WHEN no other means of debt relief are available, filing for bankruptcy may be the only way to get out of debt for most people. The good news is that the old stigma associated with filing bankruptcy no longer really exists and most people who file bankruptcy usually rebuild credit very successfully in only 2-3 years. Of course, this doesn’t mean that you should take the decision to file lightly. Filing bankruptcy is still a very serious decision and is one that must be made with the expert assistance of a knowledgeable and experienced attorney. When done correctly, however, it could be the best decision you ever made to turn a hopeless situation around.
There are 2 basic types of bankruptcy for individuals. Chapter 7 bankruptcy allows you discharge all outstanding debts that you can no longer pay with the exception of certain types of debts such as student loans, taxes and child support. The process begins by filing a "petition for relief" with the bankruptcy court. Once the petition is filed, creditors are automatically prohibited from pursuing or continuing any legal action against the debtor or the debtor’s property unless they get permission from the court. Thus, collection calls, lawsuits, wage garnishments, repossessions and foreclosure are stopped immediately.
In Chapter 7, secured debts such as mortgages, car loans, and debts for appliances, furniture and jewelry can be kept if your intention is to keep the collateral or security for the debt. If you are no longer interested in keeping the collateral (example: a car), you may surrender it to the creditor and owe nothing. The Chapter 7 trustee (the person appointed by the bankruptcy court to sell non-exempt assets) will examine the debtor by asking a few questions and no appearance before the judge is necessary. The examination is usually brief and uneventful. Creditors may show up at the examination but this is usually rare. Most Chapter 7 cases are no-asset cases and the debtor keeps everything including the family home, vehicles, bank accounts, retirement plans, etc. Thus, it is not as difficult or complicated as some people may think.
Chapter 13, on the other hand, allows you to pay back creditors, partially or fully, over a 3-5 year period under court supervision. For people who are behind in mortgage payments, filing for Chapter 13 is also a way to stop foreclosure because delinquent mortgage payments can be included in the repayment plan. The debtor’s attorney puts together a Chapter 13 plan based on the debtor’s income and expenses at the time of filing. The plan proposes a payment of a fixed amount based on the debtor’s surplus income and the plan is subject to court approval. Creditors may object to confirmation of the Chapter 13 plan based on certain grounds but once the Court approves the proposed plan, it becomes final and creditors must accept it, whether they like it or not. Thus, this could be a way for you to pay creditors on your terms instead of being forced to pay more than you can afford.
Which chapter is appropriate for your situation will depend on the facts of your case, the nature of your debts and your objective in filing. For this reason, do NOT hire an attorney who is not experienced in handling both Chapter 7 and Chapter 13 cases if you are unsure about which type of bankruptcy to file.
If you are struggling with debt problems and would like to know if bankruptcy is advisable for your situation, let us help you understand this process so that you can make an informed decision. For a free consultation, you can call my office at Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
( Published on August 26, 2009 in Asian Journal Los Angeles p. B3 )
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