Bankruptcy relief offers a fresh start for individuals and businesses that have gone through a catastrophic financial collapse. Filing can give you a clean slate to rebuild your financial muscle without experiencing external pressures from creditors and debt collectors. Unfortunately, the debt relief process is not void of downsides and unpleasant consequences. If you want to understand your financial situation in detail and know more about your best debt relief option, turn to the Los Angeles Bankruptcy Attorney today. We will give you an all-rounded picture of what to expect once you file a petition and right after you are declared bankrupt.
So, does your situation make it necessary to declare bankruptcy?
When should you file a bankruptcy petition?
Is there an ideal time to file a bankruptcy relief petition in Tustin, Orange County?
These are just some of the questions we seek to answer. We pride ourselves in sharing comprehensive legal details with our clients to ensure that the complex process of declaring bankruptcy is as smooth as possible.
Why Should You Declare Bankruptcy?
People file for bankruptcy with the primary goal of enjoying debt relief. Of course, there are always other pressing underlying reasons, such as the need to stop creditor harassment.
By filing, you immediately activate the automatic stay, freeing you from the responsibility of dealing with your creditors directly. The notice of bankruptcy sent to your creditors can do more than just prevent the disconnection of utilities and eviction. It also prohibits creditors from:
- Communicating with you directly via mail, email, or phone calls
- Sending you bills
- Filing lawsuits against you to recover their money
- Garnishing your wages
- Attempting to repossess assets linked to a debt
When to Consider Chapter 7 Bankruptcy in Tustin
There are two options to choose from when considering personal bankruptcy, Chapter 7 and Chapter 13. Understanding the difference between these two Chapters can help you make a sober decision that suits your particular financial situation.
Chapter 7 bankruptcy involves the liquidation of all the non-exempt assets of a debtor. The proceeds from the liquidation are shared among your creditors, and the remaining unsecured debts are discharged. This means that this type of debt relief is ideal for people with very little or no non-exempt assets.
To qualify for filing under Chapter 7, you need to pass a means test. The test will unveil whether you can afford to repay your debts using your disposable income. If your earnings are not enough to settle unsecured debts such as credit card and medical bills, then filing under Chapter 7 may serve your best interests.
When to Consider Chapter 13 Bankruptcy in Tustin
Chapter 13 bankruptcy involves creating a debt reorganization plan. The idea is to make some necessary adjustments and develop a plan that makes it easier for you to settle your debts using your disposable income.
You should consider Chapter 13 if your income is substantial enough to allow you to meet your financial obligations if you are given ample time. This type of debt relief will also make sense if you have too many exempt and non-exempt assets.
Even though you still have to clear most of your debt, filing will buy you more time and allow you to catch up with car loans and mortgage payments. It will also ensure that you can keep all your assets. Through Chapter 13, you can stop foreclosure and vehicle repossession.
What is the Bankruptcy Means Test?
Simply put, a bankruptcy means test helps to determine whether you qualify to file under Chapter 7 bankruptcy. If you don’t qualify because of your income level or kind of debts, this means you can file under Chapter 13.
The means test takes different aspects into account, including your family’s size, income, and expenses. It helps establish your disposable income and determine whether it is enough to repay your debts under Chapter 13.
If your disposable income is too low, you qualify to file for Chapter 7 bankruptcy and have a good chunk of your debts forgiven. If it is substantial, this means you are eligible for Chapter 13 bankruptcy.
How Does It Work?
The process of filing for personal bankruptcy is confusing, not to mention expensive. The means test clarifies whether you qualify for Chapter 7 or your best option is Chapter 13.
We will help you fill out the means test form and submit it to court with your petition papers. If you are interested in Chapter 13 bankruptcy, this test will also help set your repayment plan.
There are two main steps involved in taking a means test. They include:
Step 1 — Income Assessment Checks
First, your Tustin bankruptcy lawyer will help you gather your pay stubs and other documents that show your income for the past six months. The idea is to confirm whether your household earnings are less than the state’s median income. The laws allow room for adjustments if you lost your job, had to take a pay slash, or found alternative employment within the six months being assessed.
Step 2 — Assessment of Disposable Income
The next step involves assessing your expenses within the past six months. You need to gather documentation that shows “allowable expenses” such as groceries, medical costs, rent, and clothing. The money left after deducting allowable expenses from your income is referred to as your “disposable income.” This is what you can put toward settling your debts.
This second step of the means test is a fairly involved process, meaning even small blunders can have your case thrown out. For instance, the courts will be keen on highlighting conflicting information about similar expenses. Omitting necessary expenses is also dangerous because it may indicate your lack of being forthright with information.
A Tustin bankruptcy attorney can offer invaluable assistance to better your chances of successfully taking the means test. Apart from lending a hand with filling out the form, the specialist will also confirm all your expenses’ correct documentation.
What Happens When You Pass The Means Test?
Passing the bankruptcy means test signifies that you qualify for Chapter 7. This type of bankruptcy relief forgives most of your unsecured debts, and creditors have to settle for little or nothing, depending on the proceeds gathered from liquidation.
What Happens When You Fail The Means Test?
Failing the means test limits you to filing under Chapter 13. While appealing a means test is not possible, it is not mandatory to file for a reorganization plan. You can always take another test after six months if your situation changes and you meet the requirements for Chapter 7.
The means test is one of the first yet most crucial steps of filing for personal bankruptcy. A skilled Tustin bankruptcy attorney can help you determine the best debt relief option for your unique situation. We will also take the time to educate you about financial tools you could use to rebuild your economic life after declaring bankruptcy.
What Is The Ideal Time To File For Tustin Bankruptcy?
Filing for bankruptcy is a very personal matter. As such, only you can tell when the ideal time to file a petition is. However, before you make any major decisions, we recommend that you consult with a Tustin bankruptcy lawyer to assess your financial situation thoroughly.
Typically, the time is right to file a bankruptcy petition if you:
- Have had no success negotiating with creditors for better debt repayment plans.
- Don’t have enough assets to cover your liabilities.
- Don’t have an income that allows a practical means to service your debts.
- Have to use credit cards to settle existing debts.
Things You Must Not Do When Considering Bankruptcy
Anyone can find themselves in a difficult financial situation. If you have tried everything to no avail and have decided to file for Tustin bankruptcy, you must avoid certain detrimental financial moves. These are actions that can harm your case and make the filing process needlessly bumpier for you, your attorney, your bankruptcy trustee, and even your creditors.
Transferring Money or Property
All your assets, similar to all your debts, should be included in the bankruptcy process. Transferring your house, cash, cars to friends or relatives for safekeeping is harmful to your bankruptcy proceedings. The courts interpret such moves as fraudulent actions that could have your case kicked out.
Hiding your assets is not just dishonest, but it is, in most cases, unnecessary. After all, you can file for debt relief whether you have assets or not. Additionally, the filing doesn’t guarantee that you will lose these assets. Just talk to your attorney about your worries and the things you wish to keep even after declaring bankruptcy.
Settling Certain Debts
“Paying off certain creditors before you file can help you qualify for Chapter 7 bankruptcy.” This is a fallacy, a misguided notion that can do more harm than good to your case. Any fishy, out-of-the-ordinary debt settlement to any creditor is deemed a preferential transfer.
If your trustee notices a preferential transfer, he or she can file a clawback lawsuit against the paid creditor. This is done to get the money back and have it distributed fairly with other creditors. The additional legal process can delay the discharge of your debts.
Rushing To Max Your Credit Cards
It can be a little tempting to max out your credit cards right before filing. After all, they are debts that can be forgiven, and you can purchase non-exempt items like clothing and groceries. Well, the courts are likely to interpret this as a dishonest move.
To be on the safe side, stop using credit cards as soon as you begin sensing financial problems that may lead to bankruptcy. Only use debit cards linked to your bank account.
Accepting Future Payments
Once you file for bankruptcy, any payments you have or receive, including inheritance and tax refunds, are property of the bankruptcy court until you receive a debt discharge notice. A trustee can seize future money and channel it towards repaying your creditors.
Stopping certain payments is not always possible. Fortunately, the courts only consider certain types of transactions made during a particular period after filing. In some instances, the best decision you can make is to delay filing your bankruptcy petition.
We understand the complexities brought about by receiving future payments during the most inconvenient of moments. We can address this before you file for Tustin bankruptcy. Our dedicated attorneys will provide the best guidance based on your unique situation and goals.
Depositing Extra Monies into Your Bank Account
Once debts begin crashing your world, this would not be the ideal time to cash checks for friends or keep savings for your relative. It remains imperative to ensure that the only monies that touch your bank account are earned from your regular income sources.
When considering personal bankruptcy, it is best to keep extra money separate from your accounts. You must also not mix business cash with the funds in your accounts. Additionally, do not accept cash deposits or checks from relatives and friends trying to lend a hand during tough times. Any extra transactions may cause confusion during the filing process or appear as a fraud.
Again, any money you have or receive after filing for bankruptcy becomes the bankruptcy courts’ property until your debts are discharged. The settlement for a lawsuit is not an exception. Depending on the type of compensation and how much you genuinely need to get by, the courts may seize part or all of it.
If you already have a lawsuit underway, this is information your Tustin bankruptcy lawyer should know about before filing. In some situations, it makes better sense to shelve filing for bankruptcy. Make sure you seek reliable legal guidance before deciding on the best course of action.
Find a Los Angeles Bankruptcy Attorney Near Me
Bankruptcy cases are not always smooth and fast. Some cases are complex, leading to a long and drawn-out process that can take 6 to 12 months or more. Filing is also a challenging feat because even the most trivial mistakes can have your case kicked out. If you need reliable help filing, contact the Los Angeles Bankruptcy Attorney. Our team of skilled legal representatives can expertly maneuver the most intricate of cases. For personalized legal guidance and free consultation, call us at 424-285-5525.