Filing for bankruptcy is a significant way to find debt relief when you cannot pay your creditors. However, the process of filing for bankruptcy is daunting, especially when doing it alone. You need a bankruptcy attorney’s help with legal advice and handling the paperwork from the start to the end. Above all, an attorney will help you avoid potential mistakes that would affect a successful bankruptcy filing process. Read on and learn how a bankruptcy lawyer can help you.
A Bankruptcy Lawyer Will Help You Decide Whether Bankruptcy is Right for You
Should you file for bankruptcy? It may not seem like it, but bankruptcy can have its silver lining, and sometimes it is the right move to make. At the same time, filing for bankruptcy cannot be the best solution for your problem. Fortunately, with the help of a bankruptcy attorney, you can reasonably decide whether bankruptcy is the right choice.
Typically, your attorney will help you decide on filing bankruptcy, depending on your debts. For instance, if you have unsecured debts like unpaid medical bills, personal loans, credit card debt, and business debts, filing Chapter 7 bankruptcy might be the right choice to make. Therefore, if you file successfully, your debt will be discharged, and you will protect your assets as well.
Another instance where your attorney would advise you to file bankruptcy is when you qualify for exemptions. Although there are chances of having your property repossessed under Chapter 7, you can keep your property if it is exempted from the filing. In California, assets like pension plans, household items, clothing, and retirement accounts are exempted from repossession. Therefore, once you decide on filing bankruptcy, you can retain most of your assets despite the possibility of repossession of some of the assets. However, this would set you up for quicker financial success.
Additionally, a bankruptcy attorney will help you evaluate your income and decide whether bankruptcy will help you in the long run. You might seemingly think that you do not earn enough to pay your debts, only to realize that you can negotiate with your creditors and pay up all your debts without filing bankruptcy. Alternatively, your attorney will help you assess your financial capacity and check whether filing for bankruptcy would help you repay your debts according to the plans set up.
Finally, a bankruptcy attorney should help you identify and accept the cons of bankruptcy. For instance, before you walk into court, you should go through an approved bankruptcy counseling class. This class, often conducted online, will help you understand what will happen to your file. You will also learn about the damages of bankruptcy and the property that you will surrender. You will also learn about the bankruptcy notation that will appear on your credit report for ten years. A reasonable attorney should help you weigh the benefits and downside of all these requirements and help you decide whether you are about to make the right choice or not. Once you are comfortable and understand these consequences, you can continue with the filing. If not, your attorney should help you look for a better solution.
As a side note, a successful bankruptcy filing might be relieving, but to some people, this might leave them ashamed and depressed. Therefore, project how you react to "being bankrupt," then compare it to your feeling. Sometimes it is better to struggle to pay your bills rather than feeling as if you failed. Fortunately, an attorney will help you control your emotions before choosing bankruptcy as your final solution.
A Bankruptcy Attorney Will help You Understand Different Types of Bankruptcies
There are different types of Chapters of bankruptcy in California, each named after the corresponding Chapter in the U.S Bankruptcy Code. While you might have some flexibility in the Chapter to file, your mean test can limit your choice. Mean test is a process that measures your disposable income and how you can cover a debt repayment plan. There are other aspects of these chapters that your attorney will help you learn. Some of these aspects are explained below.
Filing Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also referred to as "straight" bankruptcy or "ordinary" bankruptcy since it is simple, fast, and commonly used by people. Chapter 7 generally takes about four to six months to complete and usually use liquidation as its main procedure. When you file a chapter 7, it means that a trustee will sell your non-exempt assets to repay your creditors. In California, debtors have to choose two types of filers: System 1 and System 2. Your attorney should help you evaluate both systems and help one that protects your property.
If you are running a business, you and your attorney should evaluate different reasons to file Chapter 7. For instance, if you have some assets and owe taxes, Chapter 7 would be a suitable option. Ideally, if a business does not pay taxes, the tax authority usually goes after the business owner. However, by filing a Chapter 7, liquidation of the property allows the taxing authorities to receive payment, which reduces your liability for the debt that your business owes.
A Chapter 7 filing also reduces the chances of being sued by creditors. Since bankruptcy trustees oversee, approve, and disapprove the distribution of your liquidation proceedings to creditors, there are high chances that your creditors will feel that they've received equitable treatment during bankruptcy.
Finally, Chapter 7 will help you continue running your business since they are some assets that you have to keep and might help you run your business. As mentioned above, since there are third parties (bankruptcy trustees) making decisions on your repayment, creditors will most likely avoid filing litigation on your business once a bankruptcy filing is closed.
At the same time, your bankruptcy attorney can advise you against filing Chapter 7. For instance, if you are a low or a no-asset debtor, you will most likely have to pay all your money to your creditors and require to liquidate any assets that you have. Therefore, if you have any means to repay your debts, it would be a reasonable option rather than lose all your assets through liquidation.
Filing Chapter 13 Bankruptcy
Chapter 13 is also referred to as the "reorganization" bankruptcy or the "wage earner's plan." Unlike Chapter 7 or 13, this plan requires debtors to propose a reorganization plan, which should be approved by the bankruptcy court before a case continues. The debtor's creditors can sometimes object to your proposal, making it necessary to seek help from an experienced bankruptcy attorney.
The reorganization plan is a three-to-five-year plan in which debtors have to make monthly payments on various debts. Every debt's nature determines you should pay off the process regarding which and the extent of the debt.
Your attorney will help you exploit the benefits and disadvantages of filing chapter 13 bankruptcy to determine whether it is the best choice for you. There are several advantages and a few drawbacks that come with Chapter 13 bankruptcy. When it comes to the benefits of using this filing process, Chapter 13 gives you more time to make your payment. Chapter 13 trustees may also be flexible on the terms of your payment. For instance, you may be able to:
- Stretch your debt payment plans
- Reduce the amount you have to pay
- Give up an item of your property that you are making payment on
Further, even though a Chapter 13 bankruptcy can stay on your record for years, it is a small trade-off for your missed debt payment, repossession, default, and lawsuits that can hurt your credit more and make it hard to explain to a future lender.
If you declare Chapter 13, it means that you can rebuild on your credit sooner than ever as long as you honor your repayment plan. Chapter 13 does not eliminate your unsecured debts, unlike chapter 7, but it protects you from your lenders’ aggressive collective actions that can have you lose most of your assets.
Despite the numerous advantages that result from Chapter 13 filing, there are a few drawbacks that come with this kind of bankruptcy. For instance, it takes five years to repay your debts under Chapter 13 plans and must be paid out of your disposable income. Your disposable income comprises any income left over after spending on necessities like medical care, shelter, and food. This means that you will tie any extra cash to your repayment plan for the stipulated time.
Apart from that, you have to deal with a negative impact on your credit for some time. The effect can last up to ten years, and you might lose your credit cards in the process. At the same time, it is impossible to have a mortgage if you don't have one.
Finally, a successful Chapter 13 filing can restrict you from filing Chapter 7 bankruptcy if you filed it within six years. It is also impossible to file Chapter 13 if your previous Chapter 7 or 13 was dismissed within the last 180 days due to court order violation or requested for dismissal after your creditor requested dismissal from the automatic stay.
Filing Chapter 11 Bankruptcy
Chapter 11 bankruptcy is predominantly for businesses that are struggling to meet their expenses like taxes and payroll. It allows businesses to reorganize their debts and continue operating with legal protection against creditors.
Like other bankruptcy Chapters at your disposal, your attorney should help you evaluate the pros and cons of Chapter 11 bankruptcy and help you decide whether it is an ideal option for your business. When it comes to the advantages that Chapter 11 brings to your business, it will have to enjoy the automatic stay, which ceases all collection activities, including proposed and commenced lawsuits.
Chapter 11 also provides a reorganization plan that reduces the amount owed and reduces their interests, helping you pay up your debts with ease. A Chapter 11 filing also places your creditors at ease once they approve your payment plan since they will likely have more than they would in a Chapter 7 filing.
As long as you intend to honor your payment plan, your business will remain operational, and you can have an opportunity to communicate your concerns with your customers, vendors, stakeholders, and suppliers.
On the downside of Chapter 11, your attorney will most likely advise its expensive and costly fees. To make matters worse, the court can reject your repayment proposal if there are unreasonable expectations to return to post-bankruptcy profitability. Additionally, if a debtor reorganization plan is accepted, you will have to seek a court's approval to perform the activities deemed outside your ordinary business.
Help with Shifting from one Bankruptcy Chapter to Another
Sometimes shifting from one bankruptcy chapter to the other might be the right thing to do. In most scenarios, debtors prefer to change from Chapter 13 to Chapter 7. This usually results from loss of job, injury, or illness. Consequently, debtors wishing to surrender a property like a car or a house and cover their debts can decide to shift from Chapter 13 to Chapter 7.
Your bankruptcy attorney's mandate is to help you understand the need to shift from Chapter 13 to 7 or vice versa. There are a few things that you need to learn before you make this decision.
Firstly, you must qualify for Chapter 7 bankruptcy. This means that you must pass the means test needed for a Chapter 7 discharge. In California, you must pass the mean test to be found eligible for Chapter 7 filing.
Once you are proven eligible for Chapter 7, you will be assigned a Chapter 7 bankruptcy trustee. It is also mandatory to set up a meeting with the creditors, commonly known as the 341 hearing. You only need to file additional forms and amend particular schedules after your bankruptcy conversion.
Your attorney should let you know about the risk of liquidation of the property that falls under the schedule that you pick. You would probably select Chapter 13 to protect your property, but Chapter 7 puts it at risk of losing it. Therefore, your attorney should help you understand this and decide on the schedule that retains your most valuable assets.
Help to Negotiate with Creditors
With everything stacked against you, bankruptcy might be your only reason. However, few reasons would want you to avoid bankruptcy altogether. For instance, if you expect a new debt like student loans or end up being disqualified since you have already filed bankruptcy for the past few years. You might also want to avoid the social feelings and stigma that follow once you choose to file.
Fortunately, creditors don't want you to file bankruptcy any more than you do. Sometimes creditors do not receive enough after a bankruptcy filing, and they might be willing to negotiate if given a reason to believe your plan for filing for bankruptcy. They would like to include a combination of:
- Waiving late fees or interest
- Extending your payment periods
- Accepting a lump sum settlement for less than paying up the full balance
Scheduling a meeting with your bankruptcy attorney before you decide to file can help you develop strategies to approach your creditors and negotiate new and better terms that are suitable for your budget. A lawyer will help you keep the bigger picture in mind while working with your creditors to consolidate and renegotiate your debt and find better and new ways to pay them.
Provide Legal Representation
Your bankruptcy attorney should be there to counsel you on the bankruptcy process and help you decide what is right for you. This involves several activities that are necessary for your filing.
Firstly, filing bankruptcy requires you to complete several forms. Most bankruptcy attorneys have specialized software that prepares and files all your paperwork in court. On the other hand, you must provide your financial information like debt information, income, assets, and expenses as part of filling the paperwork. You might also be expected to provide additional forms with the trustees.
Your attorney will ensure that you promptly file all your paperwork and avoid the adverse effects of missing these deadlines. These effects include delay in the filing process or dismissal of your case.
Secondly, a bankruptcy lawyer should always represent you at the hearing. Once you file bankruptcy, you should attend mandatory 341 meetings of creditors and other additional hearings. These hearing include:
- Chapter 7 reaffirmation hearings
- Chapter 13 confirmation hearing
- Any other motion or objection that you have filed, filed by your trustees, or creditors
Finally, having a bankruptcy attorney by your side guarantees the availability of someone who can answer your questions and help you navigate the complex process of filing bankruptcy. Despite the challenges and confusion that comes with filing bankruptcy, having a reasonable attorney brings the measure of comfort and clarity that ensures that it helps you regain your financial footing.
Find a San Diego Bankruptcy Lawyer Near Me
If you are facing financial difficulties and have a large amount of debt, the logistics of paperwork, credit reporting bureaucracy, and collecting agencies can be hard to handle without a bankruptcy attorney. That's why it is strongly recommended to hire a bankruptcy attorney to help you navigate this complicated process with ease.
We at the San Diego Bankruptcy Attorney will meet with you, discuss your financial situation and help you decide whether bankruptcy is right for you. Our lawyers provide legal advice and representation in San Diego and surrounding areas. Call us today at 619-488-6168 and schedule a free non-obligatory consultation.