What Type of Bankruptcy is Right for You?
Bankruptcy, even post- 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, is a powerful tool for individuals and businesses with financial obligations that cannot be satisfied or would be extremely burdensome to satisfy. In short, bankruptcy is a chance for individuals who have fallen behind to get a fresh start. Bankruptcy can provide temporary protection from creditor collection attempts through its automatic stay. Furthermore, bankruptcy can provide permanent debt relief by means of a bankruptcy discharge, which is granted at the close of a successful bankruptcy case.
However, bankruptcy is not the only option. Due to limits on the frequency at which a person can declare bankruptcy, it is prudent to determine whether bankruptcy is likely to bring about the most favorable result. Considering that there are different forms of bankruptcy, the filer should select a form that is most likely to achieve his or her goals, including the protection of personal property and assets; the discharge of debt; or both.
The experienced attorneys of The Bankruptcy Group understand that every financial situation is different. Therefore, we always consult closely with our clients before recommending a strategy or approach to correct your debt problems. To schedule a free, confidential legal consultation call our firm at 1-800-920-5351 or contact us online.
Debt Counseling and Negotiation with Your Creditors
Before deciding on bankruptcy, it may be prudent to have an experienced attorney negotiate with your creditors on your behalf. Upon being informed that the debtor is considering bankruptcy and that he or she has hired an attorney, many creditors become significantly more flexible and willing to work something out. Creditors understand that there is the potential for them to receive nothing under bankruptcy – especially if they are an unsecured creditor – and thus may permit for a reduced bill or a payment plan. However, negotiation of debt should only be handled after consulting with an experienced lawyer due to the potential to reaffirm a debt.
Choosing Chapter 7 Bankruptcy in California
Chapter 7 bankruptcy allows an individual who has fallen significantly behind on his or her debts to petition the bankruptcy courts for a discharge of the debt. Upon the close of a Chapter 7 bankruptcy case, the individual can start fresh since only secured debts that he or she chose to reaffirm will remain. Moreover, unlike in a Chapter 13 repayment plan, post-bankruptcy income can be used towards that fresh start and not to satisfy old debts. Chapter 7 provides immediate protection against creditors through its automatic stay, and can stop wage garnishment actions. Additionally, Chapter 7 cases move relatively swiftly and can often be completed in as little as three to six months.
Still, there are some conditions imposed upon and drawbacks to Chapter 7. To start, Chapter 7 is means tested, where people with greater amounts of disposable income are unlikely to qualify. While California does have generous state bankruptcy exemptions, any property that is not fully protected can be sold by the bankruptcy trustee. In the case of a home foreclosure or co-signers to your debt, these problems are often not fully or adequately handled in Chapter 7.
Selecting Chapter 13 Bankruptcy in California
For individuals who means test out of Chapter 7 or who have property and assets that would not be adequately protected by the Chapter 7 exemptions, Chapter 13 can provide an alternate path to a fresh start. Under a Chapter 7 repayment plan that can last for three to five years, an individual may keep all of his or her property. Additionally, if that the plan provides payment for the debt in-full, co-signers are protected from collection attempts. More types of debt are dischargeable under Chapter 13 and for the debts that are not, such as child support, the repayment plan provides more time to catch up.
Nevertheless, Chapter 13 does have drawbacks in that it is a lengthy process. For three to five years your income will be tied up in satisfying these debts. You will be involved with the bankruptcy courts for the duration of this time. Another flaw is the ineligibility of certain parties to file for Chapter 13 altogether. This includes stock and commodity brokers. Lastly, due to the complexity of the repayment plan and duration of the case, fees are often greater for Chapter 13 filings.
Consult with an Experienced Sacramento Bankruptcy Lawyer When Choosing Between Chapter 7 and 13 Bankruptcy
If you are considering filing bankruptcy, it is important to fully research and discuss your potential options with an experienced bankruptcy attorney. We can provide counseling regarding your debt, debt relief options, and the form of bankruptcy most likely to allow you to move forward with your life. To schedule a free and confidential consultation call us at 800-920-5351 or contact us online today.