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CONSUMER BANKRUPTCY
Consumer debt is debt primarily for personal, family and household purchases. The most common bankruptcy options for debtors with such debt are either a Chapter 7 liquidation case or a Chapter 13 reorganization case.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is otherwise known as a 'liquidation' case. A debtor must qualify based in part on past income before being entitled to file a Chapter 7 bankruptcy. The Chapter 7 bankruptcy process in general requires a disclosure of all assets and all debt in order to "discharge" unsecured debt such as personal loans and credit card obligations. In addition, the debtor will be expected to make decisions regarding what assets (if any) she may wish to claim as exempt. If assets are secured by a loan (eg. Automobile or Home loans) the debtor may keep the property if they are or become current on the payments and, the equity, if any, can be claimed as exempt. Nonexempt property may be required to be turned over to a Chapter 7 trustee who is charged with 'liquidating' the property and distributing the proceeds to your creditors.
What is Chapter 13 Bankruptcy?
A debtor must meet the criteria of being a 'wage earner' or a debtor with a regular income in order to qualify to file a Chapter 13 bankruptcy. The essential part of a Chapter 13 bankruptcy is the Plan to reorganize ones finances. Thus, an individual with regular income whose debt falls within the required guidelines may create a Plan to repay creditors all or a portion of the outstanding debt over a period of time (generally three to five years). The debtor must commit to paying a portion of their future income to the Chapter 13 trustee who then distributes the payments to the creditors during the life of the Plan. Upon the completion of the plan the balance of the scheduled debt will be discharged.
Chapter 13 bankruptcy further offers a debtor the ability repay amounts due that are in arrears to a secured lender during the plan period. Thus, a debtor who has not been able to pay her mortgage payments the past few months, may pay, if able, those amounts back through a confirmed plan of 3 to 5 years. In addition, a debtor may be able to remove (strip) second and third mortgages or loans that are secured by their home if the home has significantly decreased in value.
Do you need a bankruptcy lawyer to file a Chapter 7 or Chapter 13 bankruptcy?
A bankruptcy attorney will assist the debtor in gathering all the necessary information for the bankruptcy petition, identifying and claiming exemptions for property, attending the meeting of creditors which each debtor must attend, and in the case of a chapter 13 bankruptcy, prepare the Plan and attend the hearing to approve that plan. Although you are not required to use a bankruptcy lawyer, it is advisable when a debtor has significant debt, property which they would like to keep, and in circumstances where the bankruptcy involves matters of valuation, liens or ownership. Attorneys specializing in bankruptcy have significant education and experience particular to bankruptcy that is recognized by the State Bar of California.
Offering legal services from Woodland Hills, Encino and Ventura to Beverly Hills, Santa Monica and all communities surrounding the greater Los Angeles area.
"We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code." 11 USC §541
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