Interplay Legal Solutions, Inc.
Estate Planning & Debt Relief for Your Peace of Mind
Nikki Hashemi, Esq.
Bankruptcy Services
Carrying some debt is often manageable as long as 'everything stays the same' .... which it never does.
You're not alone if you've ever wondered, "I have a lot of debt, what should I do?"
There are non-bankruptcy options available to repay your debt or, if they have spun out of control, to settle with collection companies. But sometimes, unforeseen circumstances happen such as a huge medical bill, a sudden extended loss of income, ballooning interest rates, tax debts, child support or spousal support payments that are behind, etc., which throw you off the cycle of paying back your credit card debt in good faith.
That's usually when it helps to talk to a lawyer who can explain the last resort options of:
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Chapter 7 Bankruptcy to wipe out your unsecured debt (eg, medical bills, credit card debt, personal loans) or
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Chapter 13 Repayment Plan Bankruptcy to repay your priority debts with bankruptcy protection and repay your unsecured debt only to the extent that you can afford.
Depending on your situation, you may find different solutions available to you. You may also be eligible for a loan modification of your mortgage through the bankruptcy loan modification pilot program or the option to completely wipe out your junior mortgage from your primary residence if you don't have equity.
Having represented hundreds of individuals in debt crises, I've seen the devastating effects of serious debt problems on personal lives, businesses, families and marriages.
However, once you make a decision to reclaim control of your financial life, you can quickly pick yourself up and receive a fresh start.
Chapter 7 Bankruptcy
A Chapter 7 provides debtors with a fresh start by discharging (aka wiping out) most "unsecured" debt existing at the Chapter 7 petition date (i.e. the date the Chapter 7 voluntary petition is filed with the Court), and by allowing the debtor to keep limited amounts of certain exempt assets as permitted under federal/state exemption laws.
Once the Chapter 7 petition is filed, the debtor (or debtors in case of a married couple filing jointly) fall under the proverbial umbrella of the "automatic stay" provision of the Bankruptcy Code - which prevents any creditors from directly contacting the debtor or seeking to collect on listed debt if the Debtor has attorney representation.
There are different types of debt such as:
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secured debt (debt that is secured by some form of collateral - like a car loan, mortgage loan, etc.),
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priority debt such as taxes or court-ordered child/spousal support payments, or
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unsecured debt (debt that is not backed by any collateral - typically personal loans, credit card debt, medical bills, student loans) among others.
Within the 180-day period before the petition filing date, a Chapter 7 debtor must participate in and complete a credit counseling course from a credit counseling agency approved by the US Trustee's office, and file the certification for completion with the bankruptcy petition. These course costs between $25 and $35.
A second debtor education course in financial management must also be taken during the pendency of the case and filed with the court.
A typical Chapter 7 proceeding includes a mandatory and very quick 341(a) Meeting of Creditors, where the assigned Chapter 7 Trustee verifies the debtor's identity, and asks some questions about the voluntary petition, to ensure that there is no fraud or foul play involved.
Similar to other legal proceedings, it's not too difficult to find the court documents for filing a pro se Chapter 7 Bankruptcy petition. In fact, if you click on this link to the United States Bankruptcy Court for the Central District of California, you'll find all sorts of information, local forms, a complete copy of the voluntary petition, and even instructions on how to file your own bankruptcy case.
The critical question however, is what and how much are you putting on the line and what might you end up losing to the Bankruptcy Trustee and eventually to your creditors, by filing your own case? The answer can be devastating, to say the least.
A Chapter 7 Bankruptcy proceeding should only be filed if the final end-result of the case will put you in a better position than what you started off with. For example, if you own assets that cannot be claimed as 'exempt' under the federal and/or state exemption laws, then those assets may be at risk of being liquidated by the Trustee, whose primary job is to ensure that your creditors get a fair share of your nonexempt assets in return for the debt that you owe them.
There are many many more reasons that an improperly prepared or hastily filed Chapter 7 petition can leave you in a bind, and possibly more disappointed than relieved.
That's why it is absolutely critical that you talk to an experienced Bankruptcy attorney about your unique financial situation, and to ensure that filing the Chapter 7 Voluntary Petition is truly in your best interest, assuming that you have exhausted all other means of repaying your creditors in good faith.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy provides relief to individuals who have regular income and is most frequently used by debtors with sufficient monthly disposable income to make some payments to their creditors over time.
Chapter 13 bankruptcy is most beneficial to debtors who have valuable assets like significant equity in a home or car that, if they were to file a Chapter 7, the home or car is likely to be sold for payment to creditors. Often filed to stave off foreclosure, Chapter 13 allows debtors to save their homes and cars, if they can cure any past due payments and continue making monthly payments in a 3 to 5 year plan of repayment.
As with a Chapter 7 case, within the 180-day period before the petition filing date, a Chapter 13 debtor must participate in and complete a credit counseling course from a credit counseling agency approved by the US Trustee's office, and file the certification for completion with the bankruptcy petition. These course cost between $25 and $35.
A second debtor education course in financial management must also be taken during the pendency of the case and filed with the court.
Immediately after filing the Chapter 13 petition, the automatic stay is imposed which bars nearly all actions to collect prepetition (prefiling) debt or exercise any collection rights in any of the debtor's assets.
On or within 14 days of filing the petition, a proposed Chapter 13 plan of repayment must be filed with the bankruptcy court. This plan describes the amount of disposable income the debtor intends to pay toward their creditors over the three or five year plan period.
While there is no means test qualification for a debtor to file a Chapter 13 petition as there is under Chapter 7, a Chapter 13 debtor must complete the means test to determine the amount and duration of the plan.
Also, similar to a Chapter 7, a mandatory 341(a) Meeting of Creditors hearing is held soon after filing, followed by plan confirmation hearings. Debtors who are represented by an attorney need only attend the 341(a) Meeting of Creditors (with attorney presence), but their presence at the confirmation hearing is not mandatory.
Disclaimer
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.
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