The Bankruptcy Process

Bankruptcy refers to a federal court procedure that enables consumers and businesses to get rid of their outstanding debts and to repay their creditors. Bankruptcies mainly fall under two categories: reorganizations and liquidations. If you can prove that you qualify for bankruptcy, the bankruptcy court will protect you from your creditors. The process of filing for bankruptcy is not only complicated but also emotional. Usually, the process entails more procedures and commitments than most people understand. If you are considering filing for bankruptcy, the San Diego Bankruptcy Attorney can help you to know if it is the right step for you.  Before you file for bankruptcy, it is essential to understand what bankruptcy can do and cannot do for you. 

 

Overview of Bankruptcy

The first step while filing for bankruptcy entails understanding bankruptcy. After gaining understanding, you will be able to know whether bankruptcy can help you out of your financial situation. At times, you may even find that your financial situation does not require you to file for bankruptcy.  When you are considering filing for bankruptcy, you should consider a wide range of factors. First, it is crucial to consider your options. You may choose between the two most common forms of bankruptcies for individuals; chapter 7 bankruptcy and chapter 13 bankruptcy.  If you decide to file for chapter 7 bankruptcy, you may be able to clear most of your debts in a period of three months to six months. However, it is crucial to understand that you may lose some of your personal property. If you choose to file for bankruptcy under chapter 13, you may undergo a more complicated bankruptcy process than chapter 7. You will have to come up with a defined payment plan depending on your income. You may have your debts spread over the next several years. 

 

Eligibility

It is important to note that bankruptcy is not for everyone. It is advisable to consider your financial situation carefully before you finally make a decision. You may find that it is simple to fix your financial challenges with a few changes without filing for bankruptcy. You also have to ensure that you are eligible to file for bankruptcy that you intend to file. To file certain types of bankruptcies under California law, you have to meet certain conditions. For instance, if your income is high enough to pay off your debts, you may not be eligible to file for bankruptcy under chapter 7. On the other hand, if your income is low and you have heavy debts, you may not be able to file for chapter 13 bankruptcy under California law. With low income, you cannot prove that you can honor a repayment plan under chapter 13, making you ineligible for chapter 13 bankruptcy. 

 

What to Expect

When considering bankruptcy, it is essential to understand that some of your debts will remain. For instance, even if you file for bankruptcy, you may still have to pay some debts like child support. You may also have to pay some other debts like tax debts and alimony. It is not possible to wipe out these debts through chapter 7 bankruptcy or Chapter 13 bankruptcy. 

An important aspect when considering bankruptcy is to consider the impact it will have on your property. For instance, figure out what will happen to your home when you file for bankruptcy. For instance, you may relax after filing for bankruptcy because you will not struggle with mortgage payments. However, you should understand that after filing for Chapter 7 bankruptcy, you may lose your house. If you have adequate income to commit to a payment plan, you may file for chapter 13 bankruptcy and include the mortgage payments in the repayment plan. 

What will happen to other property other than your house when you file for bankruptcy? What happens to your property after you file for bankruptcy will depend on whether you had committed the property as collateral. What happens to your property will also depend on the applicable property exemption laws. If you had put up security as collateral for a loan, a creditor might be able to recover the security even after you file for bankruptcy. For instance, if you had put up your vehicle as collateral for a loan, you may lose the car even after filing for bankruptcy. 

Will bankruptcy clear all your credit card debts? If you had provided the wrong information when applying for a credit card, bankruptcy might not be able to cater to the credit card debt. In addition, if you spend beyond your means on the credit card, filing for bankruptcy may not help you wipe out the debts.

After filing for bankruptcy under California law, you should expect to open up on your personal life.  You have to prove in bankruptcy court that you qualify for bankruptcy. Therefore, you have to reveal every aspect of your financial life in court.  Other people may also come to learn about your bankruptcy. If you file for bankruptcy under chapter 7, you may have to surrender some of your assets for sale and pay your creditors. If you file for bankruptcy under chapter 13, you will have to seek approval on how to spend your money over the next few years, even if you are the one who earned money. 

 

Bankruptcy Proceedings

In California and the entire U.S, bankruptcy has a dedicated system of court throughout the whole state. In the United States, every judicial district has its bankruptcy court. On the other hand, every state has at least one judicial district. This means that every state in the United States has a bankruptcy court, and some states have several bankruptcy courts. 

Once you are sure that you intend to file for bankruptcy, you should contact a bankruptcy attorney to guide you through the process. The attorney helps you to gather all the necessary documentation before presenting your bankruptcy case in court.  As the debtor, you will have very little interaction with the bankruptcy judge.  In most cases, most people filing for bankruptcy, especially under chapter 7, do not go to court at all. You may only have to proceed to court if there is an objection to the bankruptcy plan.  If you are filing for Chapter 13 bankruptcy, you may have to appear in court at least once at the bankruptcy plan hearing. You and your bankruptcy attorney may also attend the informal meeting of the creditors. The meeting takes place out of court at the trustee's office. 

Under California bankruptcy law, judges have the legal authority to make binding decisions in bankruptcy cases.  The judges will have the mandate to make bankruptcy eligibility decisions and decide whether to grant a debt discharge. However, most of the bankruptcy proceedings will take place out of court. Legally appointed trustees will carry out the administrative duties in chapter 7, chapter 13, or other bankruptcies.

 

Choosing a Bankruptcy Option

Under California law, the most common types of bankruptcies include chapter 7, chapter 13, chapter 11, chapter 12, and chapter 9 bankruptcies.  However, the typical bankruptcies for which an individual can file are chapter 7 and chapter 13 bankruptcy.

 

Chapter 7 Bankruptcy

This bankruptcy also goes by the name' liquidation in the code'. This is because it entails selling most of your assets in cash or liquidating your assets to pay creditors. However, some limits govern the liquidation of assets per bankruptcy exemptions.  If you file for bankruptcy under chapter 7, you will have minimal non-exempt property. It may be impossible to dispose of some of your assets to pay debts, including your clothes, your vehicle, and the furniture in your home. 

While filing for bankruptcy under chapter 7, there is a difference in how you treat secured debts and unsecured debts.  For secured debt, you will have to make some decisions. You may choose to allow the creditor to repossess the asset used as collateral. You may also choose to continue making debt payments to the creditor even after filing for bankruptcy. You may also choose to pay the creditor a sum of money that is equal to the replacement value of the property used as collateral for the debt. However, it is important to note that you may be able to wipe out some secured debts after filing for Chapter 7 bankruptcy. 

 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy also goes by the name wage earner bankruptcy proceeding. This is because you can only file for this form of bankruptcy if you have adequate income to make monthly loan payments.  If you choose to file for chapter 13 bankruptcy, you will work with the court to come up with a debt repayment plan. You will stick to the debt repayment plan over the next couple of years. The repayment plan and the amount you will have to pay will depend on your financial capability and the amount of debt outstanding.

For you to be eligible to file for chapter 13 bankruptcy, you need to prove that your debt is within the limits of filing.  For instance, the limit for secured debt is $1,010,650, while the limit for unsecured debt is $336,900.  If your debts exceed the set amounts for secured debt and unsecured debt, you may not be able to file for bankruptcy under chapter 13. 

After filing for bankruptcy under chapter 13, you may be able to make payments for your secured debts without losing the property used as collateral. You will be able to keep the property used as collateral, even if you are behind on payments. You do not have to struggle with your past due payments. Instead, you can put the payments into a debt repayment plan and then pay them over several years. 

 

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is the best option for struggling businesses. After filing for bankruptcy under chapter 11, a business can organize its affairs and pay outstanding debts. As an individual, you may opt to file for chapter 11 bankruptcy if you are not able to file for bankruptcy under chapter 13. You may also file for chapter 11 bankruptcy if you own vast non-exemption-exempt properties like multiple homes. However, you should be aware that filing for bankruptcy under chapter 11 can be more time-consuming than filing for bankruptcy under chapter 13. 

 

Chapter 12 Bankruptcy

If most of your debts are arising from a family farm, you may file for chapter 13 bankruptcy under California law.  This form of bankruptcy is almost similar to chapter 13 bankruptcy except for the fact that it is mainly available to people with outstanding debts from family farms. 

 

Automatic Stay

Immediately you file for bankruptcy, the automatic stay will kick in and offer you protection against your creditors and other debt collectors. Once an automatic stay takes effect, you will not have to worry about any lawsuit, which a creditor may have filed against you. You will be safe from collection agencies or any other party seeking payment from you. The automatic stay serves as a lifesaver, especially if you are in trouble and the face of foreclosure or repossession.  What can an automatic stay do for you?

An automatic stay can help keep your utilities running even when you are behind on utility bills payment.  For example, if you are not paying utility bills, you may be at risk of disconnection of your gas, electric service, water service, or telephone service.  However, utility bills may not be adequate to make you file for bankruptcy. They may only form a part of the many debts compelling you to file for bankruptcy. 

An automatic stay may also help to stall an eviction proceeding or to stop the eviction altogether.  However, there were some recent changes in the law. According to the new changes, filing for bankruptcy may not protect you from eviction in some instances. For instance, if the landlord has a court issued a judgment against you for wrongful possession, filing for bankruptcy may not help.  The automatic stay may not be adequate to stop a landlord from evicting you.  Even if the landlord has not initiated eviction proceedings against you, an automatic stay may only help you stay a while longer.

In most cases, courts tend to rule in favor of property owners, especially if it is evident that you are misusing the property you occupy. The court may also favor the landlord if it is evident that you are endangering the property. You may also not have an advantage if it is evident that you are using or selling a controlled substance in the property. 

An automatic stay may also help to stop wage garnishment.  You will be able to take home your entire salary after filing for bankruptcy. Even if you have multiple garnishments aimed at your salary, you will be able to avoid them.

However, the automatic stay will not protect you from tax proceedings from the IRS. An automatic stay will also not protect you from paying child support. If there is a lawsuit against you aimed at establishing paternity, an automatic stay will not protect you from the lawsuit. If you had acquired a loan against your pension, an automatic stay would not be able to protect you from salary garnishment to make payments to your pension.

 

Multiple Bankruptcy Filings

If you file for bankruptcy multiple times, the automatic stay may apply for a shorter period. For instance, if you had filed for an automatic stay the previous year, your automatic stay for the current timing may only apply for 30 days. You can only extend the automatic stay if you, your trustee, or the creditor asserts that you filed for the current bankruptcy in good faith and requests for continuation of the automatic stay. 

 

Removing an Automatic Stay

 Can a creditor be able to get around an automatic stay? Yes, a creditor can navigate around an automatic stay. The creditor may submit a request in court for lifting the injunction. The creditor strives to prove in court that the automatic stay is not serving its purpose and should be lifted. For instance, you may have filed for bankruptcy a day prior to eviction from a property. The landlord can go to court and assert that you only filed for bankruptcy to avoid making payments but not in good faith.  Upon the removal of an automatic stay, you will have no option but to pay the rent that you owe.

The bankruptcy process is complicated and lengthy. You have to prove that you are eligible for bankruptcy. You also have to choose the idea bankruptcy option knowing too well that the choice you make will have implications. By working through a bankruptcy attorney, you can easily navigate your way in the bankruptcy process. The attorney will assess your financial situation and advise you on whether to file for bankruptcy under chapter 7 or chapter 13, for instance. 

 

Contact a San Diego Bankruptcy Attorney near Me

If you are planning to file for bankruptcy, it is important to work with an attorney from the start. At San Diego Bankruptcy Attorney, we are committed to helping clients file for bankruptcy. Contact us at 619-488-6168 and speak to one of our attorneys today.  

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