Bankruptcy often seems to be a final option, a last desperate attempt to stop your financial bleeding. However, filing for bankruptcy could be the best way to start restoring your credit and putting you in a good position for the future. In some cases, waiting too long to file for bankruptcy could be detrimental.
Our Orange County, CA bankruptcy attorneys understand that many people are uncomfortable with the thought of filing. For some individuals, it is a feeling of failure or personal flaw. That could not be further from reality. Bankruptcy is a federal debt relief program that many successful and intelligent people have used to their benefit. You have this same option.
If you have any questions about bankruptcy, the process, the advantages, or the disadvantages, contact The Bankruptcy Group. Bankruptcy is not the answer to every economic problem. However, it should be considered in more cases than it is. Call our law offices at 1-800-920-5351 to schedule a free appointment.
Using the Automatic Stay to Get Relief from Collections
Filing for bankruptcy has many advantages. The most immediate one is an automatic stay against every creditor you have. The minute your attorney files your case, a legal wall is erected between you and your creditors. This means, that after you file creditors are no longer allowed to call you or attempt to collect the debt you owe. For many people, the end of harassing phone calls, emails, and letters provides a sense of immediate relief.
However, the power of the automatic stay is much greater. Creditors have rights and options if you default on a loan or miss payments. By filing a complaint in court, a credit could garnish your wages, access funds in your bank account, or foreclosure on your home. If you are behind in your car payments, a lender could repossess your car without going to court. When you file for bankruptcy, the automatic stay prohibits this type of conduct as well. Furthermore, if a creditor attempts to take any action against you, they could face monetary sanctions ordered by the court.
Chapter 7 Bankruptcies in Orange County
Chapter 7 is the most prevalent type of filing in Orange County. Typically called liquidation or straight bankruptcy, a Chapter 7 filer could eliminate the bulk of their unsecured debt in a few months. However, you must qualify first.
Chapter 7 is meant for people with limited income and assets. That does not mean you cannot own a home or car. Potential filers will have to pass a means test that looks at their monthly income. To determine this amount, our Orange County bankruptcy attorney will use all the household income from the previous six months. If your income is below the median income for a family of the same size in the Orange County area, you are eligible to file. When someone’s income is higher than the median, they could still qualify. The means test allows a filer to subtract allowable deductions and expenses, including mortgage, rent, food, and other ordinary monthly expenditures. If the final amount is low enough, the filer qualifies for Chapter 7.
One of the biggest fears people have is that they will lose their property. Technically, that is true. When you file Chapter 7, your assets, including your home, car, and personal property, become part of the bankruptcy estate. A court-appointed Chapter 7 trustee will take any non-exempt assets and sell them, disbursing the proceeds among your credits. However, it is only non-exempt property. California provides debtors with two sets of exemptions to use to protect and keep their property.
Chapter 13 Bankruptcy in Orange County
If an individual or couple has too much income or their debt is secured, they might have to file a Chapter 13 bankruptcy. Commonly referred to as a “wage earner” or “reorganization” bankruptcy, a Chapter 13 filer will prepare a three-to-five-year plan to pay their creditors back. This plan must comply with various state and federal laws and be approved by the court.
Every Chapter 13 is unique and the amount of money a debtor is required to pay back will be impacted by their income, assets, and debt. Our knowledgeable Orange County bankruptcy attorneys will thoroughly review your situation to draft a plan that addresses your needs and adheres to all applicable rules and regulations.
Deciding Which Chapter of Bankruptcy to File
Before filing for bankruptcy, you need to determine which Chapter is best for you. In some cases where someone makes too much money or has non-exempt assets they want to keep, there is no choice. However, someone who qualifies for Chapter 7 might decide to file for Chapter 13 because they fell behind on their car payments and want to keep their vehicle.
Many potential filers just want to eliminate their debt as soon as possible. The first thing you should do is sit down with an experienced lawyer and carefully evaluate your financial issues and goals. For someone who is unemployed and is defaulting on $40,000 of credit card debt, filing for Chapter 7 is an easy decision. On the other hand, if you have an income, you might be able to discharge your unsecured debt while striping a second mortgage off your home in a Chapter 13 bankruptcy.
What Kind of Debt Can be Discharged?
Most unsecured debt is dischargeable through bankruptcy. For instance, you could eliminate credit card debt, personal loans, medical bills, and some utility bills. Unfortunately, certain kinds of debt are not dischargeable. Child support, alimony, and criminal restitution are kinds of debt that cannot be discharged. Most taxes are not dischargeable. However, you might be able to eliminate some older tax debt, and sometimes, interest and penalties could be discharged.
The student loan crisis is real. Discharging student loan debt is difficult and only possible under rare circumstances. That does not mean it is impossible. If you are struggling with your student loan payments, you should speak with one of our Orange County bankruptcy attorneys to discuss your available options.
Stopping Mortgage Foreclosure
When someone is delinquent in their mortgage payments and their home is in foreclosure, they have limited options. If you are in a position to pay your monthly mortgage payment but cannot pay the full amount you are behind, then filing for bankruptcy could help you keep your home.
Once you file, any foreclosure proceedings against you and your home stop. While it is not advisable to wait until the last minute, you could file for bankruptcy on the morning of a scheduled sheriff’s sale to stop the auction. After you file, you will have three to five years to pay your mortgage company the money you are behind. As long as your bankruptcy complies with the federal and state laws, the mortgage company must accept the plan.
Call Our Orange County, CA Bankruptcy Attorneys if You Feel Overwhelmed by Debt
Feeling overwhelmed by debt could be crippling. At The Bankruptcy Group, our Orange County, CA bankruptcy attorneys focus on helping debtors find solutions. Call 1-800-920-5351 to set up a confidential and free appointment.