Filing for bankruptcy is not an easy decision considering its effects on your credit score and reputation. However, the legal procedure helps you settle current unmanageable debt, stop creditor harassment and debt collection activities, giving you a fresh economic start. During the automatic stay, debtors can’t engage in any debt collection efforts and usually, this is bad for business. Therefore, the credit industry wants to discourage you from seeking bankruptcy protection as much as possible.
Unlike creditors who want to convince you to utilize various debt repayment options, which take even decades to settle with a possibility of lawsuits upon non-repayment, the Los Angeles Bankruptcy Attorney will help you know the truth about bankruptcy when faced with financial distress and what the credit industry does not want you to know about the legal process.
General Overview of Bankruptcy
People are faced with different life and economic situations every day. Unique situations require extraordinary measures based on circumstances. It is the same case with bankruptcy; the process is right for you based on your current economic circumstances. So, it’s critical to consider many factors when considering bankruptcy because it’s not for everyone. After examining your situation, you might realize that making a few adjustments could resolve your financial woes, or you are judgment-proof. You might also realize that bankruptcy is the only way to obtain a financial reprieve.
Bankruptcy is a common process among Californians that provides debtors with the chance to seek debt relief and obtain a clean slate. Although you have the right to explore this process, not everyone is eligible. Some of the conditions you must meet to qualify for bankruptcy are:
- Participate in the means test to determine your household’s gross income to know the type of debt relief you are eligible for.
- Mandatory completion of credit counseling in a government-approved program
- Provide proof of property or asset possession
- Provide valid identification like drivers license, social security card, or birth certificate
The most commonly filed bankruptcies are Chapter 7 and 13.
Chapter 7 is a form of debt relief that wipes your debt within three to six months by allowing you to liquidate your assets to pay creditors. The disadvantage with the process is that it results in loss of assets.
On the other end, there is Chapter 13 bankruptcy, a debt reorganization procedure that allows you to create a debt repayment plan to repay debt. The plan can extend up to five years and you don’t need to liquidate your assets to settle it. It allows you to retain your property, although you must prove you have a consistent and high income to repay the debt.
Either option allows you to put your finances in order when dealing with unmanageable debt to avoid creditor or collection agency harassment and lawsuits. Unfortunately, the credit industry doesn’t want you to know the truth about bankruptcy and how it helps you reorganize your debt and acquire a fresh economic start. They do this because the more you are overwhelmed with debt, the higher the profit margins.
Creditors will encourage you to explore other options instead of bankruptcy so that they can continue with debt collection and suits. It‘s for this reason that you need to consult with a profound bankruptcy attorney to know the truth about bankruptcy based on your situation and the various bankruptcy options to explore based on your unique circumstances.
The Truth That the Credit Industry Doesn’t Want you to Know About Bankruptcy
Creditors often employ aggressive means to discourage and frighten debtors into debt repayment. They understand how filing for bankruptcy hinders their debt collection efforts and lawsuits, which is why they aim to discourage you from declaring bankruptcy. So, you must know the truth about bankruptcy to put a stop to creditor harassment and any pending lawsuit for repossession, garnishment, or foreclosure. Discussed below is the truth creditors are concealing from you about bankruptcy:
Legal Bankruptcy Declaration is the Most Effective Technique to Eliminate Overwhelming Debt
One of the biggest secrets of the credit industry is that bankruptcy can effectively eliminate unmanageable debt. They will never want you to know that by declaring bankruptcy, you obtain financial relief for a particular period, which allows you to arrange your finances and repay the debt, which explains why they invest heavily in anti-bankruptcy PR campaigns to keep the truth about this legal process hidden.
The reason creditors have created a stereotype perception regarding bankruptcy is they want more of your efforts to focus on credit consolidation. Additionally, they want to keep charging late fees and acquire costly loans to increase their profit margins. However, you need to know that declaring bankruptcy can be the best option when struggling with financial issues, especially after a job loss, illness, or business closure.
If you lose your job or business where you used to generate income to service the debt, you will have difficulty paying creditors, especially when you have other bills to settle. In that case, legal filing of a bankruptcy can protect you from financial ruin by stopping all debt collection activities and contacting debtors. For this reason, creditors peddle false information regarding bankruptcy to keep you in debt so that they can benefit from late fees and high-interest rates.
Recent Bankruptcy Statutes are not as Restrictive as Many People Assume
Past bankruptcy statutes were restrictive, but it’s no longer the case with the new laws. While it’s clear the new statutes have more paperwork and legal processes you are not familiar with, this is your attorney’s burden, and you don’t need to be worried. With the legal representation of a bankruptcy attorney, all the hassle associated with the recent laws will be handled by your attorney.
To streamline the process and avoid the strict laws, do not file the process in person because it’s overwhelming and risky. It is the mistake your creditors want you to make so that your bankruptcy lawsuit can be denied. Don’t fall for the lie.
You Won’t End Up in Jail for Failure to Repay Debt
No creditor wants you to know that there is no jail time for refusal to clear the debt. Instead, they want to frighten you by messages or phone calls to the extent that you will believe the refusal to pay the debt will result in prison incarceration. However, this is untrue because the only debts that can result in jail sentence are:
- Federal tax liens
- Child support
- Particular forms of tax debts
- Debts stemming from injury claims where you are to blame
- Spousal support
- Student loans from the government
Declaring bankruptcy clears all your debts and eliminates the worry of prison or jail sentence for inability to repay debt. Any debt from a private creditor cannot result in a prison sentence, although the credit industry will make you think otherwise through their threats.
Bankruptcy Halts Garnishment, Repossession, and Foreclosure
When a creditor realizes that you are having problems with debt repayment and consolidation is not an option, they file a lawsuit with a bankruptcy court demonstrating your inability to pay the debt. If the court grants the lawsuit, it means they can garnish your wages, repossess your vehicles, or foreclose your home. Because of this, creditors can push you into believing that bankruptcy will sell all your property when you fail to repay debt, which is a lie.
Declaring bankruptcy stops all the pending lawsuits against you by the creditor, which means they cannot come after your property due to your inability to repay debt.
Note that although the automatic stay protection provided by bankruptcy pauses all lawsuits, if a creditor has the necessary resources, they can file a motion requesting the court to lift the automatic stay. When this happens, the creditors can continue with a home foreclosure or repossession. Luckily, Chapter 13 is a perfect debt relief option to prevent foreclosure or repossession, so you should discuss it with your attorney.
You Can Rebuild your Credit Score
One of the disadvantages of declaring bankruptcy is that it damages your credit score for years. The credit industry will only discuss how bankruptcy damages your credit ratings but will not disclose that it’s possible to rebuild the rating. Society has also made people believe their credit rating, individual or business will determine their future, forcing people to fear a negative credit score and avoid any action resulting in a negative score like bankruptcy.
The truth is that a negative credit score is not permanent. When you file for bankruptcy, creditors will discharge some of your debts at the end of the period, letting you rebuild your credit score for a clean slate. Creditors aim to keep you in debt because it’s their business, which is why they will never tell you it’s possible to rebuild a credit score.
A Majority of People Who Declare Bankruptcy Keep their Property
Creditors want you to believe that by declaring bankruptcy, you will lose all your property. However, what they don’t want you to know is that not everybody loses personal belongings after bankruptcy. It's true that under Chapter 7, a court-appointed trustee repossesses all your non-exempt property, then sells it off and uses the proceeds to pay debtors. Nevertheless, you retain all your exempt property like pension, automobile, household appliances, and clothing.
When you declare bankruptcy under Chapter 13, you keep all your property like cars and homes and use your steady income to repay debtors. The credit industry doesn’t want you to know this to discourage you from considering bankruptcy.
After Bankruptcy Declaration, Creditors must Abide by your Terms
Creditors don’t want you to discover that they are prohibited from engaging in any debt collection efforts that have already commenced upon bankruptcy declaration. It means you no longer have to deal with frequent phone calls and emails harassing you to repay debt. The automatic stay protection ensures that they must do it through your attorney whenever creditors want to reach out. However, when you opt for a settlement, you will not enjoy the automatic stay’s protection meaning creditors will continue with the debt collection activities.
Similarly, being tricked into a settlement means that creditors are free to file a lawsuit to force you into paying the debt, independent of the financial difficulty you are in. Filing for bankruptcy gives you the ability and control over the fashion you will resolve your debts following your terms and not the credit industry’s terms. You will avoid financial stress and creditor harassment if it’s them that must abide by your rules and not the other way round.
Many People Choosing Bankruptcy are not Deadbeats
There is a common misconception that people who declare bankruptcy are only deadbeats. However, the truth is that many good people in Los Angeles choose bankruptcy declarations not because they don’t want to repay the debt but due to the financial hardship they face. You might find yourself in a financial situation where your only option is bankruptcy declaration. Unfortunately, many debtors choose not to file bankruptcy because they are afraid of acquiring a bad name. In contrast, those who file are the ones that acknowledge their income is incapable of paying off debt.
Low and middle-class income households live in an uncertain economy that is constantly changing, creating huge financial problems. The bills you can pay today might be unpayable tomorrow. If you generate enough income to pay bills and live comfortably, you might consider taking out a loan for particular purposes. However, suppose you undergo a job loss, become incapacitated, or lose your business. In that case, you can no longer attain your income, making it difficult to keep up with loan repayment and other bills. A divorce can also have devastating financial consequences if you are left with a hefty debt you acquired during the marriage.
The economic situation keeps shifting all the time; today, you are financially stable, and the next time you are facing financial distress. Bankruptcy statutes provide you with the opportunity to regain your financial footing. However, the credit industry will want you to believe that a bankruptcy declaration earns you a bad name in society.
Not Everyone will Learn you are Bankrupt
Another myth the credit industry wants to spread about bankruptcy declaration is that everyone in society will know about it. As mentioned above, some people are afraid bankruptcy will damage their reputation. The fear that everyone will know about your decision discourages many debtors from exploring this debt relief option, which benefits creditors.
Luckily, unless you are a celebrity or politician, the only people that will learn about bankruptcy are your attorney, the creditors, and the people you choose to disclose to, like your family members or spouse. The possibility of people learning about this legal process is minimal, despite it being a public process.
Bankruptcy Declaration isn’t Costly
The cost of filing Chapter 13 bankruptcy is $281, while Chapter 7 is $306. Although you cannot pay the debt, this amount is reasonable considering the court might allow you to pay in installments, making the legal process affordable, contrary to what creditors might want you to believe.
Your Retirement Pension Remains Intact
Some creditors will convince you to withdraw money from your retirement account to settle the money you owe. However, they won’t tell you that your retirement pension is protected from wage garnishment after a bankruptcy declaration. Creditors are only interested in debt or increased profit margins, and they care less about your post-retirement life.
Bankruptcy declaration has nothing to do with your retirement because even if you cannot keep up with your retirement plan, your attorney can always petition the court for a modification to suit your economic situation.
At the Los Angeles Bankruptcy Attorney, we encourage you not to withdraw cash from your retirement account to repay creditors because doing so will interfere with your plan. Rather, declaring bankruptcy will allow you enough time to arrange your finances and pay your creditors.
You Have the Right to Eliminate Debt Through Bankruptcy
Many creditors, through advertisement, claim that you have a right to repay what you owe, but this is usually a tactic to lure innocent debtors to settling debt with the little money they have left in their accounts. Do not fall for this trick because you do not have to settle the debt under economic distress. You can declare bankruptcy instead and stop debt repayment momentarily until you regain your initial financial status without compromising other bills or necessities.
Bankruptcy declaration is often a last resort for many individuals. Therefore, if you consider automatic stay protection, it means you are under financial distress, and it’s good to seek debt relief. Creditors will make bankruptcy sound like a bad decision, but they intend to keep you in the dark about the legal procedure to keep you in debt and their business running.
When considering bankruptcy but not sure what you want, speak to a bankruptcy attorney for legal guidance.
Find a Bankruptcy Attorney Near Me
Bankruptcy declaration is a decision many debtors avoid because of fear of damaging their reputation in society. The credit industry wants to discourage you from this legal process by arguing that it’s not beneficial. However, what these creditors want is to see you repaying debt even for a decade. Fortunately, bankruptcy statutes make it clear that anyone is eligible and has a right to file for bankruptcy.
If you wish to explore your debt relief options or have an attorney review your case, contact Los Angeles Bankruptcy Attorney at 424-285-5525 to discuss more.