Bankruptcy Information

Chapter 7 Bankruptcy | Chapter 13 Bankruptcy | Personal Bankruptcy | Business Bankruptcy | Real Estate Foreclosure | Repossession | Creditor Harassment

Personal Bankruptcy Overview

For individuals who have found their debt to become unmanageable, there are two types of Bankruptcy proceedings they may consider. A Chapter 7 proceeding is the more classical type of Bankruptcy proceeding in which the applicant discloses and makes available all assets and rights the applicant may have to the court in exchange for a total discharge of debts. A Chapter 13 proceeding is different from a Chapter 7 proceeding in that all assets are retained by the applicant, rather the applicant proposes that his or her income may be used to fund a plan with monthly payments over an extended period of time in order to pay all or a portion of the applicant’s debts. For more information, read on. There are other types of Bankruptcy proceedings which are much more complex and not addressed here. An interested party should meet with an attorney in order to determine what is best for him or her.

Chapter 7 Proceedings

When faced with an inability to pay debts, an individual is exposed to various collection actions. Creditors who have collateral may seek to repossess their collateral. In some instances repossession ends it all, in others Creditors may continue collection efforts for any left over deficiency if the collateral was insufficient to pay the debt. Creditors who do not have collateral will normally seek to collect through informal means that includes writing letters, assessing late charges, telephone calls, reporting payment history to credit reporting agencies and eventually filing lawsuits. While each of these procedures are distressing, it is when Creditors obtain judgments they gain the ability to actually seize property and garnish wages.

A Judgement Creditor is entitled to use the writ powers of the court to seize property and garnish wages from a Judgment Debtor. There are certain exemptions which a Judgment Debtor may invoke by using judicial procedures. This includes homestead exemptions for one’s personal residence, a limited exemption for furniture, autos, jewelry and tools, and a portion of a Judgment Debtor’s wages which may be exempt.Howwever a Judgment Creditor can seize any value over and above the exemptions. Furthermore, more than one Judgment Creditor may pursue the same Judgment Debtor at the same time. And if a Judgment Creditor seizes some property but there is still money left owing, they can continue to come back until they are paid in full. Judgments are good for ten years and may be renewed for another ten years. The process can become very overwhelming. Judgment Debtors may try to hide assets or put assets in other people’s names, however this process itself is burdensome and can eventually be overcome by an aggressive Judgment Creditor.

Chapter 7 proceedings offer a Judgment Debtor a chance to get a Fresh Start. Simply stated, a Chapter 7 applicant agrees with the court to stop hiding any and all assets by disclosing these assets to the Court. The applicant claims the exemptions to which it is believed he or she is entitled. A Trustee is appointed in order to valuate all of the assets and determine what the proper exemptions are. If all assets are exempt, the Trustee will not seize any assets and the entire debts are discharged. If the Trustee seizes any assets, this property is sold and divided among the creditors in some fair and equitable manner. Any balance is discharged. The effect of a discharge is that the creditors may never again seek to further collect any money from the applicant regardless of what happens in the future. That is the Fresh Start which allows an applicant to get on with his or her life without being pursued by creditors.

I offer it in order to provide a basic understanding of what Chapter 7 is and what Chapter 7 is not. Before making a final decision to file, any interested person should meet with an attorney and fully discuss these procedures. If you wish to schedule an appointment with my office, please feel free to call. I will meet with you personally and provide a detailed overview and analysis of your situation. I will make recommendations based on my professional experience and what I believe is best for you. I do not charge for an initial professional consultation. If you eventually hire my to handle your Bankruptcy proceedings, I will credit that initial consultation fee to the total fee to be charged. While I cannot quote fees without first understanding your full situation, my base fee for a Chapter 7 proceeding is normally $1,500.00.

Chapter 13 Proceedings

A proceeding under Chapter 13 offers an applicant the opportunity to get a fresh start by entering into a long term payment arrangement in order to pay all or a portion of the applicant’s outstanding debts.This differs from a Chapter 7 proceeding in that none of the applicant’s assets are seized and liquidated to pay debts, rather the applicant’s future income becomes part of the bankruptcy estate and is subject to administration by the court. Therefore, unlike a Chapter 7 proceeding where the primary focus is on what property the applicant owns and what exemptions apply, the primary focus in a Chapter 13 proceeding is on the applicant’s income and necessary living expenses. A typical Chapter 13 proceeding lasts three years, but in some cases can last as long as five years. In a Chapter 13 proceeding, the applicant may propose to pay all of the debt off or only a portion of the debt off. During the payment plan, interest and late charge penalties will no longer continue to be added to the outstanding balance unless there is actual collateral for the obligation, and then interest will only accrue on the amount of the debt which is equal to or less than the value of the collateral. If the applicant proposes to pay less than all of the debt, it must be shown that what is being paid represents the best effort of the applicant and what is being paid is more than the creditors would get if the applicant merely filed a Chapter 7 proceedings. The focus is normally on the best effort and often the court closely scrutinizes the applicant’s expenses to ensure they are reasonable.

In the end, the applicant still receives a bankruptcy discharge of any unpaid balance. While there is no specific reason applicant’s elect to file Chapter 13 rather than Chapter 7, there are four situations which often lead one to elect a Chapter 13 over a Chapter 7.

The applicant is behind on house payments and facing foreclosure. When this occurs and the mortgage holder refuses to negotiate a payment arrangement, an applicant can file a Chapter 13 proceeding in which it is proposed that all back payments will be paid up over a 36 month period with interest, while the ongoing payments will start to be made in a timely manner again.

The applicant has non-dischargeable debts which are burdensome in the collection process. Certain debts may be non-dischargeable in a Chapter 7 proceeding. These could include tax obligations, child or spousal support or student loans. There are many other non-dischargeable debts, these are the most common. Wage garnishments could be up to fifty percent of available income leaving an applicant very little to live off of. A Chapter 13 proceeding can halt accruals of interest in many circumstances and result in a payment plan which is more reasonable.

The applicant has property that would be lost in a Chapter 7 proceeding. When filing Chapter 7, the court may seize and sell any assets the applicant owns which are not protected by any exemptions. If this is an asset the applicant is unwilling to forfeit, a Chapter 13 proceeding presents an alternative to pay off an amount at least equal to the value of the non-exempt assets in payments and retain the assets. Again, any plan to pay less than all of the debts requires a showing of best efforts.

The applicant has adequate income to pay the debts, but the contract terms are oppressive. Sometimes an applicant has a debt load which is barely manageable. While the debtor can continue to make the minimum payments, the ongoing accrual of high interest rates and other charges presents a future of years of payments without getting out of debt. A Chapter 13 proceeding at least allows the debtor to stop the accruals of interest and a shorter time to get out of debt.

Again, this is a summary only of a Chapter 13 proceeding. Unlike a Chapter 7 proceeding, this type of case requires a long term plan and discipline. It is not a quick fix. Before you file, it is important to meet with an attorney who has experience and knowledge in both advising you on your options and assisting you through the process. As with Chapter 7 proceedings, I offer a comprehensive consultation in which I will fully review these proceedings with you and discuss your options. I do charge $50.00 for this professional consultation which I will gladly credit towards the fee charged on a Chapter 13 proceeding. While I cannot quote exact fees until I have met and understand the complexities of your case, generally fees range between $3,000.00 to $4,000.00 for employed applicants. Those who own a business or have multiple or complex cases will usually find their fees a bit higher.

Contact Experienced Covina Bankruptcy Attorney Kelly Warren

To discuss your financial or bankruptcy matter with an experienced bankruptcy attorney who is committed to resolving your legal matter, call 626-859-1030 to schedule a confidential consultation with Mr. Warren. If you prefer, you can utilize our intake form and we will contact you to schedule an initial consultation.

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