A Description of Bankruptcy
What is Bankruptcy?
As opposed to stigma, bankruptcy can be a fresh start – you can wipe out your debt, clean up your credit, and rebuild your finances. All your balances and late payments will shortly disappear from your credit report.
It looks much better on your credit report than a bunch of unpaid and unmanageable debt. Also, when you don’t owe anyone money, you can have better opportunities to obtain loans, buy a new car, and even secure a house within a year or two.
How We Can Help
Filing a bankruptcy nowadays is considered to be a good business decision since it allows you to show your creditworthiness and build a new financial future. However, we understand that it can still be a difficult and emotional decision to make.
To make it easier, call our lawyers for help. We will discuss the best options for breaking free from debt.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is the best choice for people with low income, unemployed, or having large families. It also works for small businesses that aren’t making enough money to cover costs.
In these situations, expenses are above income, leaving no money to pay credit cards, medical bills, loans, and taxes. In Los Angeles and California, there are laws that make it easier to file bankruptcy and protect your possessions.
The Means Test
The eligibility for Chapter 7 bankruptcy requires your monthly income to be at or lower than the average income for a family of the same size in the same county. The means test determines your income that can be disposed of or used to pay back your debts.
The less disposable income you have, the better you’ll qualify for Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is designed for people who make too much money, have assets that would be sold and liquidated in a Chapter 7 bankruptcy, or have debts that they can’t wipe out with a Chapter 7 bankruptcy.
For example, if your lender is trying to foreclose on your home because of your late payments, the Chapter 13 can stop it and let you repay the amount you’re behind.
In addition, reorganization (another word for this bankruptcy) involves a three or five-year payment plan to pay a percentage of your debts based on what you can afford. None of your property will be taken away, and no interest or penalties will be added to your monthly payments.
If you make your Chapter 13 payments on time for three to five years, you come out of bankruptcy as follows:
- You will not owe any taxes to the IRS or the State
- Your car will be completely paid off
- Your mortgage will be current with no threat of foreclosure
- You will not owe anything to any of your unsecured creditors
- You will not owe any attorney’s fees