Choosing to declare bankruptcy is not an easy decision considering the importance of your reputation and credit score. However, sometimes it might be the only option you have if you are experiencing financial difficulties, and creditors cannot stop calling and harassing you over the phone because of the debt. The credit industry does not want you to know that filing bankruptcy, whether Chapter 7 or Chapter 13 in California, can halt all debt collection steps and lawsuits if there is any. Instead, they always try to convince you to start a debt repayment plan, which can take even ten years to settle, and they can file a lawsuit against you without thinking about your financial situation.
Filing bankruptcy is an effective way of regaining control of your finances for a fresh start when your debts are due, and the creditors are on your neck. However, there are some legal procedures and things you need to beware of before filing a bankruptcy petition in California. We invite you to reach San Diego Bankruptcy Attorney for any help you may need regarding bankruptcy to halt any harassment and debt collection efforts from your creditors.
An Overview of Bankruptcy
Before entering into debt settlement plans, you should consider whether filing bankruptcy will be useful in your financial situation. Bankruptcy is a legal proceeding through which individuals or organizations who cannot pay their debts can seek relief from the overwhelming debts to halt any creditors’ collection efforts. Although you have the right to file bankruptcy any time you wish, you have to meet specific eligibility requirements for bankruptcy declaration such as:
- Undertake a “means test” – A “means test” is a way of calculating and determining your gross income in your household to know if you qualify to declare bankruptcy as per your financial status
- You have to attend a credit counseling
- Show proof of property/assets ownership, including lands and vehicles
- Show valid identification, for example, driving license, birth certificate, or social security card
Typically, there are two types of bankruptcy options you could be eligible depending on the debt amount you have and assets, that is:
- Chapter 7
- Chapter 13
Chapter 7 bankruptcy allows individuals with overwhelming debts to seek relief from the debts by liquidating their assets to settle debts. Chapter 7, bankruptcy “liquidation,” is ideal for individuals with less income. On the other hand, Chapter 13 bankruptcy, also known as “reorganization” bankruptcy, is suitable for individuals or entities with regular income flow.
For Chapter 13 bankruptcy, you don’t have to liquidate your property like a vehicle or car to pay your creditors. Instead, you can come up with a debt repayment plan to clear your debt over time, usually about five years, while you are holding onto your properties or assets.
These two types of bankruptcy can buy you enough time to reorganize your financial life when you are in overwhelming debt instead of settling your debts with the only penny you have and compromise other crucial aspects of your life. However, creditors will never disclose this information to you because the more you are in debt, the bigger their profits margins, which is their goal. For that matter, you should consult with a reliable bankruptcy attorney like San Diego Bankruptcy Attorney to know the options you have when it comes to declaring bankruptcy to compile the necessary eligibility requirements on time.
What the Credit Industry Does Not Want You to Know About Bankruptcy
Every creditor knows how bankruptcy declarations can alter their efforts of debt collection and lawsuits. Hence, they will try to discourage you from filing bankruptcy so that they can keep harassing you to pay their debts and increase their profit margins over time because of accumulating interests. Therefore, you need to understand the truth about bankruptcy declaration, which will work well in your favor to halt all creditors’ debts collection efforts and any pending lawsuit against you. Here are the things that creditors do not want you to know about bankruptcy:
Legal Declaration of Bankruptcy is an Effective Way to Deal With Overwhelming Debts
Credit industries or creditors will never let you know about your rights to bankruptcy declaration, a legal option you can pursue to seek relief from the debts for a certain period before you come back on your feet financially. There is a stereotype perception that bankruptcy is only for the community’s deadbeats, which is a lie. We all face financial struggles in life at some point, for instance, due to the loss of employment, and in that case, you can consider declaring yourself bankrupt, which is okay.
When you lose your income source due to uncontrollable factors like company downsizing or lay off, you might face a hard time repaying your debts, especially if you have numerous bills to pay. In that case, the legal declaration of bankruptcy can work out in your favor to halt any debt collection efforts. Bankruptcy declaration gives you an “automatic stay” court order, which stops all actions of debts collection by the creditors even if you are facing foreclosure threats. However, the credit industry will never disclose this information to you because their objective is to keep you in debt and earn more profits from your debt interests, which hikes over time.
Bankruptcy Laws Are Not Strict as Many People Assume
Past bankruptcy laws were a little restrictive, but nowadays, they aren’t, and filing bankruptcy is not a hassle as many people think as long as you meet the eligibility requirements of the type of bankruptcy you want to file. However, filing bankruptcy can involve some paperwork and legal procedures you might not be aware of, all this burden will be on your bankruptcy attorney, who will do all the work on your behalf.
Although you can file a bankruptcy petition on your own, doing so without an attorney can be overwhelming and risky because you don’t know which type of bankruptcy will be suitable for your financial situation and the nature of your debts.
You Cannot Receive a Prison Sentence for Failing to Repay Your Debts
A legal declaration of bankruptcy will eliminate most of your debts without having to worry about jail terms for failing to settle the debts. Credit industries will try to frighten you often via messages and calls that you’ll go to jail for failing to pay your debts, but that is just a lie because it's impossible. Bankruptcy laws will discharge you from most debts apart from the following types of debts:
- Student loans funded by the government
- Child support
- Federal tax liens
- Spousal support/Alimony
- Cooperative housing fee
- Some specific type of tax debts
- Debts arising from personal injury cases that you were at-fault
The above type of debts might not be dischargeable through bankruptcy declaration and are the only type of debts that can make you suffer a prison sentence for failing to settle. Otherwise, any other type of debt from non-government creditors cannot make you suffer a prison sentence regardless of the threats you might be facing about imprisonment for failing to settle your debt.
Bankruptcy Declaration Halts Foreclosure Legal Proceedings
Suppose the financial institution or bank that holds your house mortgage starts foreclosure legal proceedings to sell your property/house to settle your debts. In that case, bankruptcy’s automatic stay can stop the foreclosure proceeding temporarily. However, because banks usually have enough resources to file a petition to lift your automatic stay order, they might continue with the foreclosure proceedings if the court finds a reason to lift the automatic stay order. Therefore, it is advisable to file Chapter 13 bankruptcy to reorganize a debt repayment plan when facing foreclosure threats.
You Can Rebuild Your Credit Score Again
Yes, filing bankruptcy affects your credit score negatively, although it is not forever. After filing bankruptcy, you can rebuild your credit score again and be able even to secure loans. Our society has trained us to believe that credit scores define who we are and how our future will become, but that is just an assumption that is not factual. Hence, most people live their life fearing negative credit scores and anything that might diminish their credit score, like filing bankruptcy.
People do not understand that filing bankruptcy does not affect your credit score forever because once your creditors discharge your debts, you can rebuild your credit score again for a fresh start. Because the credit industry aims to keep you in debt for their business growth, they will never tell you that it is possible to rebuild your credit score again after a bankruptcy declaration.
You Will Not Lose Your Property After Bankruptcy Declaration
Another myth creditors will apply to scare you from filing bankruptcy is that you will lose your property once you declare bankruptcy. However, the truth of the matter is that most bankruptcy petitioners can keep all their personal belongings like cars and houses after filing bankruptcy. If you have a regular steady income flow, you can file Chapter 13 bankruptcy and organize with your creditors a debt repayment plan, which can last even for ten years without compromising other essential needs of your life. Even if you file Chapter 7 bankruptcy, you can keep your home as long as you stay current on your house payments and continue making the payment in the future.
You Can Buy a House or Car After Bankruptcy Declaration
A bankruptcy declaration will not affect your plans to buy that dream vehicle or house. Most car dealers work with people in the middle of bankruptcy or emerging from bankruptcy. Your loan interest rates will be high after bankruptcy declaration, but securing an auto loan can improve your credit score. Later, when your credit score improves, you might refinance your loan at a lower interest rate. Similarly, bankruptcy declaration will not alter your plans of securing a house in the future because, after a bankruptcy discharge, you can apply for loans and buy the home of your dreams.
Your Retirement Pension Will be Intact
Most credit industries will not tell you that your pension is protected from garnishment when you file bankruptcy. These credit industries will try to convince you to withdraw money from your retirement accounts to settle debts rather than filing bankruptcy. Credit industries don’t care about your post-retirement life as long as they keep you in debt and keep making profits.
When you declare yourself bankrupt and fail to keep up with your repayment plan for Chapter 13 bankruptcy due to loss of income, your trustee can modify the repayment plan to suit your financial situation. Filing bankruptcy has nothing to do with your retirement money, as your creditor may try to make you believe.
Don’t withdraw your retirement benefits to repay your debts because you might compromise your plans and that special protected status. Instead, filing bankruptcy can buy you enough time to settle your debts without rush while taking care of other essential needs.
Bankruptcy Declaration Force Creditors to Play by Your Rule/Terms
When you declare bankruptcy, immediately an automatic stay court order will protect you from harassment by the creditors and other debt collection efforts against you, which had already begun, if any. Suppose you choose to enter into a debt settlement agreement with your creditor. In that case, you will lose many benefits you would gain after a bankruptcy declaration, for example, the automatic stay court order.
Entering into a debt settlement agreement will allow creditors to continue harassing you via text and email. Furthermore, creditors can still choose to file a lawsuit against you during the debt settlement period regardless of your financial hardships. A bankruptcy declaration gives you control and the ability to determine how to resolve your debts without playing by the credit industry rule and terms.
Not Everyone Will Know That You are Bankrupt
There is a common myth that when you file bankruptcy, everyone will know about it, which is also a lie. Unless you are famous or a politician, people who will know about your bankruptcy filing are your creditors and other people that you choose to disclose this information to like your wife or brother. Although bankruptcy is a public matter, chances of anyone knowing about your bankruptcy filing are very minimal, unless you are under investigation.
Filing Bankruptcy is Not Expensive
Filing bankruptcy is not as expensive as many people assume. Just because you cannot afford to pay your debt doesn’t mean you cannot afford to file a bankruptcy petition if you want to. The fee for filing bankruptcy in California under Chapter 7 is $306 and $281 for Chapter 13 bankruptcy, whether you’re a married couple or one person. California bankruptcy courts are lenient enough to let you pay this money in installment if you cannot afford to pay it in full. With a reliable attorney like San Diego Bankruptcy Attorney, you can be sure of a flat fee without any hidden cost. We are also clear on our services fees and will provide you with a flexible payment plan that will suit you.
You Don’t Have the Right to Settle Your Debt, But You Have the Right to Eliminate it Through Bankruptcy
Several credit industry players use a common tactic for advertising themselves on the radio, saying that you have the right to settle your debt. Credit industries often use this tactic to lure people desperate for debt relief to pay their debts with the only money they have in their savings account. However, you don’t have to settle the debt if you are in a bad situation financially. You have the right to file bankruptcy and eliminate those debts temporarily, if not entirely until your financial status becomes stable to settle the debts without compromising other essential parts of your life.
If you are considering filing bankruptcy, you must be in an overwhelming financial situation, which is just an excellent idea to seek relief from overwhelming debts. Regardless of how credit industries try to make it look like a wrong decision to file bankruptcy, you mustn’t buy their idea because they intend to keep you in debt while your interest rates hike. If you are at a crossroads about whether to file bankruptcy or not, you should consult with a bankruptcy attorney for further guidance to know which type of bankruptcy will be suitable in your case situation.
Find a Bankruptcy Attorney Near Me
If you want to gain control over creditors who keep harassing you on the phone for overdue debts, you should consider filing bankruptcy to gain control over your financial life as well. The credit industry does not want you to know that filing bankruptcy will halt all their debt collection plans against you. We invite you to contact the San Diego Bankruptcy Attorney if you wish to explore options for seeking debt relief through bankruptcy in California. Call our office today at 619-488-6168 to discuss your financial situation with our experienced attorneys for knowledgeable advice on navigating these challenging moments through bankruptcy declaration.