Bankruptcy is a Tool for San Diego Area Families Looking to Start Anew

Seven years on from the economic crash of 2008, many San Diego area families are still struggling to cope with overwhelming debt and financial obligations. Layoffs, reduced work hours, hospital bills, and the lingering effects of the housing market crash are all factors that can leave one with one’s back to the wall financially. Fortunately, that law has put in place a mechanism to start fresh in terms of debt – bankruptcy. The purpose of the article is to provide San Diegans with information about bankruptcy.  Because there are many myths floating around about bankruptcy, it is important to educate oneself about the subject. For individuals considering bankruptcy, it is wise to speak with an experienced San Diego bankruptcy attorney.

Debunking Myths About Bankruptcy in California

Unfortunately, for individuals and families who might otherwise benefit from bankruptcy, there exists the preconception that one exits the process with zero assets. This is simply not true. In Chapter 7 Bankruptcy, for example, there are many exemptions allowing individuals to keep most, and in some cases all, of their belongings. To say that something is “exempt” from the bankruptcy process is to say that it is excluded from the process. The state of California realizes that it is difficult, if not impossible, to start fresh financially without a car, home, and furniture. As such, the state allows for generous real and property exemptions to ensure that Californians who elect to go through the bankruptcy process are in a genuine position to regroup and find their way to better financial days. Keeping certain real and property items exempt from creditors seeking to reach assets in bankruptcy court may not please creditors, but it does serve the public policy purpose of helping California individuals and families get the fresh financial start they need.

A second myth surrounding bankruptcy is that it is the tool of the weak – that bankruptcy is a way deadbeats and bums cheat the system. This myth – perpetuated by creditors – is simply not true. Sadly, it is this very stigma that prevents deserving California individuals and families from even exploring the possibility of getting the financial fresh start they need. The truth is that every year tens of thousands of people file for bankruptcy in San Diego County alone. These people are not deadbeats or bums – they are ordinary folks who have fallen on hard times financially. Like them, you should not feel that bankruptcy is somehow un-American. California law would not allow for bankruptcy if that was the case.

Finally, there is a misperception that bankruptcy is an arduous, endless process.  This, like the myths debunked above, is not true. Bankruptcy does not have to be difficult or painful. With the help of a skilled and experienced California bankruptcy attorney, Californians in need of a fresh financial start can smoothly navigate the procedures and paperwork required to file for bankruptcy. If you are in financial distress, don’t hesitate to contact a skilled and experienced San Diego bankruptcy attorney.

Bankruptcy Law Basics

Bankruptcy is a legal proceeding in which an individual or company experiencing financial trouble can get a fresh start. When bankruptcy is filed, it immediately stops all creditors from seeking out debt collection from that person or company until the bankruptcy proceedings have concluded. When an individual files bankruptcy, it will likely discharge most, if not all, of his debt. Filing bankruptcy will not completely discharge mortgage payment obligations, but it will halt foreclosure proceedings to allow a person to catch up on late payments. Bankruptcy will also prevent repossession of vehicles, or obligate a creditor to return property after it has been repossessed. Bankruptcy also stops wage garnishment, harassment from debt collectors, restores or stops utility services from terminating, and allows a person to challenge creditors claiming that he or she owes more than he or she actually does.

Financial Problems Bankruptcy Cannot Cure

Filing Bankruptcy does not discharge all financial obligations, and it is not always the right solution for everyone in debt. Bankruptcy filing will not:

  • Eliminate the rights of secured creditors. A secured creditor is a creditor who has taken a lien on property as collateral for a loan. The most common examples are home mortgage loans or car loans. You can, however, use the bankruptcy proceedings to force secured creditors to accept payments over a certain period of time. You will not be able to keep the collateral unless you continue to make an effort to pay off the debt.
  • Discharge child support, alimony payments, student loans, criminal fines, court restitution orders, and some tax payments. See a full list of non-dischargeable debt in California here.
  • Provide protection to those that cosigned your loans. The cosigner may still be obligated to repay all or part of the loan. Debts that arise after bankruptcy is filed will be discharged.

Types of Individual Bankruptcy Filings

Chapter 7 – You file a petition to ask the court to discharge your debts. In this type of bankruptcy, you usually must give up the majority of your property, except property deemed exempt. Generally, almost all property is considered exempt. If you want to keep your house or car and are behind on those payments, Chapter 7 is probably not the ideal bankruptcy filing. In a Chapter 7 filing, the right of mortgage holders or car loan creditors to repossess those items to cover your debt is not terminated.

Chapter 13 – An individual files a plan to demonstrate how you will pay off certain debts over a three to five year period. In this type of bankruptcy filing, you are allowed to keep your property, including your home and your car, as long as you can make the specified payments to creditors. Chapter 13 bankruptcy is right for you if:

  • You own your home and are behind on payments
  • You are behind on debt payments, but if given time can get back on track
  • Have property which is not exempt, but you have the money to pay creditors over time

If you choose to file for Chapter 13 Bankruptcy, you will need to have enough monthly income to make the specified payments, as well as your daily necessities.

If you are experiencing financial trouble, contact the experienced attorneys at the Leslie Legal Group. We can help determine whether filing bankruptcy will be the right solution for you.

Chapter 7 Bankruptcy: The Basics

Today’s economic climate has caused many families and individuals to feel trapped by debt and struggling to make ends meet. Whether you have been laid off, accumulated medical debt, or accumulated credit card debt, debt can make life incredibly difficult and stressful. Bankruptcy may be an option for you to start fresh with your finances. Are you prepared to take control of your finances and free yourself from the harassment of debt collectors? If so, then filing a Chapter 7 Bankruptcy may be right for you.

A Chapter 7 Bankruptcy allows you to wipe out most debt and start fresh. This type of bankruptcy is a liquidation of your assets by a trustee. The trustee then sells all of your non-exempt assets. The proceeds of the liquidation are distributed to your creditors in satisfaction of your debt. The trustee will take a commission for overseeing the liquidation and asset distribution. Certain debts are classified as non-dischargeable. This type of debt includes student loans, fraudulent debts, alimony, child support, any fines for legal violations, tax debts, debt for personal injury or death caused by driving under the influence of alcohol or controlled substance, or any debt you forget to list in your bankruptcy filing. You will be responsible for paying these debts in full.

The filing of a Chapter 7 Bankruptcy does not require you to surrender all of your assets. Generally, you may keep your home, car, clothing, furniture, employer retirement plans, etc. An experienced attorney can help you determine which assets you must turn over and which you may keep.

If you plan to file a Chapter 7 bankruptcy, you must pass the California means test. This test applies to higher income bankruptcy filers, which means that if your income is below the required median, you will be exempt from this test. Other exemptions from the California means test include those whose debts are primarily consumer and disabled veterans who incurred debt while actively serving in the military. In order to be exempt from the means test, for example, an individual in a one-person household must have an income below $47,798.00.

The basic process of filing a Chapter 7 Bankruptcy is fairly straightforward and consistent. First, you must complete a bankruptcy petition, provide all necessary documentation, and complete a credit counseling course. After these initial requirements, you can then file a Chapter 7 bankruptcy. Approximately one month after filing for a Chapter 7, a Meeting of Creditors is held, where a trustee is appointed. Prior to the conclusion of your bankruptcy proceedings, you must also take a second course in financial management. After the Meeting of Creditors, unless there are any outstanding problems with your filing, no further action will be required from you. Approximately two months following the Meeting of Creditors, you can expect a court order discharging your debt.

Contact an Experienced Attorney

If you are considering Chapter 7 Bankruptcy as a means to rid yourself of crippling debt and get a financial fresh start, the first step is to consult an attorney to ensure this is the correct path for you. The knowledgeable attorneys at the Leslie Legal Group are here to help guide you through every step of the bankruptcy filing process. Contact us today for a consultation.