Bankruptcy

When should I consider bankruptcy?

If you are at a point that you have no reasonable prospect of being able to repay your bills within the next 5 to 7 years, it is a good time to consider bankruptcy.

What will bankruptcy do for me?

The filing of a bankruptcy petition will immediately stop all collectors from calling you, sending you letters, suing you, garnishing your wages or taking any other collection activity against you. Later on as the case comes to completion, you will receive a discharge for your dischargeable debts. Discharge, means that you no longer legally owe any debt that has been discharged. Dischargeable debts are those debts that bankruptcy law allows to be discharged. Typically, dischargeable debts include credit cards, unsecured notes and loans, gambling debts, and secured debts (ie car and house loans if the secured property, ie the car or house, is returned to the creditor).

What is a chapter 7 bankruptcy?

A chapter 7 bankruptcy is commonly referred to as a "liquidation" bankruptcy. The trustee takes any non-exempt property from the debtor and sells it, and distributes the proceeds to the creditors on a proportionate basis and then issues a discharge. It is not uncommon, especially in California for the debtor to not own any non-exempt property, and therefore, the trustee takes nothing, and merely issues the discharge. Examples of non-exempt property would include home equity in excess of $75,000; expensive cars that are paid off; money market accounts that are not in protected retirement plans; business inventory, rental houses, planes, boats.

What is a Chapter 13 bankruptcy?

A Chapter 13 Bankruptcy proceeding lets you rearrange your financial affairs, repay a portion of your debts and put yourself back on your financial feet. You repay your debts through a Chapter 13 plan. Under a typical plan, you make monthly payments to the bankruptcy trustee, who is appointed by the bankruptcy court, for three to five years. The bankruptcy trustee distributes the money to your creditors. The benefits of Chapter 13 is that it allows you to keep your home if you are behind in payments and cannot immediately repay the arrearage, but you could keep up on your payments and pay back the entire arrearage in the plan payment period.