miscellaneous other items.
Remember that, regardless of exemption laws, if you have already pledged property as collateral, it is highly unlikely you can prevent it from being taken to pay on the debt it is backing up. With unsecured loans, however, such as credit card debts, there is no right to take away exempt property (no matter how loud the threats). Even if a court judgment puts a lien on your property, for example, you can get it removed as long as you ask the bankruptcy court to do so.
Other Bankruptcy Concerns
Some other bankruptcy-related questions many ask, and the answers, are given below:
- How much will it cost to file for bankruptcy in California? For Chapter 7, the fee is $306; for Chapter 13, it is $281. And if you can't afford the fee upfront, you can pay it in installments.
- Will I have to appear in court? Usually, you only need a short meeting with your creditors' bankruptcy trustees. A few questions and a few simple forms may be involved. An actual court hearing is possible but not usual.
- How will bankruptcy impact my credit? Bankruptcy will be on your financial record for 10 years and is certainly not a positive for your credit. But, heavy debts and delinquent bills can often be as bad or worse for your credit.
Contact Us Today for Help
For answers to all of your important questions about how to file for bankruptcy or whether to file, feel free to call Los Angeles Bankruptcy Attorney 24/7 at 424-285-5525.
We will apply our deep knowledge of the law to help you get a fresh financial start.