No one is immune to financial challenges. Life happens, and a divorce, job loss, or illness could leave you with unmanageable bills. If you are at the edge and badly require a fresh financial start, it could be time to consider filing for bankruptcy. At Los Angeles Bankruptcy Attorney, we can help you choose the ideal bankruptcy chapter to file. We aim to help you take full advantage of the relief offered by the United States Bankruptcy Code.
Filing for bankruptcy should come as a last resort. Even with pressure from creditor lawsuits and harassment from debt collectors, it is vital to take the time to understand your situation better and the options you can explore. As a leading Tarzana bankruptcy firm, we can offer the legal advice you need before filing for personal or business bankruptcy.
Is It a Good Idea To File For Bankruptcy?
In some instances, the surest means to save yourself from sinking in debt and regain your financial freedom is to file for bankruptcy. However, you must consider certain factors to establish whether bankruptcy relief is the best option based on your current circumstances.
Any attorney will tell you for free that if you have other options, such as an invitation to resolve your financial issues directly with your creditors, then it is best to avoid filing a bankruptcy petition. Generally, you should only consider bankruptcy if you find yourself between a rock and a hard place.
Pros and Cons of Filing for Bankruptcy in Los Angeles, California
Filing for bankruptcy has benefits and potential disadvantages too. However, in some financial situations, the process can push you several steps closer to achieving much-needed financial freedom.
A Tarzana bankruptcy attorney can help you evaluate your situation and decide whether this is your best decision. You will also learn about your options and receive guidance to help you choose from a well-informed perspective.
Some of the perks of filing for bankruptcy include:
An Automatic Stay
Harassment and nagging from creditors can easily rob you of your sanity. Filing for bankruptcy automatically stops all collection activities from creditors, also known as a court-issued automatic stay. This doesn’t cancel debts, but it provides a temporary suspension of debt collection efforts until your case is concluded.
- Filing a petition will suspend:
- Wage garnishments
- Letters and calls from creditors and debt collectors
- Lawsuits on the debts
- Property repossession
Creditors know better than to attempt contacting debtors with court issued automatic stays. Any pursuits from them can attract hefty fines for any damages caused.
Filing for bankruptcy in Los Angeles will also free you from the responsibility of settling certain debts. Dischargeable debts include personal loans, medical and utility bills, credit card debts, and more. These debts are canceled or eliminated if you file a successful petition.
Certain assets can be “exempt,” meaning you can maintain ownership even after being declared bankrupt. While some exemptions protect only a fraction of an asset’s value, others offer full protection of possessions like your wedding ring, car, and more.
Filing for bankruptcy is guaranteed to mess with your credit score. Usually, your records can be affected for about 7 to 10 years, depending on whether you file bankruptcy under Chapter 13 or 7. However, cancellation of dischargeable debts allows you to quickly rebuild your credit and gain the much-needed financial credibility to benefit from lenders’ services.
It is imperative to enlist a bankruptcy attorney’s services because wrong timing when filing a bankruptcy petition can quickly turn your financial situation from bad to worse. Sometimes, filing too early can lead to the loss of property you may have otherwise salvaged. Additionally, filing under the wrong chapter can have adverse effects on your finances for longer than necessary.
Let’s now dive into the disadvantages of filing for bankruptcy in Los Angeles:
Loss of Credit Cards
Credit card debts are dischargeable once you file for bankruptcy. This dissuades credit card companies from lending you any monies, and they may even cancel any cards you currently hold. Fortunately, you can still obtain “unsecured” credit cards and use them to rebuild your credibility. Such cards may not have the most favorable interest rates but will help you regain a good credit score.
Questionable Financial Credibility
The decision to file for bankruptcy should not be taken lightly, mainly because it will make your financial credibility questionable. This means you may not enjoy any favors from loan and mortgage lenders, not to mention that you may also face employment and housing stigma.
Bankruptcy will not free you from settling certain debts such as student loans, child support, criminal restitution and fines, tax debts, etc. Moreover, you also face the risk of denial of federal, state, and local tax refunds.
Whether filing for bankruptcy will offer more pros than cons or vice versa will highly depend on your unique financial circumstances. That is why our seasoned Tarzana bankruptcy attorney takes a case by case approach, ensuring that each client receives personalized guidance on the best course of action.
Chapter 7 Or Chapter 13 Bankruptcy: Which One Is Best For You?
There are preset eligibility requirements you must meet to file for bankruptcy under Chapter 7 or Chapter 13.
Chapter 7 Bankruptcy Eligibility Criteria
To benefit from bankruptcy relief under Chapter 7, you must pass a means test to show your income is low enough for the courts to authorize particular debt discharge and the exemption of most of your property.
This Chapter, also known as “liquidation” bankruptcy, mainly benefits debtors with limited income and cannot pay back all their debts. Unfortunately, any “non-exempt” property is liquidated, and the proceeds are used to pay off your creditors.
You qualify for bankruptcy relief under Chapter 7 if:
- Your household income is lower than California’s median income (currently at $75,277 yearly).
- You pass a means test showing that even if your household income is higher than the median income in California, you don’t have enough disposable income to settle your debts.
Chapter 13 Bankruptcy Eligibility Criteria
If your income is too high for you to qualify for bankruptcy relief under Chapter 7, the chances are that you are eligible to file under Chapter 13. In this case, you get a chance to get your finances back on track through a debt repayment plan.
You qualify for bankruptcy relief under Chapter 13 if:
- You have a regular income.
- Your unsecured debts (debts not secured by collateral) sum up to less than $394,725.
- Your secured debts sum up to less than $1,184,200.
Filing for Chapter 13 bankruptcy has numerous perks, including you can save your car and home from being repossessed by creditors. The courts allow you to get into a 3 to 5-year debt repayment plan, covering all or a fraction of your debts, depending on your type of debts, income, and living expenses.
Some of the debts you must settle include:
- Bankruptcy fees—This includes attorney fees, filing fees, and trustee commissions.
- Non-dischargeable debts— Priority debts like alimony, child support arrears, and tax debts
- Secured debts— This includes your vehicle, home, and other secured property
Under Chapter 13, you may or may not have to repay 100% of your unsecured debts. This will all depend on the overall value of the nonexempt property you own, your disposable income, and the length of the proposed repayment plan.
Steps for Filing for Bankruptcy in California
Whether you choose self-representation or hire a Tarzana bankruptcy attorney, there are steps you must take when filing a petition. Working with a lawyer helps to dodge common blunders that may delay the process or cripple your chances of enjoying the desired outcome.
Step 1— Put Your Paperwork in Order
There is so much paperwork involved in filing for bankruptcy. Some of the documents you should gather include:
- Income verification documents
- Creditor address and debt information
- Asset information, including retirement plans, life insurance coverage, etc
Step 2— Enroll In Credit Counseling
Before you file for bankruptcy, you must enroll in credit counseling with a state-approved agency. A counseling class takes 1.5 hours on average, and you will be issued with a certificate that will be instrumental in filing for bankruptcy. Beware that this certificate is valid for about six months, so you need to file your case within this period. If it expires before you file, you may have to retake the credit counseling class.
Step 3— File Bankruptcy Petition & Schedules
You need to file a bankruptcy petition and schedules with the courts. Your attorney will help you choose the right forms for your case, depending on whether you want to file under Chapter 13 or Chapter 7. To avoid delays, perjury penalties, and even possible termination of your case, ensure that all the information you provide is true and accurate.
Our bankruptcy lawyers understand what is required when filling out schedules and petition documents. We will fill out the forms for you then review the information together before filing with the court.
There is a small filing fee you should pay when filing the documents. If the overall income combined doesn’t exceed 150% of California’s official poverty line, you can request the courts to waiver these filing fees.
Step 4— Mail Your Tax Returns to Your Trustee
The courts will assign a trustee to help you navigate the bankruptcy process. The trustee will need the state and federal tax returns you filed over the past 2 to 4 years, depending on the bankruptcy chapter you choose. In case it’s been years since you filed your tax returns, simply mail the last filed tax return.
Step 5— Attend a 341 Hearing
During the 341 hearing, the courts will need proof of your identification and social security number. Your trustee will also take about 5 minutes to ask questions about the schedules and documents you have filed. Typically, these questions are about your income, creditors, and assets and will only require you to give a yes or no answer.
Step 6— Sign Up For a Debtor Education Class
Apart from the credit counseling class, you will also need to complete a debtor education class. While you should attend the first class before filing a petition, you need to enroll in this second class after filing for bankruptcy.
Upon completing the class, you should fill and file a B23 form with the court indicating that you have gone through a Debtor Education Class from a state-approved agency. You should also attach your Financial Management Certificate obtained after the class to avoid your bankruptcy petition’s dismissal. It is crucial to promptly file your forms because bankruptcy cases are typically determined four months after the initial filing.
The above is merely an overview of the steps involved in filing for bankruptcy in Los Angeles, California. There could be more steps, depending on the bankruptcy chapter you choose. Seeking legal representation makes the whole process easier and increases your chances of being declared bankrupt and enjoying bankruptcy relief.
Can I File For Bankruptcy Without Hiring A Lawyer?
Hiring a Tarzana bankruptcy attorney is beneficial, although it’s not mandatory. This is more so when filing for personal bankruptcy. A skilled expert can dispense the much-needed guidance to protect you from making uninformed decisions that may hurt your chances of making a quick financial recovery.
Are The Services Of A Tarzana Bankruptcy Attorney A Necessary Expense?
If you are filing for bankruptcy, you are broke, and hiring a lawyer may seem like an unnecessary expense. Well, it’s not. Most attorneys charge by the hour and even demand for a retainer. However, their services are still worthwhile because their skills and experience allow them to grasp opportunities to lower your overall and generally fast track achieving financial freedom.
How Long Will It Take Until I’m Declared Bankrupt?
If you file for Chapter 7 bankruptcy relief, the case will take about three months to be completed and get rid of all your debts and creditors. Chapter 13 involves getting into a repayment plan that may take between 3 to 5 years. This option takes longer, although it allows you to retain ownership of most of your valued possessions.
Find a Los Angeles Bankruptcy Attorney Near Me
If you have a hard time controlling your debt, filing for Chapter 7 or Chapter 13 bankruptcy could offer you just the break you need. Both options provide a unique set of pros and cons that you should know about to find solutions ideal for your specific situation. At Los Angeles Bankruptcy Attorney, we have a reliable team of board-certified legal representatives who can offer you a customized strategy tailored to suit your unique circumstances. For legal representation, guidance, or inquiries about bankruptcy in Los Angeles, give us a call at 424-285-5525