Financial constraints are typical among most American citizens, owing to a series of events that may or may not be within your control. Dealing with the debts and creditors always on your neck may be stressful, and could wear you out very quickly. One of the best remedies for anyone who faces the challenge of insufficient funds is filing for bankruptcy. Declaring bankruptcy on time will save you a lot of financial strain, as it opens up additional ways to pay off debts and clean your slate against past creditors. Upon deciding to file for bankruptcy, you need to consider several factors that affect your livelihood directly. Moreover, you need to make a careful determination of the reasons for registering for the declaration, based on whether your bankruptcy affects your personal or corporate monetary state.
With a declaration of bankruptcy, your investment properties also face several risks. You often have to prepare to sell or release ownership to allow the appointed trustees to trade the property in return for debt settlement. During the consolidation of funds and property to put up for sale, you need the services of an experienced bankruptcy attorney, who will help in the negotiation process with your creditors and the judge. At Los Angeles Bankruptcy Attorney, we commit ourselves to serve all our clients in Los Angeles, accordingly, to help them undergo a smooth transition process after filing for bankruptcy. Additionally, we provide comprehensive legal advice to enable you to make smart financial decisions to avoid losing valuable property when you can retain it.
Filing for Bankruptcy
When you become overwhelmed by debt repayment, you will seek a way out to organize yourself and make repayments over a designated period. Filing for bankruptcy eases the pressure on making repayments to creditors by removing you from a position of personal responsibility to pay your debts. After deciding to declare bankruptcy, you have to follow a stipulated court process that lets you file several documents that provide enough evidence and stated reasons for declaring the state of bankruptcy.
You will need a bankruptcy lawyer's services to facilitate the filing of documents in court, as it can be a hectic process that requires particular and highly detailed submissions and supporting documents. Moreover, there is a filing fee for anyone who needs to file for bankruptcy, set to ward off applicants who would like to take advantage of the protection they receive from court after a declaration of bankruptcy. Therefore, the fee may be a bit costly, depending on the type of bankruptcy you file.
A triumphant declaration of bankruptcy will prevent creditors or any other agents in recovery firms from contacting you. Your financial matters now fall in the hands of an appointed unbiased trustee. As a result, any creditor seeking repayments from you can no longer address you directly and has to get in touch with the appointed trustee to conduct any transactions.
While most people view declaring bankruptcy as the most comfortable way out, it is essential to remember that you will still face a lot of scrutiny from the court when you decide to undertake any future ventures. Thus, you will expose yourself to constant fiscal analysis that functions to ensure that your claims of bankruptcy were valid, and not just a shield from creditors.
Moreover, you need to understand that bankruptcy will ruin your credit score significantly and may, therefore [prevent you from making individual financial decisions in the future. For example, if you manage to reinstate your past financial state after repaying all debts, you may decide to apply for a loan to facilitate new business ventures. The standard procedures followed by any bank or credit corporation requires the company to run a background check on your credit history, to determine whether your score is satisfactory for the issuance of a loan. Consequently, the bad credit score obtained from filing for bankruptcy will limit your future ventures significantly. Hence, it is essential to weigh your options objectively before deciding to settle for the bankruptcy declaration.
Types of Bankruptcy
Several options are available if you are looking to declare yourself bankrupt. The types of bankruptcy depending on the amount of money you make per month and whether your financial incapacitation affects your personal property. Therefore, you can also file for bankruptcy in case your company is on the edge of a financial crisis, to prevent the adverse effects of dealing with creditors and recovery agents directly.
Generally, the various types of bankruptcy either offer liquidation or reorganization remedies. If you choose the liquidation option, you will have to give a third party trustee the power to convert your assets and liquidate them in exchange for the settlement of outstanding debts. The process of liquidation involves converting any available assets into cash, to enable transfer to the creditors you owe money.
On the other hand, the reorganization strategy works to provide a more lenient process for debt repayment. You will have to appear before a judge with a qualified fiscal plan that lays out how you intend to repay all the money you owe. You need a bankruptcy lawyer's services to create a well-laid out long-term strategy that should convince the judge of your ability to pay off your debts consistently over the stipulated time.
You may decide to opt for Chapter 11 bankruptcy to remedy company insolvency as well, which introduces another mode of debt repayment under stringent court scrutiny and monitoring of court transactions. While you may go for different options to suit your needs, the main types of bankruptcy filed are:
Chapter 13 Bankruptcy
Applying for chapter 13 bankruptcy provides a reorganization strategy, to enable you to consolidate your funds and plan for making repayments in an organized way. Usually, a debtor who has a steady or reliable source of income is the best candidate for this type of bankruptcy, because he/she can keep up with payments. Thus, choosing to apply for chapter 13 bankruptcy requires you to have adequate income sources that provide consistent returns. Additionally, anyone who earns income above the set limits in other types of bankruptcy can also choose to file for chapter 13 bankruptcy to cater for the larger income bracket.
On top of covering the debtor, Chapter 13 bankruptcy can include any co-signer who provides surety for the loans. Therefore, if you had someone else cosign for your credit, you can exclude him/her from carrying any responsibility for the repayment of debts to your creditors. The move is a courtesy call, to prevent innocent third parties from carrying the load of your debts.
Requirements for Filing for Chapter 13 Bankruptcy
You need to fulfill several requirements to become eligible for this type of bankruptcy. The conditions to be met work to ensure that you are within the monetary bracket laid out in the United States Bankruptcy Code. Additionally, the prerequisites ensure that you have disclosed all the necessary information required to run background checks and track your past and present expenditures. Therefore, you must provide a comprehensive list of all the creditors you owe money and the amount owed to each creditor. You should also disclose all property in your name, to ensure that your assets are taken in full consideration.
Also, your debt amount must fall within the bracket of $394,725 and below for unsecured debts. The term unsecured debts cover all property or assets that are not covered by collateral, in case of a failure to repay the debt on time. For example, if you were discharged from the hospital without completing the full payment, you will have an unsettled debt with the hospital you owe money to.
Conversely, your limit for any settled debts you have should fall within the range of $ 1,184,200. A settled debt usually has collateral attached to the item or property bought, to avoid any risk of non-payment. For example, if you take out a loan from the bank, you may sign your vehicle as collateral, meaning that the bank can claim your car in case of a failure to repay the loan promptly.
Moreover, you need to submit information about your sources of income and how much you earn per month. Such information is useful to the judge when determining whether you are capable of carrying forward with a chapter 13 bankruptcy agreement with your creditors, which involves making gradual repayments without default. Moreover, the judge can apply the information to the figure you provide as your monthly expenditure, to ensure that the balance after spending your income on upkeep is sufficient to cover the creditor's demands.
You may also have to complete a credit counseling program, especially if your records indicate a recurring trend of bad credit scores. Such a finding may suggest that you need extra guidance in fiscal matters, to ensure that you undergo a full reform.
Effects of Chapter 13 Bankruptcy on Your Investment Properties
As a reorganization strategy, filing for chapter 13 bankruptcy avails you enough time to present a well laid out plan for all your ideas to make payments to your creditors. Therefore, your property and especially your primary residence is exempted from foreclosure, meaning that you can retain your home throughout the entire repayment process. As such, chapter 13, bankruptcy is beneficial to couples or individuals who value their family homes.
Besides protecting your home, chapter 13 bankruptcy also allows you to retain any property with a positive record as a source of income to settle creditors' claims. Therefore, if you own a premise that you rent out, the judge may allow you to retain it and order for a transfer of monthly income to creditors. As a result, you also maintain a certain level of control over your property instead of leaving full powers to a trustee, especially where you can manage and settle debts on time.
Essentially, all you need to do to retain your investment property is to persuade the judge that you intend to act in good faith. Your bankruptcy lawyer will help you do this by presenting the clear payment plan you come up with. As a result, you need to consider even minor details as you prepare the report to avoid intense scrutiny.
Despite the flexibility provided by a chapter 13 bankruptcy, you will still have to make payments for:
- Student loans
- Alimony fees
- Criminal fines
- Child support
Overall, filing for chapter 13 bankruptcy will allow you to keep your investment property, as long as it is beneficial in settling debts. Even though you have to sell unprofitable assets, the move helps ensure you clear your credit scores expeditiously.
Chapter 7 Bankruptcy
Under Title 11 of the United States Bankruptcy Code, you can also apply for chapter 7 bankruptcy, where your remedy requires liquidation of assets. Before filing the petition, you should satisfy two main requirements, to ensure that your bankruptcy claims are genuine. Firstly, you should pass the means test. The test requires you to provide relevant information to prove that you cannot manage to live on your monthly income beyond paying for expenditures. Thus, you may have to give detailed figures on what you spend your money on, and whether you have mandatory subscriptions to cater to. Secondly, there is a time limit that prevents you from filing for Chapter 7 bankruptcy within eight years from your last application. Consequently, if you have recurring financial constraints, it is better to plan and avoid declaring bankruptcy within the period. It may become a hectic process to seek approval for the matter in court.
Upon making a court application for this type of bankruptcy, an unbiased third party acts as the trustee. It is put in charge of making all transactions involved in liquidating your non-exempted assets. Also, filing the petition to declare chapter 7 bankruptcy executes an automatic stay of any actions on the creditor's side. This means your declaration of bankruptcy prevents your creditors or any reclaiming agents from taking any steps until they receive a green light from the acting trustee. The stay gives your trustee time to sell the non-exempt assets, and convert the cash earned to reach all the parties that require a debt settlement from you.
Regulations governing Chapter 7 bankruptcy require a clear distinction of your assets into separate classes to prioritize repayment on the most urgent types of debt. Any unsecured debt is therefore given top priority, as it includes urgent cases that require prompt repayment of debt. Some of the unsecured debts in the high priority category are:
- Any damages for personal injury to be paid to the accident victim
- Fines or penalties imposed in court
- Child support fees
- Taxation debts
However, you can retain personal property that holds value to you because of their uniqueness, or because the property is from a family inheritance. To apply the exemption of such property from liquidation by your trustee, you need to choose between a state or federal property exemption system that provides several options to protect the personal property. It is important to note that you can only apply one method, depending on what you see fit. Your bankruptcy attorney will help you go through the federal and state exemption regulations to ensure that your choice provides the best protection options for your assets. Some of the item s that qualify for protection under the exemption system are:
- Expensive musical instruments like pianos
- Rare collections
- Vacation homes
- Bank accounts
Effects of Chapter 7 Bankruptcy on Investment Property
Usually, your trustee will identify all the assets you own and select those that have viable equity. Afterward, he/she will liquidate the assets and use the cash earned to pay the creditors in the top priority category. Consequently, we advise you to stay ready for the reclamation of any small business premise or rental property you own, especially if it yields high returns on average. If sold, such property will be useful in settling your debts efficiently, even though you risk losing your source of revenue. In such a case, it does not matter whether the liquidated property served to finance your family. The only important factor is that the property is registered as property under your name.
It is essential to keep in mind that any issued court orders concerning your property liquidation serve to benefit creditors. They seek justice for your default in paying the debt. Thus, your rental premises can also help the creditors' interest because the judge may decide to issue turn over orders. The assigned trustee acquires the authority to liquidate the property for debt settlement.
Find a Los Angeles Bankruptcy Attorney Near Me
The inability to pay off all your debts does not necessarily lead to a permanent state of financial difficulties. With the available option of filing for bankruptcy, the repayment process is more manageable for you and your loved ones, without having to face the challenges of negotiating with creditors directly. For a smooth transition, you should consider legal services from the Los Angeles Bankruptcy Attorney. With our help, you are sure to receive highly effective negotiations with all involved parties to ensure you do not lose all your hard-earned investment properties. If you require a bankruptcy lawyer in Los Angeles, California, give us a call today at 424-285-5525.
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