Over 10,000 Bankruptcy Cases Filed
Chapter 7
Chapter 7 can provide those who are struggling financially with a much-needed fresh start. 3-4 months after filing your case, you will likely be free of debt without having to give up any of your assets. This is because the bankruptcy laws are very debtor-friendly, allowing us to shield your assets from your creditors.
Read MoreChapter 13
Chapter 13 bankruptcy is a powerful tool that allows you to, amongst other things, save your home if you are facing foreclosure. This chapter of bankruptcy prevents your lender from foreclosing on your home while you catch up on your arrearages, and possibly allows you to eliminate your 2nd mortgage if you are "underwater" on your 1st mortgage.
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Chapter 7 vs. Chapter 13 Comparison
Chapter 7
Put as simply as possible, a Chapter 7 bankruptcy is a liquidation. To qualify you can be a person or business that lives or does business in California. There is no debt limit, but there is an income limit. If you have primarily consumer debt (debts for personal or household uses) you need to pass what is called the Means Test. It compares your average monthly income against the average monthly income for a family of your size in California. If your income is less than the California average, then you qualify for a Chapter 7 bankruptcy. If not, then the Means Test will determine if you can pay back some of your debts over five years. If you can, there arises a presumption of abuse, and your case may be dismissed. While the majority of Chapter 7 cases are voluntary, it is possible for creditors to band together and force a debtor into a Chapter 7 bankruptcy (called an involuntary bankruptcy). If such a case is filed against you, it is recommended that you talk to a bankruptcy attorney Lancaster.
As soon as you file for Chapter 7 bankruptcy, an automatic stay is put in place that prevents your creditors from coming after you, and even from contacting you. In a Chapter 7 bankruptcy, a trustee is appointed and takes possession of all nonexempt property that you have. This property is then sold and distributed to creditors by the trustee. However in most cases, all property is exempt and the creditors are not paid anything (also known as a “no asset” case). Thus, in these common “no asset” cases, the trustee never takes possession of any property, as it is all exempt, and the debtor stays in control of it during the bankruptcy process. Unlike a Chapter 13 bankruptcy, all assets that are acquired after filing for bankruptcy do not come into the bankruptcy case. Thus, if you were to inherit a large sum of money right after filing, the trustee would not be able to take it and distribute it to creditors. Once the distribution to creditors is complete, the trustee will file a report to that effect with the court. Then the debtor will receive a discharge, which will wipe out any debts included in the bankruptcy that are dischargable. To determine which debts are dischargable, you should consult a Lancaster bankruptcy attorney.
Chapter 13
Chapter 13 bankruptcy provides for a repayment plan for your debts. To be eligible you must be an individual (not a business) that has regular income. Quite the opposite of Chapter 7 qualifications, there is a debt limit but not an income limit to Chapter 13. The debt limit is currently $360,475 of unsecured debt and $1,081,400 of secured debt in order to qualify. Chapter 13 is a completely voluntary action, so creditors are not able to force debtors into a Chapter 13 involuntarily. Unlike a Chapter 7, the trustee in a Chapter 13 case does not take possession of assets to distribute to creditors, so the debtor is able to retain all of their assets throughout the process. The automatic stay when you file is similar to a Chapter 7, but is broader. The automatic stay in a Chapter 13 extends to co-debtors, so creditors cannot come after people who are not in the case, but are also liable for your debts.
The most important part of a Chapter 13 bankruptcy is the plan. The plan provides for payments to your creditors over three or five years from your disposable income. Your allowable expenses are deducted from your income, and the leftover income is used to pay a percentage of your debt over the life of the plan. When the plan is successfully completed, any debts that have yet to be paid are discharged. However, debtors are in a Chapter 13 for a minimum of three years. Any assets that are acquired after filing of the case are part of the bankruptcy case, and are used in the plan to pay creditors. Thus, things such as wages, gifts, and inheritances can be reached during the life of the plan. To properly structure a Chapter 13 plan, a Lancaster bankruptcy attorney should be consulted.
There are a number of pros and cons when comparing Chapter 7 and Chapter 13 bankruptcies. They have different eligibility requirements, and can have very different impacts on those who file. It is always recommended to retain knowledgeable bankruptcy attorneys Lancaster such as those at Wadhwani & Shanfeld, A Professional Law Corporation, so that the correct chapter is selected for you.