Bankruptcy is a legal strategy to eliminate debts and stop collections. Bankruptcy is often filed to stop foreclosures immediately by court order, usually when a debtor has fallen behind on mortgage payments and is planning to make payments to catch up in a court-approved plan.
There are different chapters of bankruptcies that can be filed by a debtor. Chapter 7 bankruptcy is a legal admission that the debtor is not able to repay any of their loans. is an admission that the debtor seeks a relief from unsecured debt payments, but plans to repay secured debts such as mortgage and car loans.
Every year in Riverside County, California there was about 8065 chapter 7 bankruptcies filed and a total of 1962 chapter 13 bankruptcies. A total of 31,147 bankruptcies were filed to eliminate credit card debt and 1996 to stop foreclosures, a further 1962 filed to stop auto repossessions and 8065 to eliminate medical bills.
When filing for bankruptcies chapter 7 the state always hires a trustee who calculates chapter 7 mean test to ascertain whether the person[s] filing qualify for that category. If debtor income is above the median state income of $54,586 as of 2014 www.legalincome.com then it is possible that the person filing will automatically fail to qualify for chapter 7 bankruptcy and be removed to chapter 13 bankruptcy.
In Riverside County bankruptcies are filed at the US Bankruptcy court. The office is located in Riverside: click here [http://www.cacb.uscourts.gov/statistics/2010-filings-riverside]
Benefits of Bankruptcy: Eliminating Debt and Protecting Assets
Filing for bankruptcy enables one to eliminate unsecured debt like credit card debts, medical bills, and personal loan obligations.
Sometimes it can help eliminate 2nd and even 3rd mortgage lines (HELOCs) and IRS back taxes which are over 3 years old. Filing for chapter 7 bankruptcies offer a more comprehensive elimination of debts but if one qualifies for Chapter 13 bankruptcy, they are still able to eliminate all loans except priority loans and shield legally from personally liable to all debts after the lapse of the repayment plan.
Goal of Bankruptcy: Discharge
The reason for filing for bankruptcy as ascertained by the 341 meetings is to clarify that the debtor seeks to have his loans discharged in the best manner possible under the law. The law from the time of the filing seeks to protect the debtor from receiving communication in the form of emails, phone calls or to file a lawsuit from the creditors.
There are also special rules that cover community properties owned by the debtor’s spouse, even if the spouse didn’t file a bankruptcy lawsuit. A creditor is liable to fines and attorney fees if he or she violates this rule.
The exception is when a lien was not exempted during bankruptcy proceedings in which case the creditor can file the right to enforce a valid lien and also a debtor can voluntarily settle a debt that has been otherwise discharged.
The chapter 7 discharge eliminates all the legal obligations due on a debt that has been discharged. Even though, not all types of debts are discharged at the time of the filing.
All debts filed under the other chapter in the bankruptcy code come fully under dischargeable debts as obligated when they are converted to a chapter 7 bankruptcy
Certain types of debts which are not dischargeable in a chapter 7 bankruptcy include taxes, debts incurred to pay non-dischargeable taxes, students loans, alimony and child support, fines, penalties and forfeiture, debts owed to retirement plans and pension, criminal restitution and other debts deemed by the courts to be non-dischargeable.
How to File / Preparing the Petition
When you have ascertained that you want to file for bankruptcy you ought to get an attorney through you can do it yourself. The first step is to gather all the necessary documents the courts will require to administer your case which is a 6 months pay stubs or any other income verification, your creditor information and all the asset information as well as the last 2 years of filed tax returns.
After filing you will be required to complete a credit counseling class and file a petition and schedules then avail to the trustee a copy of your tax returns. During the court process, you will attend the creditors meeting after which you are required to attend the debtor education class.
Qualifying For a Repayment Plan [Means Test For A Chapter 13]
When your annual income exceeds the median income of the state of California for the year that you filed the case then your suit is automatically considered a chapter 13. In chapter 13 bankruptcy you will be required to make payments over a designated period usually 35-60 months.
The mean test used to ascertain your income is as follows
To calculate the mean test you take the earned income i.e. gross wages, tips, and bonuses plus the investment income e.g. interest, dividends and property income if you have any plus any other incomes e.g. pension, retirement income and unemployment compensation.
Incomes received under social security and incomes as compensation from a disaster like war crimes and terrorism are excluded in the computation.
Where to Appear / Attending the Meeting of Creditors
The creditor’s meetings are usually scheduled 21 to 50 days after your case has been filed, where you are required to attend failure to which your case can be dismissed. You can be excused from attending after you present a sufficient reason for such an exemption.
This hearing is generally held at the Riverside Bankruptcy courts here or an alternative venue proposed by the trustee. Usually, the trustee raises a number of questions to you as the debtor including
- Would you attest that everything is true and accurate as filed in the documents?
- Did you list all your creditors?
- Are there any substantive inaccuracies that you want to bring to my attention?
- Did you list all your assets?
- Did you get to review the schedules and documents before signing them?
Average Length Of Time In A Payment Plan [3-5 Years]
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy is simply a reorganization of your debts to enable you to make payments to your creditors within a 36-60 month payment plan.
The plan is usually 3yrs if your income is below the median income of the state of California at the time of the filing and the duration is raised to 60 months if your income is above the state median income.
Your chapter 13 bankruptcy will determine an amount to be remitted monthly to the creditors and the amount of time the payments will be made with the amount ranging from 0-100%.
Your first payment is usually 30 days after the case has been filed. It is the role of the trustee to remit the payments to the creditors as stipulated. There are three repayment plans that are used to compute the amount you are supposed to repay monthly.
- Disposable Incomes. The repayments can be calculated as the income after all the statutory deductions have been made including payments to secured debt like mortgage and car loans.
- Best Interest of Creditors. This plan seeks to as much as possible compensate the creditors for the amount they would have received in the case of a chapter 7 bankruptcy filing. This formula seeks to remit the highest possible payment to the creditors given the available non-exempt assets of the debtor.
- Priority Debts. In a chapter 13 bankruptcy filing, the debtor has to produce a full repayment plan for priority debts. These are generally state and federal taxes, alimony and child support.
At the end of the repayment period, all other dischargeable loans that are still due will be discharged meaning you will no longer be obligated to service them, neither are you liable to make payments on those debts.
Average Fees and Costs [Range Of Attorney Fees – Max Charge]
The cost of court filings as of 2015 in Riverside County indicated an amount of $335 for chapter 7 bankruptcy, $310 for chapter 13 and $1717 for chapter 11 bankruptcies.
Attorneys fees depend on the Chapter and the complexity of the case, the bankruptcy attorney, the scope of work involved, and any other expenses to be incurred during the bankruptcy process. Fees for Chapter 7 and 13 bankruptcies usually range from $750-4500 for attorney fees. [Chapter 11 fees are typically much higher]
Free Case Evaluation
Anyone who lives in the state of California can call us to be connected to one of our Riverside bankruptcy attorney. The first call will always be free. On the first call, we will take the time to review your bankruptcy situation and our bankruptcy attorney will let you know what is the best option for you and what debt can be eliminated.
References and links
law.cornell.edu
socaladvocates.com
bklaw.com
californiabankruptcyrelief.com
ezbankruptcyforms.com
cacb.uscourts.gov
