If you feel suffocated by debt and genuinely see no way that you’ll ever be able to pay it off, bankruptcy may be a viable option for you. Bankruptcy helps individuals and businesses that have more debt than they can handle. Depending on your financial situation and what your goals are with bankruptcy, there are different options you may consider.
Bankruptcy is a complex area of law that requires substantial documentation, calculations, and strict deadlines. It is crucial that you work with an attorney to minimize your stress, meet deadlines, and meet the expectations of the court. Use our list of Orange County bankruptcy attorneys below to find the right lawyer for your case.
If you are filing for bankruptcy as an individual, there are two main options available to individuals: Chapter 7 and Chapter 13. Chapter 7 involves a full discharge of all of your debts, both secured and unsecured. Those with more assets or higher incomes may opt instead for Chapter 13, which is a reorganization of your debt. The primary difference is that with Chapter 13, you do pay some of your debt back. The court sets up a three-to-five year payment schedule. During that time, you will pay back all of your secured debt and a portion of your unsecured debt. Any unsecured debt that has not been paid by the end of the payment schedule is discharged.
Options for businesses include Chapter 11 and Chapter 12. Chapter 11 allows for the reorganization of individual or corporation debts, while Chapter 12 is for the reorganization of family farm debts.
Bankruptcy in California, as in all U.S. states, is primarily governed by federal law, not state law. The process is outlined in the U.S. Bankruptcy Code, which is part of federal law. However, state law can influence certain aspects of the bankruptcy process, like exemptions.
Below is a general overview of the bankruptcy process in California, but it’s always a good idea to consult with a bankruptcy lawyer who has hands-on experience. Bankruptcy can be complex, even if you think it’s “simple” because you don’t think you have any assets.
Remember, bankruptcy is a complicated process and it’s usually recommended to consult with a bankruptcy attorney who can help you through each part of the process. Also, this is just a general overview and doesn’t cover every situation or type of bankruptcy or nuance in the laws.
While bankruptcy is handled by federal courts, certain aspects of it are left up to the states. Exemptions are set on a state-by-state basis. When determining whether or not you can file bankruptcy, the court looks at your assets and whether or not you can afford to pay back your debt. If you have enough assets, they will seize the assets, use them to pay off as much debt as possible, and then discharge the rest. However, certain assets are exempt from seizure.
In California, there are two options for bankruptcy exemptions: System 1 or System 2.
Some people believe that bankruptcy should only be used when you have exhausted every single other option and are completely out of funds. However, you may want to consult a bankruptcy attorney in Orange County before you reach that point. If there is truly no way out of your debt, it doesn’t do you any good to continue struggling for several months when you could instead be using your income to bounce back from bankruptcy and get a fresh start. Once you’ve reached the point where you don’t think your debts are manageable anymore, consider talking to an attorney.
Ready to find out if bankruptcy is a good option for you? Check out our list of local bankruptcy attorneys and reach out today.