For most people, bankruptcy is something they never think about until their finances hit a hard wall. With the poor economy and ever-rising rate of unemployment, filing for bankruptcy relief is turning into a reality some have to face. Whether a failing business, an unforeseen disaster, or bad luck has left you with more bills than you can handle, it could be time for you to consider filing a petition. As Los Angeles Bankruptcy Attorney, we understand that filing can be both confusing and emotionally devastating. We can offer you proper guidance and legal representation through each step of the process.
This post will provide insights into the bankruptcy process, its eligibility criteria, and how to rebuild your credit after filing. We take pride in helping our Cypress, Orange County clients to make decisions that protect them and their futures.
Are You Eligible For Cypress Bankruptcy Relief?
In layman’s terms, bankruptcy proceedings allow you to tell a judge that you cannot settle your debts. The courts then assess your liabilities and assets and decide whether your debts qualify for discharge. In the end, you can only be declared bankrupt if the courts establish that you have no means of repaying your debts.
It remains crucial to understand that bankruptcy cannot cancel all debts. However, filing a petition can help to:
- Stop foreclosure
- Save your property from repossession.
- Halt garnishing of wages
- Stop Eviction
- Stop creditor harassment
- Protect your retirement
- Eliminate medical bills
- Eliminate credit card bills
If these are perks you desire to enjoy, the first thing you should do is decide on the type of personal bankruptcy that best suits your situation. When filing for personal bankruptcy, the two main options you have are Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy Requirements
Chapter 7 is also known as liquidation bankruptcy. It involves a court-appointed trustee liquidating your assets to obtain proceeds for settling some of your debts. Under Chapter 7, some assets are exempt, meaning that you can retain their ownership.
You will need to take a means test to establish whether you are eligible for filing under Chapter 7 bankruptcy. Your income should not exceed the median income for persons or families of your size within Los Angeles to qualify. This chapter can wipe away all your debts and give you a clean slate in about three months. The catch, however, is that you must demonstrate your genuine inability to settle your debts.
What is a Means Test and What Does It Measure?
A means test in Chapter 7 measures your disposable income after removing key expenses like your mortgage, rent, and car loan repayment. Only people whose disposable income doesn’t hit a specific threshold are allowed to file under Chapter 7.
For instance, you automatically qualify to file for Chapter 7 bankruptcy if your monthly income does not hit the state median income threshold. You may also be eligible to file if your monthly household income is greater than the state median, but you lack a substantial disposable income to settle your debts.
Just about everyone who wants to file for Chapter 7 bankruptcy must take a means test. However, the laws excuse you from undergoing the test if:
- You are a veteran living with a disability.
- The majority of your debts are non-exempt.
- You’re a National Guard member on active duty.
Chapter 13 Bankruptcy Requirements in Los Angeles, California
When filing for personal bankruptcy, you can explore the option of Chapter 13 if you don’t qualify for Chapter 7. This Chapter focuses on ensuring you can pay back as much debt as you can within 3 to 5 years. Again, a means test will be necessary to determine your debt repayment plan’s most suitable length.
Even though Chapter 7 offers a more enticing deal because debtors get a fresh financial start within a shorter time, Chapter 13 also provides a unique set of benefits. For instance, you can save your home from foreclosure and even your car from repossession. The best part is that you are allowed to dictate how much you can pay your creditors monthly.
In Los Angeles, your unsecured debts need to be lesser than $394,725, while your secured debts ought to be lesser than $1,184,200 to qualify for Chapter 13. The courts adjust these figures periodically based on the Consumer Price Index or the overall cost of living in the U.S.
Another crucial requirement is signing up for credit counseling. Ideally, the training should take place within 180 days before filing a Chapter 13 bankruptcy petition.
Six Steps of the Bankruptcy Process in Los Angeles, California
Both Chapter 7 and Chapter 13 bankruptcy have a unique process that involves several stages before your debts can be formally discharged. Furthermore, each bankruptcy case presents unique challenges that may make one case more complex than another.
Below is a general list of the six steps of the bankruptcy process:
Step 1 — Pre-Bankruptcy Counseling
Even though anyone can file for bankruptcy, the relief offered is not taken lightly. The law requires you to set a meeting with an accredited credit counselor before filing a petition. The idea is for you to have a more in-depth look into your financial situation and receive general guidance about your bankruptcy options.
The pre-bankruptcy counseling meeting only takes 1 to 2 hours. In case you don’t know of a government-approved credit counselor within your area, you can always request your Cypress bankruptcy attorney for recommendations.
Step 2 — File Your Bankruptcy Petition
This is arguably the most complicated part of the bankruptcy process. A bankruptcy petition is a complex document that classifies and describes your outstanding debts. This document follows a strict format that is better off when formulated by a skilled bankruptcy lawyer. The expert will analyze your financial records and seek to understand your financial situation in-depth before creating and filing the petition.
Step 3 — Automatic Stay
Once you file your petition with the courts, a judge will issue an automatic stay prohibiting your creditors from making further collection efforts. The creditors mentioned in your petition will receive a Notice of Stay, also known as a Notice of Filing, making it illegal for them to conduct any collection proceedings.
Step 4 — Creditor’s Meeting
The court-appointed bankruptcy trustee will schedule a creditor’s meeting within 1 to 2 months after filing your bankruptcy petition. This is a short meeting that can take anywhere between a few minutes and one hour.
You, your Cypress bankruptcy attorney (legal representative), and the court-appointed bankruptcy trustee must be in attendance. In rare cases, creditors may also be present at the meeting to present their case or lodge complaints. This only happens when a debtor is accused of fraudulent or illegal activities.
When filing for Chapter 7 bankruptcy, the trustee will approve your filing right after the creditor’s meeting. If you filed a Chapter 13 bankruptcy petition, the trustee would proceed to create a 3 to 5 year debt repayment plan.
Step 5 — Debtor Education Course
You are approaching the final stages of the bankruptcy process. However, you will first need to complete a debtor education course from an approved agency. This is just a short 2-hour course that you may even complete virtually. It teaches better budgeting and income management skills, as well as how to manage credit better.
Step 6 — Notice of Discharge
If you filed a Chapter 7 bankruptcy petition and your filing is good so far, you will receive a Notice of Discharge as soon as your trustee liquidates your non-exempt assets and uses the proceeds to repay your creditors. Under Chapter 13, you receive a Notice of Discharge after completing your repayment plan. The notice indicates that all your debts are cleared in both cases, and you can now enjoy the much anticipated fresh start.
The bankruptcy process is not as long and complicated as many assume. This is more so if you seek the help of an experienced Cypress bankruptcy attorney. The expert will handle all the necessary paperwork on your behalf, help you dodge common blunders, and provide appropriate guidance to ensure the process is as quick and smooth as possible.
Tips To Help You Rebuild Your Credit after Bankruptcy
Restoring your credit after being declared bankrupt is possible. While you may not achieve a good credit score overnight, you can regain excellent credibility with diligence and proper financial management.
Filing for bankruptcy reduces your credit score by about 200 points, and this will reflect on your report for 7 to 10, depending on the Chapter you choose. All the same, there are certain steps to help you regain a good score sooner than expected. They include:
Check Your Credit Report
Once your debts are discharged, and you have a clean slate, be sure to check your credit report for inaccuracies. Some creditors delay or fail to update the accounts of debtors who file for bankruptcy.
If you aim to improve your credit score, check your credit report from TransUnion, Equifax, or Experian. Ensure all discharged debts are marked as discharged and immediately inform the credit agency if they show up as active.
Don’t Shy Away From Using Secured Credit Cards
Using credit cards right after filing for bankruptcy may seem counterproductive, although it’s not. For credit to work for you, the secret is to avoid piling up too much debt than you can handle. Take out small credit amounts and pay them promptly to establish a commendable payment history. With time, a good track record will increase the odds of securing bigger loans, such as mortgages and car loans.
Pay Your Bills Promptly
Another effective way to rebuild your credit is to pay your bills promptly. The idea is to avoid any records that may show a lack of commitment to becoming a trustworthy debtor.
Readjust Your Lifestyle
Money problems don’t last a lifetime. When you face financial concerns, it is best to take a step back and analyze your income and expenses. In some cases, cutting down on unnecessary costs is vital for you to recover financially. Reduce your daily coffee runs, dine out less or even shop for only what is necessary for you to have an easier time focusing on sprucing up your credit.
Create an Emergency Fund
Living within your financial means is crucial. It is equally important to have some money set aside for emergencies. The last thing you want is to live one crisis away from falling back into debt. An emergency fund will cushion you, ensuring you can still pay your bills and credit cards on time even if your car breaks down or a loved one requires emergency medical care.
How Soon Can I File For a Different Chapter of Bankruptcy?
If your debts are discharged under Chapter 7, you must wait for four years from the date you filed a bankruptcy petition to file for Chapter 13. On the other hand, if you filed for Chapter 13, you need to wait for six years since you filed a petition to file for Chapter 7.
It is possible to file for Chapter 7 immediately, instead of waiting for six years. You simply need to settle at least 70% of all your unsecured debts.
My Cypress Bankruptcy Petition Was Dismissed With Prejudice; what Does This Mean?
There are court orders you must follow when filing for bankruptcy. Violating these orders can result in the dismissal of your case with prejudice. This simply means that you abused the bankruptcy system, forcing the courts to impose certain temporary restrictions on when you can file another petition.
If the courts dismiss a petition with prejudice, this doesn’t mean you can never benefit from bankruptcy relief. You merely need to wait for the imposed restrictions to be lifted before filing once more.
When Can I Enjoy Another Bankruptcy Discharge?
The law allows you to file for bankruptcy as many times as you want. However, this does not mean that the courts will issue a Notice of Discharge each time you file. There is a time limit in place, meaning filing before a certain period elapses is likely a waste of time.
If you want another Chapter 7 bankruptcy discharge, you must wait for eight years from the date you filed your previous Chapter 7 petition. On the other hand, you must first complete your 3 to 5-year debt repayment plan under Chapter 13 and receive a Notice of Discharge before you can file for another petition under the same Chapter. If you want to file sooner and have the ability to repay your initial debts, you can file a new Chapter 13 petition and go through all the six steps of bankruptcy after two years.
Find a Los Angeles Bankruptcy Attorney Near Me
If you’re considering filing for Cypress bankruptcy, the Los Angeles Bankruptcy Attorney is committed to providing just the legal guidance and representation you need. We aim to make the process of filing as quick and straightforward as possible. We also take pride in helping our clients rebuild their financial health and enjoy a more financially secure future. To schedule a consultation, call 424-285-5525424-285-5525.