Most people eligible for bankruptcy don’t know its possible advantages. While it’s true that declaring bankruptcy could impact an individual’s finances for several years into the future, it’s the best choice for most people. However, every individual’s financial situation is unique.
Deciding if, how, and when to declare bankruptcy is an intricate process, and the repercussions of filing when you shouldn’t do so could be substantial. You must consult an experienced bankruptcy lawyer to determine whether bankruptcy is your ideal option.
We invite you to call us, the Los Angeles Bankruptcy Attorney, if considering filing for bankruptcy in Westminster, Orange County. You will schedule a free consultation with one of our skilled lawyers to discuss your specific situation and how declaring bankruptcy could affect your financial situation.
Bankruptcy is a generalized word for a federal court procedure that helps businesses and individuals pay off their creditors and eliminate their debts. If you are facing financial hardships, bankruptcy can offer a path to finding relief from overwhelming debts. You only have to prove that you’re entitled to it. If you do, a Westminster bankruptcy court protects you during this period.
We have different forms of bankruptcies in Westminster (Chapter 7, 13, 12, and 11), and some of them are available only in particular circumstances. These types are further classified into two primary categories: reorganizations (Chapters 13, 12, and 11) and liquidations (Chapter 7).
Among these bankruptcy types, Chapter 13 and Chapter 7 are the most prevalent for businesses and individuals, respectively. Businesses can also file for Chapter 11 bankruptcy, (LLCs) limited liability companies, and partnerships included, whereas Chapter 12 is suitable for family fishermen and family farmers. It’s similar to Chapter 13 but provides extra benefits to debtors.
If you file a Chapter 7 bankruptcy, it means your assets may be sold to pay off your debts. On the contrary, filing a Chapter 13 bankruptcy means that you’ll probably be capable of keeping your property, but you have to submit and stick to a repayment plan that’ll enable you to pay off all or some of your debts within three to five years. Chapter 11 and Chapter 12 also have a repayment plan, just like Chapter 13. If a corporation declares bankruptcy, it means that either the business will continue operating with reduced repayments to debtors or close.
How a Bankruptcy Court Works and What You Can Expect
Whereas many court case proceedings occur in either criminal or civil courts, bankruptcy has a devoted system of courts across the country. Every judicial district in the United States has its bankruptcy court, whereas every state has one district at the minimum. California has four judicial districts— Southern, Central, Eastern, and Northern Districts. A Westminster bankruptcy is filed in the bankruptcy court for the Central District.
It isn’t surprising that most filers may be concerned that a bankruptcy court judge might treat them harshly if they declare bankruptcy. Admitting financial difficulties can not only be humiliating, but a lot of people may be intimidated by the thought of facing a judge. If this applies to you, you may feel better to know that chances are you won’t ever need to testify before a judge. And should that happen, you will find the court personnel, judge, and most probable even your lenders to be polite and professional.
Bankruptcy judges have the discretion to make binding decisions in bankruptcy cases, for example, whether to agree to debt discharge or eligibility issues. But most bankruptcy process aspects are conducted outside court. For instance, a trustee appointed by the court does all the administrative tasks of Chapter 13, Chapter 7, and the other kinds of bankruptcy proceedings.
As the debtor, you’ll have minimal interaction with the judge. Many of the Chapter 7 filers do not even go to court. They only meet the judge if there are objections to the bankruptcy plan. Chapter 13 filers typically go to court only once— at the bankruptcy plan hearing. The informal creditors’ meeting (known as a 341 meeting) is generally conducted as the appointed trustee’s office.
What to Expect
Although many individual debtors don’t set foot in court, as mentioned, all debtors have to be present in one formal meeting. Beyond this meeting, you will only be required to testify before a judge if specific issues arise in your case, and most of these issues are resolved before even appearing in court is required.
Hearings rarely occur under Chapter 7 bankruptcies. Many cases are simple and last between four and six months. On the other hand, bankruptcy under chapter 13 is more involved. To begin with, it requires that the judge approves the repayment plan. It lasts between three and five years. A lot of things may and do occur during this period.
These are the various issues that may need a hearing before the judge:
Creditors’ meeting— when you declare bankruptcy, the court appoints a trustee whose duty is to oversee your case. Approximately one month after the filing, the trustee will hold a meeting with you. He/she will use this meeting to illuminate the info that the paperwork you submitted in court contains. The creditors’ meeting usually goes for approximately ten minutes. Whereas lenders may attend this meeting, they hardly do.
Confirming your repayment plan— the judge has to approve the repayment plan you’re proposing. If the plan is right, he/she will agree to it on the trustee’s recommendation. However, various issues may crop up. You will need to prove that you will afford the repayments and pay all your disposable income into the plan. Should you have any questions or concerns about this, you may need to attend the confirmation hearing and testify in support of your plan.
Motion to Prolong the Automatic Stay— If you are filing for bankruptcy afresh shortly after the judge dismissed the previous one, you will have to request him/her to prolong the automatic stay beyond the original thirty days. An automatic stay is a court order that stops lenders from coming after you to collect. Before the judge agrees to your motion, he/she will need you to give reasons as to why your previous case was dismissed, the circumstances that have changed between your old and new case, how you are set to make sure that your new case succeeds, and what you hope the bankruptcy to achieve.
Motion to terminate the automatic stay— as we mention, an automatic stay stops lenders from collecting from you during the bankruptcy period. But in case you have secured debts, such as a mortgage or car loan, you have to continue paying them even if you are bankrupt if you need the property to keep being collateral. Should you stop making payments, the creditor is entitled to foreclose or repossess the property after obtaining the court’s permission. The lender requests this permission by bringing a motion that seeks to lift the automatic stay. Should you oppose this motion, you may need to testify in court to prove how you will be capable of making the payments in the days to come.
Motion to grant additional debts— as it’s the rule, you cannot secure more debts when you have declared bankruptcy under Chapter 13. Considering the repayment plan under this kind of bankruptcy, it isn’t unusual for vehicles to develop mechanical problems or other emergencies. A few debtors under chapter 13 also take advantage of mortgage modification. Some judges have to grant these kinds of motions through a hearing, while others will give the trustee the discretion to approve requests for new debts.
Adversary proceedings— the trustee, creditor, or you may have a reason to bring a lawsuit (adversary proceeding) in a Westminster bankruptcy case. The most prevalent types of lawsuits in an individual’s case contest either your legal right to a general discharge or the dischargeability of givens debts. Just like in civil court suits, the parties conduct discovery, challenge motions, and argue the case in front of a judge, should it reach this far.
Motion to drop your case— should you miss your repayments per your plan, the trustee may bring a motion to dismiss your case. You could tell the judge why you fell behind with your repayments and how you plan on avoiding that in the future.
If you are to appear in court for one reason or the other, you need to consult a Westminster bankruptcy attorney for advice on what you should and shouldn’t say before a judge.
Benefits and Drawbacks of Declaring Bankruptcy
The following are ways in which you will benefit upon filing for bankruptcy:
- Credit Score— Even though worries concerning a tanked credit score delay most people in declaring bankruptcy, and a bankruptcy record stays on your record for seven to ten years, most debtors begin improving their credit scores after they declare bankruptcy. After your dischargeable debts are forgiven, it allows you to start on a clean slate and start rebuilding your credit.
- Dischargeable debts— You might be capable of discharging or canceling your responsibility to pay off some of your debts. Dischargeable debts are those that can be forgiven through a bankruptcy filing. These generally include utility and medical bills, personal loans, and credit card debts.
- Bankruptcy exemptions may enable you to keep owning your assets after bankruptcy— Should you exempt your assets, it means you do not have to be worried about them being seized during bankruptcy. The exemptions play a critical role in Chapter 13 and 7 bankruptcies. Certain exemptions will protect up to a given dollar amount of a property. At times the exemption protects the full value of a propert Some apply to specific assets such as a wedding ring or motor vehicle, whereas others are applied towards all the properties you own.
When it’s not the right time or when you should not, declaring bankruptcy escalates a bad financial situation to worse. Filing for bankruptcy too early could mean that you lose the property you’d otherwise have kept. It could also mean that you must declare a different kind of bankruptcy that’s not in your best interest (i.e., filing Chapter 13 rather than Chapter 7). Nonetheless, even when filing for bankruptcy is your best move, it also has long-term effects on your finances that they must consider before you can file. The possible drawbacks of bankruptcy are:
- Loss of your credit cards— most credit card companies will automatically cancel the cards you have upon filing for bankruptcy. You’ll most likely receive several offers to apply for unsecured credit cards once you file. These could help you reconstruct your credit score but usually need higher interest rates and annual fees.
- Difficulty securing a loan or mortgage— declaring bankruptcy may make it challenging to obtain another mortgage or loan for several years.
- An immediate effect on credit score— a bankruptcy under Chapter 7 will remain on your credit score for ten years, while Chapter 13 will stay for seven years.
- Denial of refunds— federal, state, and local tax refunds may be denied due to bankruptcy.
- Loss of real estate and property— at times, not all real estate and personal property are By this, it means that a Westminster bankruptcy court may seize certain assets and sell them to pay off your creditors.
- Non-dischargeable debts— we have certain types of debts that can’t be discharged through bankruptcy. They generally include child support, alimony, criminal fines and restitution, student loans, and any debt you acquired through debts.
- Housing and job stigma— some prospective landlords and employers ask questions about any recent bankruptcy you have filed, which could negatively impact your chances at both.
There's an overlap between the disadvantages and advantages of declaring bankruptcy since many of them depend on an individual’s unique financial situation, and several different factors could affect this situation.
Find a Westminster Bankruptcy Lawyer Near Me
Bankruptcy is a complex topic as it involves a lot more than filing paperwork in court. You first need to have an in-depth understanding of the different types of bankruptcies available and the one best suited for you. There are many bankruptcy terms involved that a layperson won’t understand. And most importantly, you need to make sure that the filing process is flawless, so your case isn’t thrown out.
The only person who can help you maneuver this process is an experienced bankruptcy attorney. If you are filing for bankruptcy in the City of Westminster, Orange County, we will help you at the Los Angeles Bankruptcy Attorney. Please contact us today at 424-285-5525 for a consultation. We are devoted to taking a case-by-case approach to help each of our clients control their debts, file for bankruptcy, and have a debt-free future.