Let’s face it – no one actually wants to file bankruptcy. Consumer bankruptcy is properly seen as almost the last resort for financially beleaguered individuals and couples. However – bankruptcy shouldn’t be seen as the very last resort.
Consumers turn to bankruptcy for a lot of reasons.
Did you buy too much using credit cards? Are those bills coming due without the money to repay them
High rates can make repayment nearly impossible.
Did you get sick and end up with huge medical bills?
Without health insurance, or with low-reimbursement health insurance, even a short hospital stay can result in catastrophic fees – impossible for the average person to ever repay.
Did you get behind in paying your taxes?
The Internal Revenue Service and the California Franchise Tax Board are debt collection experts. If you owe a state or Federal entity money, rest assured, the agency will be collecting eventually.
If the particular tax debt qualifies, we may be able to help you discharge the taxes in full.
Even if you can’t discharge the tax debt, we may be able to help you set up a 3 or 5 year plan to repay with either no (or minimal interest).
Has your car been repossessed?
In certain cases, we may be able to help you get the car back and repay the delinquent amounts.
Is your car worth less than what you owe?
We have strategies that might allow you to save thousands of dollars on repaying your car loan.
- Are you facing eviction?
Although it is not a long-term solution, a bankruptcy might allow you to stay in your rented property longer before any eviction proceedings can be completed.
Types of Consumer Bankruptcies
For most consumer bankruptcies, there are really only two options: Chapter 7 and Chapter 13.
- Chapter 7 is the bankruptcy that provides the most complete and immediate relief.
- We help you complete your bankruptcy forms (or ‘schedules‘) and submit them to the Court.
- You typically have one meeting with the bankruptcy trustee (the 341 Meeting of Creditors) about 6 weeks after filing the case. Your bankruptcy attorney participates in that meeting with you.
- If everything is done properly, the Court discharges you from responsibility for your debt as soon as the applicable deadlines pass (generally about 6 weeks after your 341 Meeting is complete).
- If you qualify, your outstanding debt can be fully discharged in the space of about 4 months.
In order to qualify for Chapter 7 bankruptcy, your household gross income must be below the “median income” for your state. It is critically important for your bankruptcy attorney to make sure you actually qualify for a Chapter 7 before filing – otherwise you may be stuck in a bankruptcy that you cannot afford to complete.
In order to qualify for Chapter 7, your household income must be below the “median income” for your state. The “median income” changes every year in May.
As of May 15, 2021, the median annual income in California for households with
- 1 earner – $62,938 / year [$5,245 / monthly]
- 2 earners – $83,435 / year [$6,953 / monthly]
- 3 earners – $92,735 / year [$7,728 / monthly]
Although these are the basic numbers, if your income is above the “median income” then there are other factors that a good bankruptcy can use to help you qualify for Chapter 7.
Another important consideration when considering Chapter 7 bankruptcy is your “property.” Your property includes all of your assets, both real property and personal property (like bank accounts, savings, collectables, cars, etc.)
If you file a Chapter 7, the bankruptcy trustee has a right to seize and sell all of your ‘unexempt‘ property and use the funds to pay your creditors.
Because of the availability of ‘exemptions’ a good bankruptcy attorney can help ensure that you do not lose property if you file for Chapter 7 relief.
If you can’t qualify for Chapter 7, or you have assets you want to try and protect, then your next best option is a Chapter 13.
A Chapter 13 bankruptcy allows you and your attorney to develop a repayment plan that will be approved by the bankruptcy court and should allow you to only pay back a fraction of your debt.
Chapter 13 bankruptcies are also extremely useful for purposes other than discharging debt. Because of the rules governing Chapter 13, bankruptcy attorneys have developed different strategies to use the Chapter 13 process for a number of different purposes.
Chapter 13 bankruptcy is a useful tool to:
- Repay mortgage delinquencies and arrears over the course of 3 to 5 years
- Repay tax liabilities over time, preventing the Internal Revenue Service or Franchise Tax Board from taking devastating collection actions against you during that time
- Halting or delaying foreclosure proceedings on your real property
- Giving you more time to attempt to either refinance or sell your real property to make sure you do not lose your valuable equity
However, Chapter 13 filings are very complicated and few self-represented parties ever manage to complete all of the requirements for Chapter 13 without competent bankruptcy counsel.
Other Types Of Bankruptcies
There are a number of other types of bankruptcy filings available to consumers. However, 95% of all consumer bankruptcies are either Chapter 7 or Chapter 13 filings. The other types of bankruptcy filings you may have heard about are:
- Chapter 11
- Chapter 11 filings are historically meant to assist larger corporations in reorganizing. Chapter 11 filings can also be used for consumers whose debt exceeds the limits of Chapter 13.
- Chapter 11 Sub-Chapter S
- Chapter 11
Chapter 12 Sub-Chapter S bankruptcies are a recent creation to allow small businesses the ability to reorganize without the significant burdens of a classical Chapter 11 filing
- Chapter 12
Chapter 12 Sub-Chapter S bankruptcies are reserved for the particular problems with filing bankruptcy to reorganize farms
Ready to Get Started?
If you are ready to begin working with an attorney who can guide you through this process safely and efficiently, please contact the Law Offices of Geoff Wiggs and arrange a free consultation.