Chapter 7 Bankruptcy in California: Should I File?
Even with the best of intentions, it can be difficult to break the cycle of debt.
Bankruptcy is a legal tool people can use to restructure their finances, but it often carries an undeserved stigma. Bankruptcy remains misunderstood by many people even though 18,817 bankruptcy petitions have been filed this year in California as of June 2021.
If you’re struggling with your bills, you are not alone. Especially as we deal with the ongoing financial issues brought on by the coronavirus pandemic.
If you’re ready to get your bills under control, a free consultation with a bankruptcy attorney is a smart first step. Filing bankruptcy can also help set you up for future financial success. A good bankruptcy attorney wants to see you succeed after your current debts are discharged or reaffirmed.
You shouldn’t feel pressured to file for bankruptcy unless it is the right choice for you or your family to restore your financial security.
The process for filing for bankruptcy in California falls under federal law and it is designed to help you get a fresh start with your creditors. But some state laws do affect the property you’re allowed to keep as you move through the bankruptcy process.
There are several different types of bankruptcy, called chapters, but today we’re going to focus on filing Chapter 7 bankruptcy in California since this chapter is the one most favored by people.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the simplest and most common form of bankruptcy. Almost all filers can expect to have their debts forgiven through the process. Most people can also expect to keep essential property and items needed to live and go to work.
Because Chapter 7 doesn’t have a repayment plan for getting caught up on your mortgage or car payment, you’ll want to speak to a local Riverside bankruptcy attorney about how to handle your house and car as part of your bankruptcy proceedings.
And for most filers, the Chapter 7 process can be completed in approximately 6 months, and you can begin wisely rebuilding your credit.
When Should You Consider Filing Chapter 7 Bankruptcy?
The cycle of debt can take a toll on both your financial and emotional well-being. If you are struggling with paying your bills, filing for Chapter 7 bankruptcy might be the right choice for you to get a fresh start.
If you can answer “yes” to any of these five questions, you should consider speaking to an attorney who specializes in bankruptcy
- Do your debts cause issues with your quality of life – like your ability to get a good night’s sleep or causing arguments with a spouse or partner?
- Do your debts total more than half your annual income?
- Would it take more than five years to pay off your debt even if you took extreme measures?
- Do you feel like you have no money left over after you cover the necessities?
- Do you have a lower median income than most people in your state?
Does Filing for Chapter 7 in Riverside Erase All My Debts?
Filing for Chapter 7 bankruptcy can wipe out a lot of common debts, but not all debts. You can get relief from past due credit cards, medical bills, personal bills, and even utility bills. If you’re willing to give up your car or house, even a debt secured by collateral, can be discharged.
If you’re behind on child support or have a tax debt, you can’t get those sorts of debts discharged in bankruptcy.
For a lot of people, their student loans are a concern. It isn’t easy to have your student loan debt discharged in bankruptcy. In fact, it requires a separate lawsuit against the student loan company. But for some, the amount of debts that can be forgiven frees up enough money that student loan debt can be managed.
What Happens to My Credit If I File Chapter 7 Bankruptcy?
The truth is your credit score may not be in the best shape right now and filing for bankruptcy can affect different people’s scores differently. You should anticipate companies closing your credit accounts after they are notified of your filing status. Expect to live without credit while you go through the Chapter 7 process. After your debts are forgiven, you will be able to begin rebuilding your credit and increasing your credit score.
Will I Qualify to File Chapter 7?
To file Chapter 7 bankruptcy, you’ll have to pass a means test. You cannot have filed another Chapter 7 within the past eight years or a Chapter 13 in the last six years.
You cannot have filed another bankruptcy petition in the previous 180 days that was dismissed because you failed to appear or to comply with the court’s orders or that you voluntarily dismissed because your creditors tried to recover property they had a lien against.
How Chapter 7 Bankruptcy Works
Chapter 7 is called a liquidation chapter because any nonexempt assets can be liquidated by a court appointed trustee to repay your creditors.
This rarely happens – around 95% of all Chapter 7 cases filed do not have any assets which are not protected by state exemption laws.
When a Chapter 7 is filed, you are protected by an injunction called an automatic stay. Creditors can no longer contact you seeking repayment, nor can they:
- Foreclose on your house
- Have your utilities disconnected
- Repossess property
- Garnish your wages
Chapter 7 bankruptcy can be used by individuals, businesses, and sole proprietors to wipe away unsecured debts. Once these liabilities are removed, you will have the freedom to rebuild your credit.
How Can I Keep My Property When Filing Bankruptcy in California?
For most people, you won’t lose everything you own if you file for bankruptcy. Using the California state exemptions will help you maximize what you’ll be able to keep after your discharge.
If your property is protected by an exemption, you’ll get to keep it. If you file with your spouse or domestic partner, you typically cannot double exemption amounts.
California state law has two lists of assets that you can protect in your bankruptcy. The trick is deciding which list works best for you since you can’t pick some from one list and some from the other. You need to have a full understanding of the list that works best for you and your assets you want to retain. Only a qualified bankruptcy attorney can advise which set of exemptions is right for you
Can I File for Bankruptcy on My Own?
While it is possible to file for bankruptcy without the help of a professional, it can be a tricky proposition. Even in cases that seem straightforward, complications can arise. Especially if you have any questions about California’s exemptions.
Some creditors may attempt to contact you after you have filed, or they may oppose your filing. It is also easy for laypeople to make mistakes in their filings, which can result in your discharge being denied or the trustee selling your property.
To protect your interests, it is recommended that you hire a certified specialist in bankruptcy.
Our Riverside office is run by attorney Frank X. Ruggier, an experienced litigator who is knowledgeable in both California and federal bankruptcy codes.
3 Benefits of Working with a Bankruptcy Attorney
There are many benefits to working with a Riverside bankruptcy attorney; here are 3 you may not have considered:
You Won’t Be Lost in the Shuffle
Residents of Riverside and the Inland Empire know that in Southern California, many things tend to revolve around Los Angeles. You may even assume that using a law firm from “the city” will improve your case, but that isn’t always so.
Many metropolitan firms have dozens of lawyers. These lawyers take on numerous clients, and a team of paralegals will assist them as they prepare cases.
Unfortunately, clients sometimes feel lost in the shuffle of these giant practices. You may end up speaking to a different person each time you call the office or relying on paralegals for updates.
We are a boutique law firm. Our lawyers are intimately familiar with each case they take on; you will never have to speak to someone who is trying to learn about your case from their notes while they stall you on the phone.
Familiarity With Local Trustees
A trustee is appointed to each Chapter 7 bankruptcy case. Your trustee is assigned based on the division in which your case is filed. We have a working relationship with many trustees from the Central District of California – Riverside Division panel. In fact, Larry D. Simons is a Chapter 7 trustee assigned to the Riverside division.
Occasionally, disputes arise during the bankruptcy process. Your lawyers may need to negotiate – or even file litigation – to settle these matters. If your lawyer has a previous relationship with your trustee, it could help to resolve disputes more quickly.
Assistance with Your Finances
Our work is not strictly limited to resolving your Chapter 7 bankruptcy. At the Law Offices of Larry Simons, we believe in setting our clients up for future success.
We will review your entire financial situation and make recommendations that can help you going forward. We will make suggestions that can keep you from falling back into debt.
Most people find having a bankruptcy specialist on their side makes the process a lot easier. A bankruptcy attorney who knows both federal and state laws that will affect your bankruptcy can assist you in determining the most appropriate chapter to file, when the right time is to file, and help you select the right exemption scheme to protect as much of your property as possible.
This trusted professional will also make sure your filings are complete and accurate and they’ll let you know when you can stop paying on the debts that will ultimately be discharged in your bankruptcy case.
Bankruptcy is a legal and legitimate tool to clear your debts and start fresh with a clean slate. Schedule a free consultation in our Riverside office today.
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