If you’re an individual and are deep in debts, applying for bankruptcy could give you a new financial beginning. In California, you mainly have two bankruptcy options to choose from: Chapter 7 and Chapter 13. The two bankruptcy chapters work differently and are designed for individuals with different financial needs and goals. Therefore, it is crucial to understand how each works to make an informed decision to remedy your situation. It is advisable to seek the guidance of a competent bankruptcy attorney.

If you’re considering applying for bankruptcy in La Palma, Los Angeles Bankruptcy Attorney could help you make the right decision based on your needs. We have competent bankruptcy attorneys that will also walk you through the legal processes for a successful outcome. Take advantage of our excellent skills and experience today to manage your debts and recover from your current financial situation.

Bankruptcy Chapter 7 or Chapter 13?

Individuals considering going through the bankruptcy process in California have mainly two bankruptcy options: Chapter 7 or Chapter 13. A person will qualify for one chapter and not the other, based on their current financial situation and needs. Thus, it is advisable to understand how each bankruptcy chapter works, then choose the one you can easily qualify for and one that will eventually help you achieve your financial freedom. Working with an experienced bankruptcy attorney comes with several benefits, including a clear understanding of what each chapter entails and what chapter best suits your situation. A reasonable La Palma bankruptcy attorney will also help you file the necessary documents in court for a speedy and successful process.

Bankruptcy Chapter 7

Bankruptcy Chapter 7 is what is referred to as liquidation bankruptcy. It is the kind of bankruptcy process that will help you eliminate most of your unsecured debts fast. Bankruptcy Chapter 7 is most suitable for individuals who have a limited income and don’t have the current ability to make payments to all or most of their debts. Under this Chapter, the court will discharge some debts and then assign you bankruptcy trustees. These trustees will put some of the valuable assets you have on sale to raise funds for the repayments of your remaining debts. Once your debts are cleared, you are free to start again in life.

The good thing about this option is that it renders you debt-free sooner than later. Therefore, you have a chance to start all over again and can quickly recover in a few years. Additionally, it puts a stop to all your creditor’s calls, messages and threats. Immediately you file for bankruptcy, the court will issue an automatic stay. Anyone that calls to demand payment, whether a creditor or a collecting agency, could be penalized for contempt of court. It gives you peace of mind even as you ponder what your life will be like after the bankruptcy process.

Chapter 7 California bankruptcy also eliminates your full involvement in the debt repayment process. You will not be required to find a market for your assets to raise enough funds to pay off your secured debts. As mentioned above, the court assigns bankruptcy trustees to your case. Trustees will review your documents, sell off your valuable assets, and determine the order in which your remaining debts will be repaid.

After the court discharges your unsecured debts, creditors or debt collectors cannot contact you for repayment. The only time creditors can demand payment for dischargeable debts is if they can prove in court that you made a mistake or committed fraud. Note that while filing for insolvency, you are required to provide accurate and truthful documents and information. Failing to do so could result in the dismissal of your case. The court can also charge you with perjury. Your La Palma bankruptcy attorney will ensure that you have correctly prepared your documents. 

To qualify for bankruptcy Chapter 7, you will be required to undergo a means test if you’re currently earning beyond the median wage. The test calculates your income against your financial obligations. If, from the results, the court establishes that you have a high earning potential, you will only be allowed to file for bankruptcy Chapter 13. However, if your earning potential is low, you will not benefit from debt reorganization. Thus, you can apply for Chapter 7. Note that if you’re already earning below the median wage, you automatically qualify for Chapter 7 and will not undergo the means test.

Additionally, the court requires that you obtain credit counseling from a reputable counseling agency. Counseling must take place within 180 days of applying for bankruptcy. Chapter 7 California bankruptcy aims at giving relief to hardworking individuals who have been hit hard by economic hardship. If you’re already earning a good salary or wages, you can handle your debt repayments and only apply for Chapter 13. Your La Palma bankruptcy attorney will ensure that you understand all the requirements in detail.

The Advantages

For those that qualify for Chapter 7 bankruptcy option, here are some of the benefits you could enjoy:

  • Chapter 7 allows you to start life afresh, free of debts. The court will discharge your unsecured debts and ensure that your secured debts are taken care of. By the end of the process, you will be free of all obligations, ready to start a new life from a new financial standpoint.
  • The court grants you protection against your creditors and debt collectors as soon as you submit your applications. If you have always lived in fear of harassment from your creditors, you will begin to enjoy life immediately after submitting your applications. The automatic stay order will be in place, forbidding your creditors or debt collectors from contacting you in any way.
  • No more wage garnishments from the date you file your application. If your employer has been withholding part of your wages for the repayment of a particular debt, the automatic stay puts a stop to that too. In short, creditors are ordered by the court to stop any effort of recovering payment from you until the determination of your case.
  • Any wage you earn or property you acquire after the filing date will be yours. The bankruptcy court cannot use that to pay your creditors.
  • The court doesn’t consider the amount you have in debt to qualify you for Chapter 7 California bankruptcy. It means that you can still be eligible even if you owe so much money.
  • Your case will be concluded in a maximum of six months. This is the period within which you must wait to be debt-free. In just a few months, you may be well on your journey of financial recovery.

The Disadvantages

Chapter 7 also comes with some disadvantages you shouldn’t ignore. Some of them are:

  • You are likely to lose assets that might have taken you years to acquire. Under Chapter 7, your non-exempt property is sold by trustees to raise money for your debt Therefore, if you want to keep some valuable assets like your car or home, Chapter 7 may not be the right choice for you.
  • Your application for bankruptcy does not protect your co-signers. Cosigners to your loans will still be stuck with your debts unless they too pursue bankruptcy protection.
  • If your property is about to be foreclosed, the automatic stay will only offer temporary protection. You might lose it as soon as the trustees start carrying out court orders.

Bankruptcy Chapter 13

California bankruptcy applicants who do not qualify for Chapter 7 are allowed to try Chapter 13. They could be those deep in debts but aren’t willing to let go of some of their valuable assets. They are also individuals who earn decent wages but aren’t able to honor their debt repayments. Chapter 13 bankruptcy is mainly about debt reorganization. It allows you to develop a more comfortable and manageable payment plan that you can keep for three to five years. The plan must organize your debts in order of priority, starting with the most urgent to the least important.

To apply for Chapter 13, prepare all your financial documents and statements which disclose your current financial situation. In the statements, you will provide information regarding all your debts, the amount of income you receive, and expenditures. Information provided must be true and accurate. Your La Palma bankruptcy attorney will ensure that you include all the documents needed for the court to accept your application. Failing to provide accurate information could lead to criminal charges for perjury. The court can also dismiss your case, leaving you in the same financial situation or worse. Additionally, creditors can file a lawsuit against you for misinforming the court.

The Advantages

Here are some of the advantages of filing for this bankruptcy chapter:

  • Chapter 13 allows you to keep your valuable assets. Once you file your case in a bankruptcy court, your creditors will no longer sue you or proceed with repossession or foreclosure. Therefore, if you have a car or home you are unwilling to lose despite your financial situation, Chapter 13 bankruptcy could be the ideal choice for you. The court issues an automatic stay shortly after it receives your paperwork. The order stops any debt recovery activities by your creditors or debt collectors. Your creditors’ only chance of recovering their money is through renegotiating with you for better repayment terms.

You’ll have a more flexible repayment period that could run to up to five years, within which you must have cleared all or part of your debts. The court allows you the option of disposing of some assets and keeping those that are more valuable to you. If you earn enough money to pay off your debts, you are free to keep all your assets and stick to the repayment plan.

  • Chapter 13 bankruptcy only appears on your credit report for seven years, while Chapter 7 remains ten years. It means that with Chapter 13, you will rebuild your credit soon enough. Additionally, lenders are likely to trust you after a Chapter 13 bankruptcy than a Chapter 7. Moving forward, you can obtain a loan without worrying about a denied application or high repayment rates, and other issues that come after bankruptcy. The reason for this is because Chapter 13 shows your will and ability to pay your creditors.
  • You could benefit from a discharge of unsecured debts with Chapter 13 bankruptcy. Debt discharge leaves you with a few (though significant) debts to worry about. Unsecured debts are those that have no collateral. Debts like those include medical bills and credit card debts. If the bankruptcy court discharges some of those debts, you will never be required to pay them back. It leaves you with fewer obligations to manage for a period of up to five years.


There are some downsides to filing for this bankruptcy option. Some of these are:

  • In Chapter 13, you generate a payment plan, where you use your income to make payments. Unlike Bankruptcy Chapter 7, your post-bankruptcy income is used up in debt repayments for the length of time the plan will run.
  • Chapter 13 involves a more complicated process. Thus, you pay a higher legal fee than what you could have paid for Chapter 7.
  • Chapter 13 doesn’t free you of debts until the end of the repayment period, which could be five years.

Both Chapter 7 and Chapter 13 bankruptcy options are right for those that qualify.  But significant consideration needs to be put in determining the one that best suits your situation. Choosing the right La Palma bankruptcy attorney might help you in decision making. An experienced attorney will also simplify the process for you and protect your interests throughout the process.

Find a La Palma Bankruptcy Attorney Near Me

If you’re in severe debt and cannot keep up with your payments, applying for bankruptcy could better your situation. However, you must make the right choice of a bankruptcy option to file in court for a favorable outcome. If you seek legal help in La Palma, Los Angeles Bankruptcy Attorney could offer you the much-needed advice and guidance. We have excellent skills and knowledge to help you determine the right bankruptcy option for your situation. We will also walk with you through the process and even after that until you recover financially. Call us at 424-285-5525, and let’s be there when you need us the most.