Bankruptcy is a legal proceeding that allows individuals and businesses deep in debt to start fresh. When you cannot pay your debts and creditors are all over, calling you to claim payment, you can decide to file for bankruptcy for personal or business finances. Bankruptcy is a significant decision that cannot be taken lightly. This is because the decision could significantly affect your financial life in the future.
The first step you need to take before deciding to file for this type of relief is to understand the available choices. Matters bankruptcy can be complicated and challenging to comprehend for an average person. Therefore, legal guidance from the Los Angeles Bankruptcy Attorney will go a long way for you. Our Lake Balboa Bankruptcy attorneys work hard to ensure you understand the nature and process of bankruptcy.
Overview of Bankruptcy in California
Bankruptcy is a process that allows you to make a fresh start on your finances when you cannot pay your debts. Filing for bankruptcy is a right provided by the federal law for individuals and business entities. Declaring bankruptcy prevents your creditors from seeking repayments until the matter is sorted out legally. There are several types of bankruptcy you can explore in California. However, there is an eligibility criterion that you need to meet before filing under each category.
Some of the benefits you accrue from declaring bankruptcy in California include:
Bankruptcy eliminates your obligation to pay all of your debts. When you file bankruptcy under chapter 7, some of your property is liquidated to cover the debts, and the rest is discharged.
Stops foreclosure on your home. Bankruptcy does not automatically eliminate mortgages or liens on the property. However, this process allows you time to catch up on the payments within a specific period agreed between you and the creditors.
Stops harassment. When you are unable to pay your debts, creditors may be all up in your case threatening and harassing you in an attempt to collect the debts. However, when you file for bankruptcy, you are protected from harassment and other debt collection actions.
Bankruptcy allows you to challenge creditors who try to defraud you by collecting more than you owe.
Declaring bankruptcy prevents creditors from repossessing property such as a vehicle or return the items they have forcefully repossessed.
It is crucial to understand that bankruptcy is incapable of curing all your financial troubles. Also, it may not be the right option for everyone who has financial difficulties. Bankruptcy cannot:
Eliminate the rights of secured creditors. A secured creditor is one who takes a mortgage or lien on your property as collateral for a loan. Even when you file for bankruptcy, you will be required to make a plan to pay the secured creditors, or else you lose your property.
Discharge certain debts. Debts such as child support and alimony are singled out for special treatment in California. Therefore bankruptcy will not allow you to escape making these payments.
Protect debt cosigners. If your relative cosigns a loan for you, they may be required to pay a part or full loan even after you discharge the debt in bankruptcy.
If you want to seek bankruptcy relief in California, there are several decisions you need to make. You need to determine the bankruptcy category that suits your needs and seek legal guidance from a Lake Balboa Bankruptcy attorney.
Types of Bankruptcy
If you are considering bankruptcy, you may be tired of endless calls and threats from creditors seeking payments. Bankruptcy is the kind of relive that allows you to start over on a new slate. There are two main types of bankruptcy you can explore in California chapter 7 and chapter 13. Both types of bankruptcy come with the privilege of the automatic stay that protects you from the creditors during the bankruptcy process.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is known as liquidation bankruptcy since your property is sold out to cover your debts. However, not everyone is eligible to file under chapter 7. If the law believes that you can maintain chapter 13, you won't be allowed to file under chapter 7.
In the liquidation bankruptcy, you surrender our non-exempt property to the bankruptcy trustee who sells them to cover your secured debts. The debts remaining after all your non-exempt property is sold will be discharged. Some of the benefits you accrue from chapter 7 bankruptcy include:
You can have a completely fresh start since all the unsecured debts are discharged
The wages you earn and the property you acquire after the filing of a bankruptcy cannot be used to pay creditors
The qualification criteria do not stipulate a minimum debt to acquire this relief
The bankruptcy process is complete within three to six months
However, even as you are receiving a fresh start, you will lose your non-exempt properties liquidated to pay the debts. Chapter 7 bankruptcy is not a permanent solution to foreclosure. Therefore, you need to make other plans to keep your home.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a reorganization type of relief. You work with a local bankruptcy trustee to make a repayment plan for your debts. With the repayment plan, you can keep enough to sustain life while paying your debts. Under Chapter 13 bankruptcy, the repayment plan is often three to five years, after which the remaining debts are discharged.
When you file bankruptcy under chapter 13, you have the opportunity to keep your property provided you make the necessary payments. The repayment plan allows you to separate creditors with the order of importance. If the plan you make can cover all the debts, your cosigners will be immune from the creditor's collection efforts.
The setbacks of chapter 13 bankruptcy are that your finances are tied through the repayment period. The bankruptcy court process does not end until you complete the payments. Before you decide to file for bankruptcy under Chapter 13, guidance from a Lake Balboa Bankruptcy attorney is vital.
Divorce and Bankruptcy
A collision of divorce and bankruptcy is one of the most complicated situations that could arise financially. Declaration of bankruptcy is common among divorcing couples due to the financial instability brought about by this process. Most people try as much as possible to avoid bankruptcy. But this type of relief may be the best way to reorganize your financial life after a divorce.
When the divorcing spouses decide to declare bankruptcy, the divorce process could be slowed down considerably. This is because divorce entails not only the separation of people but property division. After you file for bankruptcy in the middle of divorce proceedings, the properties and debts will be frozen until the bankruptcy process is finished. Therefore, property division in a divorce cannot occur when bankruptcy has not been fully processed.
The bankruptcy process creates a bankruptcy estate where the marital property will be liquidated to cover the pending debts. After the bankruptcy court closes the case, the divorce court can divide its remaining properties. Debts are viewed as marital property during a divorce. Therefore, if your partner decides to file for bankruptcy and you do not, you may be left with the burden of paying the debts you jointly owned.
Most divorcing couples opt to declare bankruptcy jointly before a divorce to avoid the two processes' collision. During a divorce, the property is either classified as jointly owned or individually owned. The effect of divorce on the property in bankruptcy proceedings varies depending on the type of property under consideration. If your spouse declares bankruptcy, your personal property cannot be involved in the liquidation process. However, creditors may demand the sale of jointly owned property to recover the half owed by the spouse declaring bankruptcy.
After a divorce, one spouse may be required to pay child and spousal support to the other. Even if bankruptcy allows you to discharge some debts, the relief will not cancel your responsibility to pay alimony and child support. However, the process may significantly affect the amount you are required to pay.
In California, one spouse may be asked to cover attorney expenses for the other spouse during divorce proceedings. Fortunately, when filing for bankruptcy, you can list the attorney fee as a dischargeable debt. Divorce and bankruptcy can be quite messy. Therefore guidance from a Lake Balboa Bankruptcy attorney is crucial.
Effects of Bankruptcy on Alimony and Child Support
Bankruptcy is a way to clean your financial slate. Through this process, you can discharge the medical debt, credit card debt, and even back taxes. However, some debts, such as child and spousal support, cannot be discharged by declaring bankruptcy.
When you have a child, the law requires both parents to take responsibility for caring for the child regardless of whether they are married or not. Child support is the money paid to the custodial parent to contribute to the child's needs. If child custody is joint, the parent spending less time with the child may be required to pay child support. In California, child support is paid until the child attains eighteen years.
When you declare bankruptcy, you are allowed automatic stay. This means that creditors cannot sue you for unpaid debts, repossess your property, or foreclose your home. However, the automatic stay will not allow you to evade payment of child support. Should you file for bankruptcy, the law requires that you make all your child support payments.
When you file bankruptcy under chapter 7, your non-exempt property is liquidated to cover your debts. Debts such as child support and alimony are given consideration and are covered before other types of debts. Your liquidation proceeds to cover child and spousal support and the balance used to pay other creditors.
Chapter 13 bankruptcy allows you to create a payment plan to pay your creditors. If you owe child support, the payment plan will help you catch up with the payments. Wages earned after filing chapter 13 bankruptcy become part of the bankruptcy estate. Therefore creditors cannot sue you to recover payments from them even for child support. If you are dealing with unpaid child support and you are in the process of bankruptcy, it could be wise to seek guidance from a Lake Balboa Bankruptcy attorney.
Bankruptcy and Foreclosures in California
Before arriving at a point of bankruptcy, most people find it hard to continue paying the mortgage for their homes. You may not lose your car or house after declaring bankruptcy. However, this is the case for individuals whose equity in the property is exempt. If your property is not fully exempt, you can keep it as long as you pay the non-exempt value under chapter 13 bankruptcy.
Some creditors might have security interests in your home if you gave up the mortgage as collateral to your debts. If you fail to make payments on the debt, the creditor could repossess the property and sell it to recover their money. Several ways are available to keep your mortgage property after bankruptcy. You can either make a plan to pay the creditor until the debt is covered or offer the amount for which the property you want to keep is worth.
If you want to save your home during bankruptcy proceedings, it would be a wife if you consulted with a Lake Balboa Bankruptcy attorney to guide the options available for you.
Find a Los Angeles Bankruptcy Attorney Near Me
Deciding to declare bankruptcy is not easy. However, when you are tired of all the phone calls from creditors, it might be the only way to reorganize your financial life. Several types of bankruptcy are available to meet both personal and business needs. Chapter 7 bankruptcy helps you eliminate unsecured debts, while Chapter 13 allows you to form a repayment plan to clear your debts.
There are specific qualifications that one needs to meet to qualify for a particular type of bankruptcy. Therefore, it would be wise to consult a bankruptcy attorney before deciding your course. If you think bankruptcy might be the solution to your financial problems, we invite you to contact us at Los Angeles Bankruptcy Attorney for guidance and case evaluation. Call us today at 424-285-5525 if looking to file for bankruptcy in Lake Balboa to discuss more details of your situation.