Bankruptcy Lawyers in Pasadena, California
It’s common knowledge that bankruptcy is an option, but many people aren’t sure whether it’s appropriate for them or how to enforce their rights once the bankruptcy is filed. This primer, written by a skilled California bankruptcy lawyer, can aid you in understanding the complexities of the US Bankruptcy Code. Don’t forget to get the counsel of a competent bankruptcy attorney before making any decisions about filing for bankruptcy. Let’s find out how a Pasadena bankruptcy attorney can help you fight for what you deserve when it comes to your financial freedom.
- Bankruptcy: What Is It?
- How to File Bankruptcy in Pasadena, CA
- Get a Pasadena Bankruptcy Attorney Now!
Bankruptcy: What Is It?
A person or organization may apply for bankruptcy in federal court to get rid of their outstanding obligations. It is a court order that demonstrates how an insolvent (unable to pay their debts) person or company intends to repay their creditors. Most of a debtor’s pre-bankruptcy debts will be discharged when he or she completes his or her bankruptcy case. In terms of bankruptcy, Chapter 7 is the most prevalent kind, followed by Chapter 13 and Chapter 11. In a nutshell, bankruptcy is a way for debtors to start over and learn from their previous financial errors.
Types of Bankruptcies
A person may petition for bankruptcy in three distinct ways or chapters:
- 7th Chapter
- 11th Chapter
- 13th Chapter
Bankruptcy under Chapter 7
The court automatically sets a temporary hold on your present debts when you apply for Chapter 7 bankruptcy. Creditors will not be able to collect payments, garnish your salary, foreclose on your house, repossess property, evict you, or switch off your utilities as a result of this.
Bankruptcy under Chapter 11
Individuals may declare Chapter 11 bankruptcy, which was originally designed for companies. These are complicated cases that are usually filed by high-earners who have too much debt to qualify for a Chapter 13 bankruptcy.
Bankruptcy under Chapter 13
This is a reorganization for those who have a steady income and can afford to pay off some of their debts under a court-approved repayment plan. The plan can’t be more than five years. The debt is either paid off or dismissed at the conclusion of the bankruptcy plan’s period.
Creditors are handled differently depending on the sort of debt owed to them. These are the debts:
Unsecured debts are liabilities that are not secured by real or personal property. In case of failure, an unsecured creditor cannot seize the borrower’s property. Their only option is to sue. Included in unsecured debts are:
Purchase money is the most prevalent secured debt. You provide the bank a purchase money security interest in the property you buy with the money you borrow. Car loans and mortgages are two instances of secured debt, wherein the car or the house is used as collateral for the loan.
To maintain the property, the filer must keep paying the debt. That doesn’t mean the debt isn’t dismissed, but it does mean the filer doesn’t receive a free vehicle or home.
If you have mortgages, you may maintain them even if you file Chapter 7 bankruptcy. It’s all the same. The personal obligation for a mortgage is dismissed since the Bankruptcy Code does not require reaffirmation. The bank may still foreclose if the filer stops paying their mortgage. The discharge only protects the homeowner from a deficiency judgment after the foreclosure.
If you owe money on cars or personal property, these must be mentioned on Schedule D as well as Schedule A/B. The filer must also inform the court and the creditor of their intentions. Bankruptcy Code provides three options:
- Give up the property (and discharge the debt)
The bank seizes the automobile and discharges the debtor’s responsibility to pay the outstanding loan. This is particularly useful for “upside-down” autos when the loan sum exceeds the car’s value.
On the Statement of Intentions (Official Form 108), the filer merely expresses their plan to surrender a vehicle. This is either after scheduling a pick-up with the filer, obtaining a court order removing the automatic stay and enabling repossession, or after the discharge is entered.
- Redeem the property (and discharge the debt)
Redemption may also be used to get out of an “upside-down” auto loan. In this case, the bank obtains the car’s fair market value in one go. The loan is discharged. Redeeming an automobile involves a lump sum payment to the bank, hence it’s not often utilized. Banks that specialize in “redemption loans” generally charge hefty interest rates.
- Reaffirm the loan and retain the vehicle and loan
A vehicle loan is reaffirmed in around 20% of consumer cases.
When a debtor signs a reaffirmation agreement, they pledge not to discharge the debt. Because reaffirmation may severely reduce the benefits of bankruptcy, either the debtor’s counsel or the bankruptcy court must allow it.
The BAPCPA also included the necessity to execute a reaffirmation agreement to keep a car after bankruptcy. Previously, debtors could “ride through” their auto loans as long as they paid on time. Most, but not all, auto loan lenders will accept a “ride through” if the bankruptcy court rejects the reaffirmation arrangement.
The Bankruptcy Code gives precedence to certain obligations. This is important in asset cases when the trustee pays unsecured creditors.
Priority debts include child support, alimony, and tax bills with no tax liens. Priority unsecured debts are paid first, whereas secured debts are paid by the collateral that secures the obligation.
Priority debts are paid before unsecured creditors in asset cases. Priority debts are nondischargeable in bankruptcy, although not all non-dischargeable debts are classified as a priority.
Bankruptcy does not always remove debt. The following debts are not dischargeable in bankruptcy without the creditor’s involvement:
Some debts are canceled only if the creditor agrees. They are:
- debts accumulated via fraud, such as lying on credit applications,
- debts incurred intentionally just to be discharged in bankruptcy later on
How to File Bankruptcy in Pasadena, CA
The first step is to determine whether bankruptcy is the best choice. The decision to file for bankruptcy should be made carefully and in collaboration with a bankruptcy attorney.
Assess your suitability. A consistent income is required for Chapter 7 bankruptcy and for Chapter 13 bankruptcy.
An example of such documentation is a credit report.
Before filing for Chapter 7 or Chapter 13 bankruptcy, you must complete a court-approved credit counseling course. To file for bankruptcy, you’ll need a certificate of completion.
- Accomplish bankruptcy forms.
Because this paperwork may be lengthy and difficult, many filers engage a qualified bankruptcy attorney to complete them. Please print and sign these documents for the court. Any mistake can result in a bankruptcy dismissal, which you would not want to happen.
Depending on your situation, you may be eligible for a fee waiver or payment plan.
Be mindful of the filing date because the schedule of the other activities in the bankruptcy process depends on this. Your appointed bankruptcy trustee will notify you of your 341 meetings and an automatic stay will be placed on your property.
- Provide all supporting papers to your trustee.
Your trustee will ask for documentation. Otherwise, your bankruptcy won’t be discharged.
Bring a government-issued ID and any other required paperwork to this meeting. Creditors are also welcome to attend but rarely do.
- Confirmation hearings (Chapter 13 bankruptcy and Chapter 11 bankruptcy).
Like a 341 meeting, a confirmation hearing requires you to present a repayment plan to the court. To be effective, the plan must be approved by the court.
- Attend a Debtor Education Class.
Your debts will not be discharged until you’ve completed the debtor education course.
- Get your debts discharged.
A bankruptcy discharge relieves you of obligations and responsibilities accrued before filing. A discharge is a new beginning – the purpose of bankruptcy!
Exemptions from Pasadena Bankruptcy
Exemptions are laws that safeguard a person’s assets from creditors. Almost every state has exemption rules for creditor collections. Even if numerous creditors attempt to collect from a single individual, they can only access so much property.
Creditors may no longer seize the filer’s property following the bankruptcy. The trustee represents the bankruptcy estate and is bound by the claimant’s exemptions.
There are also federal bankruptcy exemptions that are spelled out in the Bankruptcy Code, although states may opt out. Opt-out states restrict filers to state-law exemptions.
Other states let filers choose between state law and federal bankruptcy exemptions. It’s either one or the other, you can’t combine the two. Similar to moving to a different state for bankruptcy exemptions, there is a two-year wait.
Exemptions for property come in many forms and sizes. Some safeguard a specified type of products (e.g. home goods, furniture, or instruments of the trade). Some, but not all, of these exclusions place a cap on the value of a single item in that category. For example, federal bankruptcy exemptions cover up to an accumulated amount of $12,625 in household assets, clothing, appliances, books, animals, crops, or musical instruments. But no single item may be valued at more than $600.
Others safeguard valuables of any worth. Most retirement funds, for example, are fully insured. There is a “wildcard exemption” in certain jurisdictions, and the Bankruptcy Code provides for a “homestead exemption” that protects the filer’s stake in real estate used as a home.
Non-exempt equity is the difference between a property’s worth and the exemption.
Valuation of Property
You now know that all property enters the bankruptcy estate and that exemptions protect some property up to a certain amount. Because the actual worth of an asset is vital in determining whether the trustee can liquidate it, the filer supplies the trustee with a value estimate for all of their assets.
Your home’s value isn’t:
- how much you paid
- who owns it (if you still pay)
- how much a new version sells now
Your property’s value is what someone would pay for it in its current condition.
Assume you paid $1,000 for your sofa 6 years ago. A $1,000 purchase (or possibly more if you financed it and paid interest) is worth only $150 now. That is the current value. Remember, the appraisal is to help the trustee determine whether they can sell the property to recoup monies for the bankruptcy estate.
Property that is totally exempt due to its low value: Neither the trustee nor anyone else may use it to settle the filer’s obligation.
Property worth more than the allowable exemption but not totally exempt: The trustee may sell the property if the value is unprotected. The filer gets the exemption in cash. Filers may sometimes “buy back” nonexempt equity from the trustee to maintain the property.
Exempted property: Nonexempt property is auctioned if there is enough to provide a “meaningful” distribution to unsecured creditors. A “meaningful contribution” is not defined.
Almost everyone has something unprotected, but it’s generally worth less than $500 and too little for the trustee to handle. It is also obvious that most Chapter 7 cases do not distribute property to creditors, meaning most filers retain all they own.
Every personal bankruptcy seeks a discharge.
In certain instances, bankruptcy is a federal court judgment that relieves the filer of their financial obligations.
The bankruptcy discharge clears the way for a new beginning. Once the court grants the discharge, creditors are permanently prevented from collecting the debt. Most unsecured obligations are discharged in Chapter 7. Certain debts cannot be discharged under Chapter 7. They are:
- Recent tax owed
- Alimony and child support
- Student debts that have not defaulted. The borrower must prove in an adversarial procedure that not paying back student loans would cause them and their family undue hardship. Sadly, just 0.1 percent of student loan filers do this. Among those who do, 40% succeed.
After receiving a Chapter 7 discharge, a person cannot file another Chapter 7 petition for at least 8 years. In other words, although it is feasible (and not unusual) to file bankruptcy more than once in a lifetime, different waiting periods apply.
Get a California Bankruptcy Attorney Now!
Concerned about how much it will cost to file bankruptcy? Nervous about how bankruptcy will affect your credit? Whatever is holding you back, it is time to stop worrying and start taking control again. We can help you do just that, put you back in control of your financial future. So, request a free phone consultation now. You have nothing to lose and peace of mind to gain. We make a bankruptcy filing affordable to help you get back on your feet. Talk to one of our reliable bankruptcy attorneys at Pasadena Bankruptcy Law now!