Hallstrom, Klein & Ward LLP - Learn More About Bankruptcy
Serving Irvine, Rancho Santa Margarita, Laguna Beach, Long Beach, Costa Mesa
Bankruptcy Info
As dedicated Orange County bankruptcy lawyers, our attorneys provide extensive information for their clients. If you would like to learn more about various bankruptcy options, their benefits and burdens, and your life after bankruptcy, please peruse the information below. However, only a one-on-one discussion can help you determine the best bankruptcy option for your situation, so please contact us to schedule your FREE consultation by calling 949- 450- 8500.
Chapter 7 bankruptcy is a legal process by which most unsecured debts can be discharged, or eliminated. This bankruptcy procedure will enable you to get rid of unsecured debt including credit card bills, medical bills, and finance company loans. However, certain types of debt cannot be discharged in a Chapter 7 bankruptcy, including child support payments, student loans, recent taxes, criminal fines, and parking tickets.
Chapter 7 allows you to typically keep all of your property that is pledged as security for a loan. As long as your car and mortgage payments are current, and there is no significant equity in your property, you should be able to reaffirm the debt. However, if you do not want to keep the property and still be responsible for the debt, you can surrender the property to the lender and your debt will be discharged. Typically, individuals filing a Chapter 7 bankruptcy keep their home, their car, and their personal belongings.
During the Chapter 7 bankruptcy process, you will submit all of your financial information to the court and your debts and assets will be reviewed by the court appointed trustee and your creditors. All your creditors will be notified of your bankruptcy and instructed to cease all collection action unless the court later approves some action.
Chapter 7 bankruptcies are also known as liquidations because any non-exempt assets that the debtor has may be liquidated (sold) by the trustee for the benefit of the creditors. Most Chapter 7 bankruptcy debtors do not have any non-exempt assets, so they are able to keep all of their personal and real property.
Chapter 7 bankruptcies benefit individuals and families because they eliminate the stress of paying their unsecured debts, while allowing individuals to keep most of their property and assets. Filing a Chapter 7 bankruptcy petition stops foreclosure proceedings, wage garnishment, creditor harassment, and other collection actions that stress out individuals facing overwhelming debt.
The following is a partial list of property exempt from being seized and sold pursuant to the enforcement of a judgment or bankruptcy liquidation:
Property Value or equityPersonal residence $75,000 + homestead exemption Single motor vehicle $3,300Jewelry, heirlooms, art $6,750Personal Property used in business $6,750 or $13,475 if jointly owned with spousePersonal Injury award $20,725Life insuranceloan value etc. $11,075There are multiple statutes with conflicting dollar amounts that overlap, so it is important to seek legal advice regarding property that may be exempt.
Under California statutes, the homeowner exemptions are $75,000 for a single person, $100,000 for a married person or head of household and $175,000 for a person 65 years old or older or a disabled person or a person 55 years old or older with an income less than $15,000 or $20,000 if married.
However, under new Federal Rules, the homestead exemption is capped at $125,000 if the property was acquired within 3 years and 4 months before the petition date and the debtor’s previous residence was in a different state.
Also the value of the homestead exemption will be reduced to the extent that any of the equity in the property was obtained by taking nonexempt cash or selling nonexempt assets and applying the money to reduce the principle on the debtor’s home mortgage or make home improvements, thus increasing the homestead exemption amount.
Individuals must qualify in order to be able to benefit from a Chapter 7 bankruptcy filing. Because a great portion of an individual’s debt is completely eliminated, the law strictly regulates who can qualify to file for a Chapter 7 bankruptcy. The government requires individuals to take a "means test" in order to determine whether they qualify for a Chapter 7 bankruptcy.
This means test involves a review of your income and all of your assets and liabilities, including your bank accounts, properties and other financial information. The means test first compares your income to the median income in your state. If your income is lower than the median income in your state, you can file for Chapter 7 bankruptcy. However, if your income is greater than the median income in your state, other calculations regarding your income and allowable expenses are required to determine whether or not you can file for Chapter 7 bankruptcy.
A bankruptcy lawyer at OC Bankruptcy Lawyers can help you figure out whether you will qualify for a Chapter 7 bankruptcy, even if you do not satisfy the means test. It is critical that you proceed carefully and correctly if you are thinking about filing for bankruptcy. Some individuals are denied the opportunity of filing a Chapter 7 bankruptcy because they did not fully understand how to fill it out form for the means test. At OC Bankruptcy Lawyers, a qualified Irvine bankruptcy attorney will help you figure out if you qualify for Chapter 7 bankruptcy, and will file all the necessary paperwork with the court. The process is very technical and complex, so it is important to seek legal assistance for your bankruptcy filing. Contact us by calling 949 - 450 - 8500 today for your FREE consultation. Chapter 7 bankruptcies are not only available for consumers. Businesses can also benefit from filing for bankruptcy protection under Chapter 7. Typically, in a Chapter 7 business bankruptcy, the company winds up its affairs and ceases doing business. In a business Chapter 7 bankruptcy, the businesses assets are liquidated (sold) to pay its creditors and any remaining debt will be discharged. Contact an experienced Chapter 7 business bankruptcy to determine if this option is right for you. Contact us by calling 949 - 450 - 8500 today for your FREE consultation.
Chapter 13 bankruptcy is referred to as a "reorganization" because it enables individuals to consolidate their debt and reorganize it into an affordable monthly payment plan approved by the court. Chapter 13 bankruptcy does not completely erase a person’s debt, but consolidates the debt and restructures it into a monthly payment plan that the consumer can afford. At the end of a three to five year repayment period, the remaining balance of the unsecured debt is discharged (eliminated). When the court awards a chapter 13 bankruptcy filing, the debtor pays for living expenses first, and then any left over money is used to repay creditors, even if it’s just pennies on the dollar. The debtor is thus able to pay off their debts in affordable monthly payments over a period of three to five years, depending on their disposable monthly income, expenses, and assets. Chapter 13 bankruptcy cases typically last for three to five years from the date of the initial filing to the date the remaining debts are discharged.
A Chapter 13 bankruptcy enables Consumers to consolidate their mortgage arrearages, balances on car loans, student loans, credit card debts and other unsecured debts. All of the debtor’s outstanding debts must be included in the Chapter 13 bankruptcy consolidation. Many individuals find a Chapter 13 advantageous because they can consolidate student loans and taxes with their other bills and pay them over time, thus stopping collection actions even though these obligations cannot be discharged in a Chapter 7 bankruptcy. A Chapter 13 bankruptcy will also stop the finance company from repossessing your car. Your past due car payments will be consolidated with the entire balance on your vehicle loan so you can pay it all off over the next three to five years.
Additionally, if your home is currently in foreclosure, a Chapter 13 bankruptcy filing will stop the foreclosure any time prior to the sale, and allow you to repay your mortgage arrears through your Chapter 13 bankruptcy. You will still be obligated to make all future mortgage payments, but your lender cannot foreclose to collect any outstanding mortgage payments. This is because a Chapter 13 filing allows you to consolidate all of your missed mortgage payments or “arrears” and then repay them over 3 to 5 years. For example, if you are $12,000 behind on your mortgage, and your regular house payment is $2,700, then under a Chapter 13 plan your mortgage payment would be your normal $2,700 payment plus approximately $200 ($12,000 ÷ 60 months) to repay the arrears. Consequently, if you are in default, the Federal Court reinstates your mortgage so that the lender cannot foreclose while you are under its protection by making your payment under the court approved plan. To learn more and discuss your situation, please contact a skilled Orange County stop foreclosure lawyer.
The court also strictly scrutinizes any fees the lender tries to impose on top of your normal mortgage payment. Consequently, a Chapter 13 program may result in a more favorable repayment plan than those currently offered by many lenders through their loan modification programs. In some situations, you can even eliminate the lien from your second and third mortgages. This is knwon as lien stripping. To learn more about this bankruptcy mechanism, please contact one of our experienced Orange County lien strip attorneys today.
About a month after you file for a Chapter 13 reorganization, you will be required to appear before a judge and a court-appointed trustee. At this appearance, the trustee and the judge want to make sure that understand the amount of payments you must make and that you have the ability to pay them. However, while you are in an interest-free Chapter 13 repayment plan, your creditors cannot collect from you. Your creditors are forced to accept the amount allocated to them by the Court.
People who usually qualify for Chapter 13 make enough income to cover any living expenses, but not enough to completely pay off all of their debts. When individuals do not qualify to file for a Chapter 7 bankruptcy, they often will be eligible to file for a Chapter 13 bankruptcy because there is no “means test” to disqualify them as there is with a Chapter 7. In many situations, individuals file for Chapter 13 bankruptcy when they have suffered a temporary loss that makes it impossible for them to promptly pay all of their debt. However, prior to filing a Chapter 13 bankruptcy, it is important to realize that you must have a consistent source of income in order for your repayment plan to be approved by the court. A self employed individual can qualify as well as the wage earner, as long as the court believes the source of income is sufficient and dependable. You must be able to pay something on your debt in addition to your monthly living expenses in order to qualify.
It all depends on the specific situation of the debtor. Generally speaking, Chapter 7 bankruptcy is better for people who have a lot of unsecured debts, like credit card debt and medical bills. Individuals who do not have a lot of property, or do not currently have much income, or have a lot of unsecured debt, may want to consider filing Chapter 7 bankruptcy. However, consumers who have a regular income and non-exempt property they want to keep should consider a Chapter 13 bankruptcy. This is especially true if they have a second trust deed on their home and would like to eliminate it through a lien strip proceeding in Chapter 13. It is best to consult with an experienced bankruptcy attorney so he can review your specific financial situation and advise you as to which type of bankruptcy protection would be best for you.
Generally, any person who is 18 years or older may file bankruptcy, regardless of their citizenship status. Married couples may file jointly or individually. Individuals, partnerships, or corporations can file a chapter 7 bankruptcy petition if they reside, have a place of business, or property in the United States.
If you were granted or denied a Chapter 7 discharge in a prior case within the last 8 years, you might not be entitled to receive a discharge in a subsequently filed Chapter 7 bankruptcy in California.
Additionally, individual consumers generally need to pre-qualify under a “means test” or qualify by other methods to legitimately file a Chapter 7 bankruptcy petition. An individual may still be able to file a Chapter 7 bankruptcy even if they do not meet the means test requirement under certain circumstances, such as when much of their debt is business related. You should seek legal advise before assuming that you do not qualify to file a Chapter 7 bankruptcy petition.
A consumer generally must qualify under the Chapter 7 means test in order to file for Chapter 7 bankruptcy protection. The means test first compares your income to the median income in your state. If your income is lower than the median income in your state, you can file for Chapter 7 bankruptcy. However, if your income is greater than the median income in your state, additional calculations regarding your income and allowable expenses are required to determine whether or not you can file for Chapter 7 bankruptcy.
For bankruptcy purposes, a persons’ residency and domicile is the location where that person has lived for the majority of the 180 days preceding the bankruptcy filing. So, someone could file bankruptcy in California after living here for 91 days. However, a individual can only claim California’s asset exemptions if he or she has resided in California for the previous two (2) years.
People who do not qualify for a Chapter 7 bankruptcy usually qualify for Chapter 13. They typically make enough income to cover any living expenses, but not enough to completely pay off all of their debts. When individuals do not qualify to file for a Chapter 7 bankruptcy, they often will be eligible to file for a Chapter 13 bankruptcy because there is no “means test” to disqualify them as there is with a Chapter 7.
We will help you correctly fill out the paperwork for the means test. The form is six pages long and asks for a lot of financial information regarding your household income and expenses.
To learn more, contact our offices at 949 - 450 - 8500 for your FREE consultation.
