When your financial life is in chaos, and you cannot pay your debts, you could always have a fresh start by declaring bankruptcy. The federal law provides the right for bankruptcy to individuals or businesses who cannot pay their debts and cover their daily expenditures. Bankruptcy is a legal proceeding that stops your creditors from collecting debts from you. This helps you rearrange your finances until your debts are legally sorted.

Filing for bankruptcy could be a great relief for your debts. However, not all individuals qualify for different categories of bankruptcy. If you consider filing for bankruptcy in North Hills, understand the various types and the category that best suits your situation. The decision to declare bankruptcy is tough. Therefore legal guidance from the Los Angeles Bankruptcy Attorney would go a long way for you. 

Basics of Bankruptcy in California

In California, you can file for bankruptcy if personal or business debts become overwhelming. Personal bankruptcy is a case filed by an individual or married couple. If you file for bankruptcy with your spouse, the bankruptcy is considered joint. However, you do not have to file a joint bankruptcy if it is not convenient for your situation. 

When you file for bankruptcy, the court will grant you an automatic stay. This stops any collection attempts from creditors. If you are on the verge of foreclosure, the process is put to a stop. Some creditors may challenge the automatic stay by filing a motion to lift it. If the court grants the motion, the protection offered by automatic stay will no longer be available. The most common categories of bankruptcy available include:

Chapter 7 Bankruptcy

Filing Chapter 7 bankruptcy is an easy and direct option of obtaining a fresh start in your financial affairs. Chapter 7 bankruptcy is referred to as liquidation since your properties are auctioned by the bankruptcy trustee to cover your secured debts. Liquidation bankruptcy could help eliminate debts such as medical bills, credit card debts and protect you from wage garnishment.

When you file for this category of bankruptcy, you must prove that you do not have enough income to cover your debts. You need to pass a means test before receiving relief under chapter 7 bankruptcy. Bankruptcy court selects a trustee who is responsible for your properties. The trustee is only allowed to liquidate property that is not protected by an exception.

If your properties are all non-exempt, the bankruptcy trustee will not sell the assets in bankruptcy, and creditors cannot recover. As soon as you file for bankruptcy, creditors cannot call you or sue you for the debts you owe. Liquidation bankruptcy is often granted three to four months after filing. Filing for a liquidation bankruptcy comes with pros as well as cons. Therefore, guidance from your North Hills Bankruptcy Attorney would help you make the right decision.

Chapter 11 Bankruptcy

Chapter 11 Bankruptcy is often a business type of debt relief. Even though you can file under this chapter with your spouse, it is not included in the list of personal bankruptcies. If your business's debts are too much to cover, you can either seek relief under chapters 7 or 11. The trustee will sell all your business and personal assets to pay secured creditors in chapter 7.Business entities have no opportunity to claim exemptions. The trustee sells all their assets to cover the debts.

On the other hand, chapter 13 could be used to restructure your business and its obligations. When your business is in financial trouble, a North Hills Bankruptcy attorney can guide you on to reorganize your business finances.

Chapter 12 Bankruptcy

Chapter 12 is a less complicated form of bankruptcy that allows farmer families and fishers to reorganize their debts. This type of bankruptcy works like chapter 13 but has specifications to meet farmers' and fishermen's unique needs.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is known as reorganization since you make a repayment plan to repay your debts. Unlike chapter 7, you cannot apply for a reorganization bankruptcy for your business. For you to qualify for bankruptcy under this chapter, your secured and unsecured debts cannot exceed a particular amount.

When you seek relief under the reorganization bankruptcy, you need to create a budget based on your income and expenses. This will help you come up with an amount you are comfortable paying each month. The bankruptcy trustee will assess your plan, and the court must approve it before you proceed. After the court's approval, you will need to pay your disposable income, and bankruptcy wipes out other debts.

If you want to retain ownership of your properties, it would be wise to file for chapter 13 bankruptcy. However, you should ensure that you can follow through with the three or five years plan to repay your creditors.

Chapter 15 Bankruptcy

This chapter of bankruptcy is available when you file bankruptcy under another country's laws, but you own assets in the United States. This category of bankruptcy deals with cross-border issues.

The decision to declare bankruptcy is complicated. Understanding the bankruptcy that suits your needs could be challenging. Therefore, you need guidance from a North hills Bankruptcy Attorney to help make the right decisions and represent you in the bankruptcy case.

Bankruptcy and Taxes

California is one of the States that imposes a State income obligation to its residents. Additionally, one has to satisfy any federal tax obligation. Like other debts, tax debts could be overwhelming and difficult to pay. Filing for bankruptcy ensures that your unsecured debts are discharged.

Before opting for bankruptcy, there are several alternatives you can explore to deal with your tax debt. Some of the options include filing an amended tax return, offer in compromise and installment agreements. Since each individual has various financial obligations, you need to consider your situation before deciding to proceed. 

The offer of compromise is an option for taxpayers who do not have delinquent returns. For the OIC, you will be required to make an offer less than what you owe. If they accept it, your debt will be settled. In the OIC program, you must make a first high payment and remain compliant with the plan.

Filing for bankruptcy could discharge a portion of your tax debt for California and federal tax. Whether your tax debt is dischargeable through bankruptcy depends on the following factors:

  • The age of your tax debt based on the filing due date
  • The date of assessment done by the taxing agency
  • Whether or not you tried to avoid tax obligations

For you to discharge your tax debts in bankruptcy, the debt must be at least three years past the filing deadline. Also, you need not be attempting to evade the tax or commit fraud.

Under liquidation bankruptcy, your unsecured debts are discharged. Provided your tax debt meets the above requirements, it could be discharged alongside other unsecured debts. In Chapter 13 bankruptcy, you will make a plan to cover your tax debt. Your payment plan includes regular payments to the trustee, who distributes them to your creditors. Sometimes, you could enter an agreement with the IRS to adjust the amount of debt you owe.

If the IRS has a lien against some of your property, bankruptcy will not wipe out the debt. This is because they will still have a right over your property. However, your liability may be wiped out. Should the IRS sell your property and recover less than your debt, you will not be liable for the balance. The IRS must seek permission from the bankruptcy court to seize property in bankruptcy.

Even though you cannot discharge all your credit card debts in reorganization bankruptcy, you may work out a manageable plan to help you cover the debts while in bankruptcy. Such a program could be more favorable compared to other plans available outside bankruptcy.

Bankruptcy Frequently Asked Questions

The issues surrounding bankruptcy are complicated and could be best handled with guidance from a competent bankruptcy Attorney. The following are some of the frequently asked questions on bankruptcy in California:

1.  What can bankruptcy do for me?

Some of the benefits you could accrue from declaring bankruptcy in California include:

  • Your legal obligation to cover most of your debts is eliminated. This occurs when your debts are discharged, and the discharge is designed to give you a fresh start.
  • When you declare bankruptcy, you can stop foreclosure of your home. However, bankruptcy will not eliminate your mortgage debts. You will be allowed some time to catch up with your payments.
  • Bankruptcy stops creditors from harassing you or trying to collect debts.
  • Declaring bankruptcy in California allows you to challenge creditors trying to collect more than you owe them.

It is essential to understand that bankruptcy will not eliminate all your financial problems. In bankruptcy, you cannot eliminate all rights of secured creditors. A secured creditor offers collateral for your debt. Also, debts such as child support and alimony are not eliminated by filing for bankruptcy.

2.  How often can I file for bankruptcy?

You cannot receive a chapter 7 bankruptcy relief in California if you have filed within the last eight years or six years under chapter 13. If you want to file for reorganization bankruptcy, you must not have received a liquidation relief in four years. Suppose the court did not grant you bankruptcy in your previous attempts. In that case, you can file and receive a discharge without time restrictions. However, the court factors in the reason for bankruptcy denial when deciding on your petition.

3.  What will happen to my home if I declare bankruptcy?

If your equity to your property is fully exempt, you will not lose your car or home in bankruptcy. If your property is non-exempt, you can still keep it by paying the non-exempt value in chapter 13 bankruptcy. Bankruptcy does not eliminate security for creditors. Therefore, if a creditor has security interest on your property and you do not pay your debts, they have a right to take the property, sell it and recover the debts.

Alternatively, you can agree to keep paying the debt until you complete the payments. If a creditor attempts to use fraud to recover more money, you can challenge the obligations. If you want to file for bankruptcy and keep your home, guidance from a North Hills Bankruptcy attorney will go a long way for you.

4.  Will I have to go to court for bankruptcy?

When you want to file for bankruptcy, your case is handled by the bankruptcy court. However, most bankruptcy cases require you only go to the creditor's meeting. This is a meeting for your bankruptcy trustee and other creditors who want to attend. In this meeting, you could be asked to answer a few questions. Should complaints arise in one of your debts, you can dispute the debt in court. In this case, you will receive a notice on the date to appear from the court or your bankruptcy attorney.

Find a North Hills Bankruptcy Attorney Near Me

Bankruptcy is a legal tool that offers relief for individuals overwhelmed with debt. There are different types of bankruptcy, and for each, there are eligibility criteria you need to meet to file. The level of benefit you accrue from bankruptcy varies from case to case. Therefore, you need to understand the category you qualify for and know if it meets your specific needs.

The process of declaring bankruptcy could be quite complicated since you could lose some of your assets to creditors. Therefore, it is crucial to proceed with competent legal guidance from a North Hills Bankruptcy Attorney. At Los Angeles Bankruptcy Attorney, we will guide you through the different types of bankruptcy, their alternatives and advise you on the best options. Contact us today at 424-285-5525  to speak with our bankruptcy attorneys.