Overview

There are various kinds of Bankruptcies and benefits for those seeking relief from debt. Debtors, however, often feel guilty or ashamed for the filing of a Bankruptcy petition. It should not be the case. Professionals and giant corporations do the same thing. Getting a fresh start, free from the shackles of debt, is a tradition that has a long moral and legal standing as suggested by a Los Angeles bankruptcy lawyer.

In Deuteronomy (15:1-2), it is written that:

Debtors’ prisons are history. Today, federal laws afford the unfortunate way to get a fresh start or a breather to reorganize. While not all debts are dischargeable, the great majority is. If a debt is discharged, you do not have to pay it at all!

Dischargeability

Examples of debts you will probably have to pay are U.S.-guaranteed student loans (there are exceptions) and child support. Such debt is called “non-dischargeable.” A secured portion of a home or automobile loan is nondischargeable. Generally, you must continue to make payments on the secured debt or return the security (the car, etc.) The unsecured portion of the loan is dischargeable.

On the other hand, all credit card debts or signature loans, without any collateral, are normally dischargeable. An orange county bankruptcy attorney rightly mentioned that the determination of dischargeability is a legal issue and should be evaluated on a case-by-case basis by an experienced bankruptcy attorney.

For example, your income taxes, assessed over three years ago may be dischargeable depending upon the facts of your case. An employer’s employment taxes are usually non-dischargeable. Bankruptcy, however, can force the taxing authorities to accept a three to five-year payment plan even though it has demanded immediate payment before the bankruptcy. We at A1 Accident Lawyer offer you a free consultation with an Anaheim bankruptcy attorney. It will give you a better idea about whether or not your debt problem will be solved by filing for bankruptcy or debt reorganization. Because bankruptcy will show on your credit report and will make it difficult for you to obtain credit from some lenders, a bankruptcy attorney can provide additional consultation on re-establishing your credit.

Will you have to give up your house or car when you file bankruptcy? Typically no, for example, a debtor may keep his/her residence, with a homestead, which is $50,000 for single debtors, and $75,000 for married debtors. An experienced Los Angeles bankruptcy lawyer pointed out that there are many categories of exempt properties including life insurance, disability and health insurance benefits, pensions etc. The key is to fill out the bankruptcy papers correctly to ensure that you can claim the exemptions properly. Many individual debtors take advantage of laws, which allow them to keep most or all of the property they own. The more you own of value, the greater the chance that some of your property will be taken by the Bankruptcy Trustee and sold to pay off your creditors. Our bankruptcy attorney will be able to evaluate your case and advise you regarding what property can be protected.

The minute you file bankruptcy under any chapter, all of the civil lawsuits, collection actions, threatening phone calls and letters, wage garnishments, levies, evictions, and foreclosures against you come to an immediate halt. This federal protective order is referred to as the “AUTOMATIC STAY.” Any creditor continuing collection action against you is breaking the law and will be forced to stop.

Differences in Bankruptcy Laws

For some debtors, Chapter 7 is not as advisable as Chapter 13, debt reorganization. Chapter 13 is an alternative to Chapter 7.

In Chapter 13, a debtor has the same protection under the AUTOMATIC STAY as a Chapter 7 debtor. However, within 15 days after the debtor filed the petition must file a repayment plan. A debtor can pay from 1% to 100% of total unsecured debts (depending on the disposable income), without any interest. For prepetition secured debts (like a mortgage,) however, a debtor has to pay 100% plus 12% interest. The plan is reviewed by the Trustee and must be approved by the judge. Chapter 13 is only available to Individuals (not corporations) having a regular income and with debts not exceeding $1,000,000 ($250,000 in unsecured debts and $750,000 in secured debts).

Chapter 11 is the reorganization chapter, which is most commonly used by corporations or individuals that do not wish to file Chapter 7 and owe too much debt to qualify for Chapter 13. In Chapter 11, the creditors vote to accept or reject a proposed plan of reorganization. The Court must also approve the plan. An Anaheim bankruptcy attorney states that the advantage of Chapter 11 is that you can delay payment of many pre-petition debts until a repayment plan is approved. Such approval may take more than six months after the case is filed. Chapter 11 is expensive and requires intensive reporting and legal procedures.

Nevertheless, when a debtor is in business, faced with a lawsuit or a large IRS levy, Chapter 11 might be a possible solution. Before a decision is made to undertake a Chapter 11 bankruptcy, the debtor must talk to an experienced attorney in Chapter 11. Our attorney is available to consult with you regarding the advantages and possible disadvantages of filing under Chapter 11.

Please see the following flow-chart of Chapter 7 and Chapter 13 to give you a general idea regarding the procedure of bankruptcy and its timelines.

If you need a fresh start and are considering Bankruptcy, please contact one of our experienced orange county bankruptcy attorney for a free evaluation of your claim.