Declaring and filing bankruptcy is a complicated decision that might be the solution to clear your debts. Even as a hardworking person, you can find yourself struggling with debt because of loss of employment, juggling a credit card bill to purchase necessities such as food, or identity theft. Whatever the case, you need to prepare adequately. Whether you want to save your home from foreclosure, negotiate debt from lenders in debt settlements, seek advice for the most effective bankruptcy solution, you require a Lake View Terrace Bankruptcy lawyer. Los Angeles Bankruptcy Attorney is committed to helping you overcome your debt and get back to your feet.
How Chapter 7 Bankruptcy Works
A Chapter 7 case wipes out the debts and gives the debtor a fresh start. Often the debtor has massive credit card debt and unsecured bills, and few assets.
It's a liquidation where the trustee gathers all assets and disposes of nonexempt assets. The trustee pays you the exempted amounts. Then the proceeds are distributed to the creditors.
Chapter 7 bankruptcy does not discharge debts like child support, student loans, taxes, fraudulent debts, and alimony.
You might keep secured debts like your home and car by reaffirming the debts. Should you sign a voluntary reaffirmation agreement, you cannot file bankruptcy again for eight (8) years. To reaffirm your loan, you should be current on your payments. You could selectively reaffirm the debts. For instance, you could indicate that you want to keep your home and jewelry but want to return your motor vehicles to respective lenders.
How a Chapter 13 Bankruptcy Case Works
In Chapter 13, you have a thirty-six to a sixty-month repayment plan that proposes the amount you will pay your lenders. More often than not, you will pay some of the total outstanding debt. A three-year plan is used if the gross income is below the California median income. On the other hand, a five-year plan is practical if the gross income is above California's median income.
Your required payment amount is founded on the most significant amount determined using one of the formulas below:
Disposable income — Payment calculated founded on income minus secured debt payment for your auto loan or mortgage and national standards deductions.
Priority debts — The plan should offer full repayment of your priority debts. These debts include income taxes, child support, and alimony.
Creditors' best interest — The repayment plan should give your unsecured lenders an amount equivalent to what he/she would receive from Chapter 7 bankruptcy case liquidation. The amount is calculated by determining the value of your nonexempt property.
After considering all the factors above, your monthly payments are determined by checking which formula gives the most considerable payment amounts.
After completing the repayment plan period, your remaining dischargeable debts not repaid during the repayment plan term will be discharged. In other words, you are no longer accountable for the debts.
How to Choose the Right Bankruptcy Type
Your assets and income determine which bankruptcy chapter you bring. For example, having a lot of income might stop you from getting Chapter 7 bankruptcy.
In a Chapter 7 case, the trustee can sell the nonexempt asset to pay the lenders, making it expensive if you have many assets. On the other hand, Chapter 13 permits you to have the property and pay some or all the loan via a repayment plan.
Moreover, if specific conditions are met, a Chapter 13 case allows you to:
Save your motor vehicle from repossession or home from foreclosure,
Eliminate a second mortgage through lien stripping, and
Lower your mortgage's principal balance or auto loan with a cramdown.
Below are scenarios that would help determine the best strategy:
You are unemployed and have few assets —In this case, filing a Chapter 7 case is the most convenient, effective, and fastest way to get rid of your debts.
You are an unemployed homeowner with equity — If you have a lot of equity in your home, Chapter 13 is the most effective option. Since the homeowner can only keep their house in Chapter 13 if they have sufficient income to facilitate their repayment plan, it is less likely that an unemployed person will use Chapter 13.
Wealthy debtors with significant debt amounts should file a Chapter 11 because of the income and debt limits of Chapter 13 and Chapter 7 bankruptcies.
If you are behind on your mortgage payment, Chapter 13 bankruptcy provides a method to cure or catch up on a previous due mortgage payment. It also eliminates part of your dischargeable debt. You can get rid of your medical bills, credit card bills, or second mortgage and save your house from foreclosure.
How to File Bankruptcy
After you have decided on the best chapter, you should prepare for the case filing. Here is a step-by-step guide:
Collect all the Necessary Documents
Typical documents you should collect to complete the bankruptcy paperwork include:
Evidence of income for the last six months. If you're employed, you should submit proof of any money made within six months. Pay stubs are the best proof.
Collect information about your lenders, their address, and how much you owe them.
Documents with information on your assets like 401K, vehicle value, life insurance policy, and bank accounts
Valid identification documents such as birth certificate, social security card, and driver's license
Tax returns filed in the previous two years
Enroll in a Credit Counseling Class
A debtor should enroll in a credit counseling class before bringing the case. Generally, the program could be done online or via phone and is about 11/2 hours long.
You should complete the program within six months of the bankruptcy filing. You shouldn't complete the program until you're sure you want to file a bankruptcy case. Should your certificate expire, you should retake the class.
Engage an Attorney
It is possible to self-represent, especially if the case is straightforward. However, the rate of success for debtors without legal help is low.
A Lake View Terrace bankruptcy lawyer could address issues raised by your creditors and help you navigate requirements and paperwork. Your attorney has also previously represented debtors and could make your filing process run smoothly.
What You Should Not Do Before Filing a Bankruptcy Case
When you have financial stress, you can do anything to reduce the pressure. Nonetheless, because you have a right to get a discharge order, it is advisable to confirm whether you can bring a bankruptcy case now or later. In the section below, you will learn the factors you should consider before filing your bankruptcy case.
Do Not Rush Not Bankruptcy Too Fast
Although bankruptcy is a solution to clear your debts, you are restricted in how you could file a case. You could get a discharge eight (8) or six (6) years after a chapter 7 and 13 bankruptcy case filing, respectively.
During your waiting period, a debtor can find themself in financial challenges like an illness that results in significant medical bills, foreclosure, eviction, car repossession, and unemployment.
If you have filed a Chapter 7 bankruptcy case, you cannot file the case again. Your lender will garnish the wages, cease precious assets, and levy money in bank accounts. Chapter 13 could be useful, but you should have adequate income to be eligible and pay all the discretionary income for three (3) to five (5) years.
Do Not Wait for Long
Sometimes, it is advisable to bring a bankruptcy case fast. For example, if you're experiencing wage garnishment, the earlier you file your case, the more funds you will save for footing your bills.
It is also recommended to file quickly when the lender has a suit against the debtor. Your Lake View Terrace bankruptcy attorney will analyze the claim to check if it involves fraud allegations. If this case goes to court, you might be unable to pay your debts. Once the lender wins the lawsuit, the lien right that accompanies it will permit your creditor to attack bank accounts, garnish wages, foreclose on the home, and repossess the motor vehicle.
Do Not Provide Inaccurate, False, or Incomplete Information
Per penalty of perjury, you should submit accurate and complete information on the bankruptcy paperwork. If you deliberately misrepresent information like failing to reveal your property, you might face criminal penalties like fines and incarceration.
If you file incomplete information, the court could dismiss the bankruptcy, or you could be required to pay more charges and submit additional paperwork. If you fail to include an asset, the trustee could find and cease it. And if you fail to outline all your creditors, that loan might not be discharged.
The Federal Bureau of Investigation investigates Lake View Terrace bankruptcy offenses. Consider consulting with a seasoned attorney first if you aren't confident about how to solve the problem.
Do Not Drain the Retirement Accounts
You could protect your retirement money in bankruptcy. Therefore, it is a costly mistake to withdraw your retirement money to clear debts that might be discharged in bankruptcy. Always speak with a knowledgeable attorney before acting.
Do Not File for Bankruptcy When You're About to Acquire a Significant Property
You need to consider bankruptcy if you expect to receive an income tax refund, inheritance, repayment of a loan you made to another person, or settlement from a lawsuit. After receiving the money, you can use it to pay your creditors.
Should you find yourself in this situation, contact an experienced Lake View Terrace bankruptcy lawyer to discuss the available options.
Remember to File Your Income Tax Returns
If you should not file your tax returns probably because you get disability insurance, you should not worry about the Chapter 7 case requirement. However, if you should file taxes and have not done so before bringing a bankruptcy petition, you might get into problems.
Tax returns determine the previous and current asset holdings, earnings, and potential priority tax claims. It is impossible completing bankruptcy paperwork and getting a repayment plan without the returns.
Do Not Pay Off Some Lenders
Suppose a particular lender has been patient with a debtor, especially when they aren't current with payments. In that case, the debtor might choose to pay their loan before other creditors outlined in the bankruptcy petition.
The court deems this a preferential transfer that could result in a clawback and issues in the bankruptcy proceeding. Should the trustee feel that you made the payment to avoid listing the lender in your bankruptcy plan, the trustee could sue the creditor to return the money to your bankruptcy estate.
Do Not File a Suit
If you have a business disagreement that should be resolved or a person owes you money, do not bring a case against the person before filing a bankruptcy case. Whatever you obtain from your suit could become part of the bankruptcy estate.
Should You File a Joint or Individual Bankruptcy Case?
If you're married, you can decide to bring bankruptcy individually or jointly with your partner. Generally, filing the case together is more practical, especially if you have significant joint debts.
On the other hand, individual bankruptcy could be beneficial if:
One partner has a separate nonexempt asset that might be at risk in bankruptcy, or
Only one partner has debts.
Both options come with pros and cons, and you should consider the following before deciding:
The type and value of assets you own separately and jointly
The California exemption laws which determine what asset you could keep
Every spouse's credit score
Whether marital adjustment deduction used in lowering income will assist one partner in being eligible for individual bankruptcy case filing
The combined income
Find a Los Angeles Bankruptcy Lawyer Near Me
Are you struggling with huge debts because of a health condition, identity theft, divorce proceedings, or unemployment? Are you experiencing creditor harassment? Are your interest rates too high that the loan does not seem to become smaller irrespective of how much you pay? If this is your situation, it is worth noting that it's okay to prioritize yourself, your loved ones, and your needs and file for bankruptcy. At Los Angeles Bankruptcy Attorney, we understand that the decision to bring a bankruptcy case is difficult, and once manageable debts might be unmanageable now. We bring many years of experience to the table. We could offer one-on-one attention as we review your financial history and suggest the way forward. Call us today at 424-285-5525 to schedule your initial consultation with one of our knowledgeable attorneys.