When you are overwhelmed by debts, declaring bankruptcy may be your ideal choice. Once you declare bankruptcy, you will have time to reorganize your finances and plan on paying the budget. The bankruptcy court in Lake Forest will allow you to pay your creditors what you may afford, and the rest could be forgiven. Understanding bankruptcy could be complex. Thus, you will require assistance from a bankruptcy lawyer.
Bankruptcy law has several chapters, and not every chapter will suit your case. Without legal assistance, you may end up making mistakes. At Los Angeles Bankruptcy Attorney, our experienced attorneys are here to help you solve your financial situation. We will evaluate your financial situation and advice on the available options before declaring bankruptcy.
An Overview of Bankruptcy
Bankruptcy is a legal exercise that helps a debtor have relief from various debts they cannot repay. Additionally, the process allows the creditor to receive their money from any asset owned by the debtor, which isn't essential for their living. You may feel exhausted by debts and decide to declare bankruptcy. However, declaring bankruptcy may be a tough decision you have made. Therefore before you file for bankruptcy, you should think wisely since the process may affect you for long periods.
Note that not all the debts will be discharged for declaring bankruptcy. Ask yourself the following questions before you declare bankrupt:
- Do I have any other option apart from declaring bankruptcy?
- Which type of bankruptcy fits my situation?
- What kind of debt will I eliminate by filing for bankruptcy?
Who Qualifies for Bankruptcy in California?
Factors that a Lake Forest bankruptcy attorney considers when determining whether you are eligible for bankruptcy include:
- If a creditor has initiated a collection exercise against you.
- If you have outstanding debts (tax)
- If you have several debts, which include secured debts and the credit card that they are not able to make payments each month, or they are only able to make only limited payments
- If you have fallen behind on your mortgage payments
- The creditors are making calls and threats to sue you for failing to pay the outstanding debts.
If your financial situation matches the elements outlined above, you should seek assistance from a bankruptcy attorney. The attorney will discuss whether you are eligible to apply for bankruptcy or not. Additionally, he/she will help in determining whether bankruptcy will solve your financial problems.
Types of Bankruptcy
The main goal for filing bankruptcy is to clear debts. However, the various bankruptcies aren't treated equally. Note that chapter 13 and chapter 7 are the most common types of bankruptcies. The following are several types of bankruptcies in Los Angeles:
The type of bankruptcy is commonly referred to as straight bankruptcy or liquidation. Under chapter 7 bankruptcy, a court appoints a trustee to oversee the sale of any property which you own and has value. The assets are used to pay your creditors. Additionally, the remaining unsecured debts will be erased.
Note that the bankruptcy court will not force you to sell your basic properties, including your car, house, retirement accounts, or your home. Additionally, the chapter doesn't stop a foreclosure rather postpones it. The best way to avoid debts is by recommitting yourself to the agreements and making the payments. The court will only allow you to file for a chapter 7 bankruptcy when you don't earn enough money to pay back the debt.
Notably, the court will use a method (means test) to decide on your ability to pay back the debts. The means test will compare your earnings with the California average. Additionally, through the means test, they will investigate your financial stability to see whether you have disposable income for paying back a decent amount to the creditors. Therefore if your earnings are too low, then you will qualify for a chapter 7 bankruptcy.
Remember, after declaring bankruptcy, the bankruptcy laws will require you to attend a creditors’ meeting to answer the creditors any questions about your finances and debt. Additionally, the chapter will remain on your creditor's report for ten years. Note that the law will not allow you to for the chapter again up to eight years.
Chapter 13 focuses more on individuals with regular pay. The court comes up with a monthly repayment plan whereby you will repay a portion of your unsecured debts within five years. They reorganize the monthly repayment plan based on the total amount of the debt and your financial income. Notably, the court places you under a strict budget where they monitor your spendings.
Chapter 13, bankruptcy, will allow you to maintain your assets but catch the debts which cannot be included when petitioning for a bankruptcy. Additionally, the chapter may stop the foreclosure because you have enough time to place your mortgage up to date. The bankruptcy law allows anyone to declare bankruptcy when their unsecured debt is $419,275 or below, and their secured debt is $1,257,850 or below. Notably, you should be updated on the tax fillings. Remember, chapter 13 will remain on your credit report for up to eight years. Note that you are not eligible to refile the bankruptcy type until two years pass. Speak with your Lake Forest bankruptcy attorney to know whether you qualify to declare bankruptcy under the chapter.
The chapter is commonly known as reorganizing bankruptcy since it reorganizes a corporation or business. A corporate or business will come up with a repayment plan to repay their debts as they operate their business. Note that the creditors and the court must approve the repayment plan. However, individuals, including real estate investors with huge debts, will qualify for 13 bankruptcy.
Alternatively, the real estate investors with numerous high-value assets and properties may choose Chapter 11 bankruptcy. Remember you will continue to operate your business under the supervision of the court. Once your management is less effective or dishonest, the court may appoint a trustee.
Upon fulfilling the terms of the repayment plan, the court may discharge the remaining debt. The chapter may benefit you in several ways, including low-interest rates and reduced monthly repayments. The chapter is among the most expensive to file against. Therefore as we mentioned, explore other options before you commit yourself to chapter 11 bankruptcy.
Chapter 12 bankruptcy is majorly a repayment plan for the fishermen and farmers to prevent selling or foreclosure of their property. You are allowed to maintain your property and come up with a repayment plan. The chapter is similar to chapter thirteen, but it comes with extra benefits.
Note that you will only file for the chapter only if you are a fisherman or a farmer with regular earnings. The income may be seasonally provided. It will cater to the repayments under chapter 12. Chapter 12 debtors may be for single or married individuals, corporations or partnerships. However, if you are filing for bankruptcy as an individual, you should:
- Have a total debt amount below $4, 153,150, for a farmer, or a total debt below $1,924,550 for a fishermen
- Have practice or involve in farming or fishing operations
- Owe 50% of the total debts in a farming operation account or 80% of the total debt in a commercial fishing operation account.
- Be driving above 50% of your gross income from the farming or fishing operations.
According to bankruptcy laws, an automatic stay prevents creditors from collecting anything from you. Notably, the automatic stay will become effective immediately when you declare bankruptcy. It applies to all bankruptcy types. However, it will not protect non-debtor entities, including guarantors, coo-defendants, corporate affiliates, and corporate officers.
An automatic stay will prevent creditors from taking action against you. For instance, it will protect you against foreclosure of your home, the creditors will avoid communicating with you, and the court will not begin or proceed with proceedings.
How is a Debt Discharged in a Bankruptcy Case?
Once you declare bankruptcy, you will be free from the burden of paying a certain debt. Therefore when the bankruptcy discharge occurs, you won't be legally held responsible for paying out the discharged debt. Not that the Lake Forest bankruptcy court will disallow your creditors from coming to collect for the discharged debt. Additionally, the creditors won't be legally allowed to issue letters, make calls, or take any legal action against you. Remember, by declaring bankruptcy, you won't discharge all debts. The following debts won't be eliminated by declaring bankruptcy:
- Student loans
- Tax debts
- Debts from spouse or child support
- A debt you owe an individual who worked for you.
- A debt you the government for fines or penalties.
- The damages of any personal injury which you caused while DUI
- Any debt which you never included in your bankruptcy papers
Exemptions When Filing for Bankruptcy
By declaring bankruptcy, you will have an opportunity to retain your essential property, which you need to make a fresh start after the end of the bankruptcy period. The assets are your exempt items. The exempt properties once you file a Lake Forest bankruptcy are:
- Health aid
- Personal effects, including household items and jewelry
- Motor vehicle
- Cemetery and burial place
What are The Benefits of Declaring Bankruptcy?
When you file for bankruptcy, you will discharge most of your debts, thus eliminating your legal duty of repaying the debts. Additionally, a Lake Forest bankruptcy may help you to:
- Restore or avoid termination of utility service
- Prevent foreclosure of your mobile house, home and allow you to update your repayment
- Stop harassments, debt collection, wage garnishment, among other actions from your creditors.
Alternatives to Filing Bankruptcy
You may find avid bankruptcy no matter the huge debts you have. What you just need to do is to know the available option for you. The following steps may help you jump out of debts without declaring bankruptcy:
Have a Financial Plan
As we mentioned under chapter 13, the bankruptcy court will place you on a strict budget then monitor your general spendings. However, the fact is you have the potential to do the same without filing for bankruptcy. If you have a budget, you will cut all the unwanted spending, thus repaying your debts. Since you are in a survival mode, no more vacations, no more dining out. Therefore instead of the government planning for your money for five years, you may plan by yourself.
Consider Necessities First
The necessities are mostly the basic needs. Before you plan anything, ensure you cover food, shelter, transportation, and utilities. It will be next to impossible when you want to fight your debts while you don't have something to eat or fare to drive to your workplace. Therefore ensure you consider yourself first before moving to others.
Sell Your Assets
As we mentioned above, the bankruptcy court will sell your property under chapter 7. What about if you had sold the property instead? Therefore if you possess any valuable item, including a fancy lawnmower, a boat, jewelry, furniture, guitar, or collectibles, anything which is not essential for your survival has to go. Note that this will happen once you declare bankruptcy, only that you won't have control over the sale of the property.
Boost Your Earnings
Your earnings are the most powerful tool for fighting your debts. The higher you earn, the more you may clear your debts. Therefore you may go for a second job or extend your working hours in your main job. Although it may seem exhausted, you will easily clear your debts.
Find A Lake Forest Bankruptcy Attorney Near Me
Bankruptcy cases are different. Therefore you will need legal help from a bankruptcy lawyer. Consider an experienced attorney who will first evaluate your situation and then provide legal assistance. He/she may provide other better options than declaring bankruptcy. Additionally, they may guide you on the chapter which works best for your situation.
At Los Angeles Bankruptcy Attorney, we are here to help you solve your financial crisis. We will evaluate whether filing for bankruptcy is the ideal choice for your situation. Call us today at 424-285-5525 and speak with one of our bankruptcy attorneys. We will serve you irrespective of your location in Los Angeles.