When you do not have enough income or assets to pay your debts, you may wonder if bankruptcy is the right option. If you decide to file bankruptcy, Attorney Michael Mahon can help you complete the process quickly and successfully.
1. What types of bankruptcy are available?
Two different types of bankruptcy are generally available to individuals: Chapter 7 and Chapter 13. Under either, it is important to remember that you have exemptions that protect your property, and the goal is to pay your creditors as little as required. While Chapter 7 bankruptcy requires you to liquidate your non-exempt assets and pay as much of your debt as possible, Chapter 13 does not require liquidation. However, under Chapter 7, bankruptcy allows you to discharge the debts you cannot pay immediately, while Chapter 13 requires you to repay a portion of your debts over time with future income. A Chapter 13 plan is based on your current financial situation, and often debtors find they can improve their situation without having creditors hovering over them.
2. Which type of bankruptcy is best?
Each type of bankruptcy offers different advantages. While some clients may qualify to file either type of bankruptcy, others may qualify for only one type. For example, in order to file Chapter 7 bankruptcy, you must pass the means test, which compares your income to the median income for households of your size. If your income is too high, Chapter 13 will be your likelyoption. Some individuals file a Chapter 11 bankruptcy if their debts are high enough. This would provide a longer timeline for getting a plan approved in most cases, but Chapter 11 is much more expensive than Chapter 7 or Chapter 13.
3. How long does the bankruptcy process take?
The length of your bankruptcy case may range from a few months to a few years, depending on the type of bankruptcy you choose. In general, Chapter 7 cases are shorter than Chapter 13 cases about three to four months in the Eastern District of California (Sacramento and the Central Valley, excluding Bakersfield). Chapter 13 cases generally are for 5 years, with the first four months or so involved in getting the plan approved. After that, the debtor writes a monthly check to the Chapter 13 trustee.
4. What are the disadvantages of bankruptcy?
Your credit score will be lowered for a number of years if you file bankruptcy. If you are considering bankruptcy, chances are you already have numerous 30-day late accounts and have a low credit score already. A bankruptcy gives you a clean slate for legal debts, but the credit rating system is based on history of timely payments, not whether you still legally owe. Also, if you re-affirm debts, such as on a car or a home, post-bankruptcy missed payments will allow your creditor to proceed as if you had not filed. Sometimes you can utilize non-bankruptcy legal protections against creditors or attorney-led negotiation that can allow you to modify these debts without dealing with unsecured (generally credit card) debts. If an unsecured creditor has not gone to a lawsuit to obtain a legal judgment, a creditor’s ability to take your property is normally zero.
5. What about consolidation loans or other options?
Bankruptcy has the advantages of being immediate, certain, complete, and fair to all your creditors, including secured and unsecured. It allows a fresh start, generally after two to three meetings with an attorney, including a short, 5-minute, informal process at the federal courthouse, in a small trustee meeting room, not a courtroom. Other paths out of debt are not immediate, certain, or complete.
If you have unsecured debts to individuals instead of just credit card companies, many options touted on national advertisements just will not work for you. Finally, most Chapter 7 bankruptcies result in zero payments to unsecured creditors. Most debtors find 100% relief from debts and getting breathing room RIGHT NOW is better than reducing payments, and sticking with a long-term payment plan that may or may not conserve part of a credit score. The only reason credit card companies back off and agree to consolidation loans or other options is if there is a credible threat of immediate bankruptcy filing, because they know in a bankruptcy, the unsecured creditors get less money. Only a bankruptcy filing can get all of your creditors to stop harassing you immediately because they are afraid of violating the Automatic Stay in the Bankruptcy Code.
Contact a Bankruptcy Attorney in Sacramento
If you are considering bankruptcy in Sacramento, you need an attorney you can trust. Michael Mahon is a Sacramento Bankruptcy Attorney with many years of experience helping clients get out of debt. Please contact Law Office of Michael D. Mahon today to schedule a free consultation or learn more. If you know when you would like an initial call, you can schedule a no-cost, no-obligation consultation call with the attorney at the link below.