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.