When you face a financial hardship in this modern world where almost everything involves money, you can easily fall into a debt trap because creditors look forward to exploiting people like you with their high-interest loans. Credit cards and loans can help you keep your head above the water during these challenging economic times, but paying these debts without a reliable source of income can be a pain in the neck.

Even if you have a reliable income source, paying these debts can become overwhelming with time if the salary is little and your lifestyle is expensive. Therefore, most people opt to file bankruptcy to seek debt relief from these overwhelming bills and debts. Filing for bankruptcy can work out in your favor in this kind of situation to enable you to plan and control your finances without harassment from creditors.

To know more about what a bankruptcy declaration can do for you or your friend, we invite you to contact the Los Angeles Bankruptcy Attorney wherever you are in Laguna Beach. Our attorneys will explain to you available bankruptcy options to overcome your debts with ease and offer you the legal representation you need throughout this process.

Understanding Bankruptcy and Risk Factors that Can Make You File For Bankruptcy

Filing for bankruptcy is the process whereby an individual legally declares his/herself or his/her business unable to pay unsettled debts. Typically, declaring bankruptcy releases an individual from personal liability for specific debts (secured and unsecured) through a court order known as "automatic stay."

A bankruptcy debt discharge will prohibit all your creditors from contacting you regarding their money. However, when you declare bankruptcy in California, it will reflect on your credit record, which will affect your financial options or choices in the future.

Whether young or old, married or single, male or female, any person can come to the point of deciding to file bankruptcy due to various life circumstances causing financial hardships. However, some people are at more risk of declaring bankruptcy than others due to their unique life circumstances and financial situation.

In no order of importance, below are some of the risk factors that make most people consider bankruptcy declaration as a reliable means of finding debt relief despite the harm it has on credit rating:


One of the main risk factors that can put you in a debt trap, necessitating bankruptcy, is divorce. While it is not true that filing bankruptcy can lead you to divorce, divorce can indeed make you go bankrupt.

Usually, most people who file bankruptcy include divorce in their petition as the main contributing factor to their current financial situation. The financial impact that divorce can have on a person goes beyond the initial distribution of assets and attorney's fees. The aftermath of a divorce can lead to the accumulation of overwhelming debts because you have to keep your bills current, even without the other partner.

Relying on a Credit for Living Expenses

Relying on credit for living expenses like paying for food, clothing, and other lifestyle needs is another risk factor that makes several people go bankrupt. What starts as a temporary solution to financial hardship can make you accumulate massive unsecured debts over time, necessitating a bankruptcy declaration.

Job Loss or Income Reduction

Contrary to common belief, most people who go bankrupt are not unemployed. Most people who file for bankruptcy are usually hardworking individuals with some form of income. If you lose your job due to life uncertainties like company lay-off or the current COVID-19 pandemic affecting the global economy, you might turn to credits to make ends meet, which is a risky financial move.

It is possible to experience a sudden drop in income, even if your job is secure because of uncertainties like illness or car accidents, demanding some time off work. Unless you have an emergency fund in your account to handle these kinds of life uncertainties, you might have to declare bankruptcy to keep your head above the water and keep your creditors at bay.

Carrying High Debts into Retirement

Nowadays, seniors (people above the age of 60) are among the fastest-growing groups of people who file bankruptcy in California, accounting for about ten percent of all bankruptcy filings. Seniors are prone to life circumstances that can easily jeopardize their financial status, for instance:

  • Most seniors will live on a fixed income, which leaves them with no ability to keep up with their regular bills and lifestyle needs when they retire.
  • Most seniors have no savings plan because they were using their pre-retirement income to meet their ongoing debt obligations.
  • Seniors are more prone to injury, illness, and other health-related problems, which can dig deep into their finances if they do not have an emergency fund account.

If you are approaching your retirement stage without a savings account and you have high debt, you are at risk of going bankrupt. Ensure you contact a Laguna Beach bankruptcy attorney to determine if a bankruptcy declaration can help you resolve financial issues after retirement.

Benefits of Bankruptcy Declaration

The benefits you can accrue from a bankruptcy declaration depend on your unique financial situation because a bankruptcy declaration does not erase all your debts. After reviewing your current financial situation, a reliable Laguna Beach bankruptcy attorney can help you make the right decision to help you out of the difficult financial bind. Declaring bankruptcy can ease a lot of stress you are facing by stopping:

  • Debts lawsuits from your creditors
  • Repossession of some of your property/assets (in Chapter 13)
  • Collection agencies or creditors calls and messages
  • Foreclosure
  • Wage garnishment

Apart from stopping all the above debt collection efforts from your creditors, bankruptcy declaration will also:

  • Free you from many debts (in Chapter 7)
  • Prevent your creditors from selling some of your "exempt" properties like a primary vehicle or a house (in Chapter 7)
  • Put an end to your accumulating or growing debt for a fresh start to take charge of your finances.

Crucial Considerations in Bankruptcy Declaration

Bankruptcy declaration in California is a complex and emotional process that requires you to be very careful before making your final decision. It takes much more time and a lot of considerations than most people know, but it can also be a much-needed solution for your significant debt problems.

Before embarking on this life-changing process, it is worth examining the following considerations with the help of your bankruptcy attorney:

  • The impact on your credit rating
  • The impact on your ability to apply for credit or low-interest loans
  • Whether you can qualify for particular chapters or forms of bankruptcy
  • Whether you could lose your property or assets (when you file Chapter 7)
  • Whether you could retain your valuable properties or assets from repossessions
  • The difference in expense and time associated with each chapter or form of bankruptcy

It is also essential to consider other bankruptcy declaration impacts to know whether to file bankruptcy or not and to know better bankruptcy options to file. For instance, some chapters of bankruptcy may:

  • Stop foreclosure
  • Fail to discharge your credit card debts
  • Create financial obligations or issues for your debt co-signers
  • Impact your pension/retirement plan and other assets
  • Feel like a substantial invasion of your privacy when it comes to the requirements of the bankruptcy court and working with a court-appointed trustee

All of the above considerations or concerns can impact your desirability of seeking debt relief through bankruptcy. However, none of these concerns are worse than staying with your overwhelming debts or making your whole financial situation even worse. Sometimes, debt relief is necessary if you want to stand on your financial feet again.

A bankruptcy declaration can give you a fresh financial start that you need, and afterward, you can continue working towards the financial situation you want. Make use of the available and reliable Laguna Beach bankruptcy attorney's services to make an informed bankruptcy decision that will solve your financial woes.

Bankruptcy Options to Consider

Most Laguna Beach bankruptcy attorneys will offer you a free consultation over the phone or at their office to determine whether you are eligible for bankruptcy and your available options. Here are common bankruptcy options that your attorney is likely to advise you to file:

Chapter 7

Also commonly known as "liquidation" bankruptcy, Chapter 7 allows you to discharge most of your debts, including credit cards and personal loans. To qualify for this form of bankruptcy, you have to pass a "means test," which checks your current income level and at the same time sell some of your "non-exempt" assets/properties to repay your debts. To finalize everything under chapter 7, it may take about three to four months.

Chapter 13

Often known as "reorganization" bankruptcy, Chapter 13 is also a reliable option for discharging your debts. Under this form of bankruptcy, you will repay your debts over time through a court-approved repayment plan for a duration of 3 to 5 years.

You don't have to liquidate your property under Chapter 13, but you must have a steady income to deposit the required monthly payments to settle your dischargeable debts over time.

If you want to protect your "non-exempt" assets/properties, Chapter 13 will not suit you. Figuring out the right form of bankruptcy to file for your specific and unique financial situation is an issue you will want to discuss with a reliable Laguna Beach bankruptcy attorney.

Non-Dischargeable Debts in Bankruptcy

Even though a bankruptcy declaration can wipe out most of your unsecured and secured debts, it cannot solve all your financial obligations. Some debts are non-dischargeable under the California bankruptcy statute, for example:

  • Child support
  • Particular unpaid taxes
  • Debts of malicious and willful injury of another person or asset/property
  • Alimony
  • Particular student loans
  • Debts you owe following personal lawsuits due to negligence or illegal drug substance use while driving a vehicle.

Ensure you discuss with your attorney the types of debts you want to discharge through bankruptcy declaration for legal advice on the available bankruptcy options in your favor. You cannot undermine the need for an attorney when filing bankruptcy. If you mistakenly leave out a dischargeable debt in your petition, the bankruptcy court cannot discharge you from the obligation to repay that debt if everything else goes well.

Rebuilding/Reinstating Your Credit Rating After Bankruptcy

Going bankrupt can be devastating, but it might be the best decision to rebuild your credit score or increase your credit rating. Most hardworking individuals like you contemplating filing bankruptcy already have a low credit score due to late payments.

Most people don't know that a bankruptcy declaration is the fastest way to rebuild a low credit rating. Your credit rating may even start shooting up immediately when you file for bankruptcy.

Despite what most people think, there is a possibility of reaping good rewards of having a good credit score/rating, even with a bankruptcy declaration record in your past. If you are ready to improve your credit score/rating after bankruptcy declaration, here are tips for doing so:

  • Find and address the root cause of your financial problems necessitating a bankruptcy declaration.
  • Create a budget that breaks down all of your expenses and income. Deciding how much you want to spend and save and committing to that plan can improve your financial status.
  • Create a savings account and make it a habit to save money for emergency cases and life after retirement
  • Make timely payments of your bills and other financial obligations.
  • Acquire a new credit card and demonstrate that you are now in control of your finances by using it wisely and responsibly

In conclusion, even though filing bankruptcy will affect your credit rating, it isn’t a permanent situation because you can easily improve your credit rating/score again quickly using the above tips.

Find a Laguna Beach Bankruptcy Attorney Near Me

Legally, filing bankruptcy in California is not a smooth process because there are several requirements that you must meet for a debt discharge. Fortunately, you don't have to unravel these confusing legal decisions and choices on your own with the services of experienced attorneys at Los Angeles Bankruptcy Attorney.

Contact us today at 424-285-5525 and schedule an obligation-free consultation with our confidential attorneys wherever you are in Laguna Beach.