When Is Emergency Bankruptcy Needed to Stop Foreclosure?

In financial difficulties, thousands of Americans could face foreclosure. If you get behind on payments on your home and you simply can’t keep up financially at the moment, it could be that you can use the bankruptcy system to stop foreclosure. An emergency bankruptcy filing can be hugely helpful. It might be that you can stop it from happening at all, but more likely you will at least be able to delay the foreclosure on your home so you can buy time to establish how you are going to solve the issues, restructure your lending and generally save your family home.

When is The Best Time to File For Bankruptcy?

If you are looking at an emergency bankruptcy filing to stop foreclosure, what is the best time to file? When is this required? How can you ensure that your emergency bankruptcy does what you intend it to?

 

As you get closer to foreclosure then bankruptcy becomes your best option for stopping the sale. This works because something called an “automatic stay” will be forced into effect when you file for emergency bankruptcy.

 

The effect this has is that it means banks cannot immediately foreclose on your home or collect the debt. Because of the fact that foreclosure activities need to be slowed or stopped while the bankruptcy process is carried out.

What Can the Bank Do About Bankruptcy Filing?

The next thing that will probably happen after you have filed for bankruptcy is that the bank files what is called a “motion for relief” from the automatic stay. Effectively, they’re asking the bankruptcy court if they can continue to try to track down and claim their money regardless of the fact you have filed for bankruptcy.

filing for bankruptcy

So, you might be wondering what the point is? Why would you file for bankruptcy if the bank is going to potentially be able to come after its debts anyway? Well, if the bankruptcy court does deem that the bank will be able to continue with the foreclosure process and close your case after order of discharge, you will have delayed the process by up to two months.

The Benefits of Delaying Foreclosure

If you have managed to delay the process, you might be wondering what you need to do next. Some people think that all they have achieved is delaying the inevitable, but this is not the case at all. An emergency bankruptcy filing can give you the chance to restructure your finances and your lending. You may be able to get yourself in a far better position financially, and as a result you could potentially avoid the foreclosure eventually. 

 

Instead of delaying the process, think of it as buying yourself some time. The procedure might take two months, so this is an extra 8 weeks or so you have to try and find other solutions, negotiate lending and work out how you might be able to keep your property. Or, even if you are resigned to the fact that the property will be foreclosed upon, it can give you time to work out other arrangements.

Types of Bankruptcy to Prevent Foreclosure

  • Chapter 13 – Chapter 13 bankruptcy might allow you to restructure the debts you have. Some debts are repaid in full whereas others might be repaid in part. This usually takes place over a three to five year payment plan. Because of the fact this might allow you to repay the mortgage you have (and that is threatening your foreclosure) you may well get to keep the house and remain living there throughout. You will pay a smaller amount of the debts back. If you don’t get to complete the process and aren’t granted this type of bankruptcy it is still good for stopping the foreclosure.
  • Chapter 7 Bankruptcy – A Chapter 7 bankruptcy might not be the best bet for saving your property unless you are able to get a modification on your loan. If your goal is to prevent foreclosure though, a Chapter 7 bankruptcy filing can do the job. You may be able to file bankruptcy Chapter 7 online. Another benefit is that you can potentially live in the home during this time without making payments. Compared to Chapter 13 bankruptcy, this type of bankruptcy can totally absolve your liability for any of the debt and though it isn’t a good idea if you want to keep the property, it does the same job of buying you time.

 

Can You File Bankruptcy Online to Stop Foreclosure?

Some aspects of the bankruptcy application allow you to file Chapter 7 online. Because of the fact that bankruptcy involves completing forms and filing them within a court, you can possibly do this online. Some courts allow you to submit all of the paperwork online but you need to check your local restrictions on whether or not this is the case. You will probably have to attend a 341 meeting in person. This is a meeting with the allocated official who is designated your case. This can’t be done online.

 

The court system is catching up! Gone are the days where everything had to be done in person and while you can’t do every aspect of an emergency bankruptcy filing online, a lot of the admin can be carried out from the comfort of your own home.

 

Unfortunately, we can’t answer every question on the process of filing for bankruptcy online due to the fact that each and every bankruptcy court has its own processes and its own restrictions. Local state law might even come into consideration here. So how can you find out the rest of the information you need? Contacting your local bankruptcy court is the way to receive all the guidance you require.

What File an Emergency Bankruptcy Filing Process Usually Looks Like

What is the process of filing for bankruptcy? Which steps do you need to take to get to the bankruptcy petition and stop foreclosure.

 

You will need to fill in Form 101 – Voluntary Petition for Individuals Filing for Bankruptcy. This is effectively the notification that you are filing for bankruptcy. Next comes Form 121 – Your Statement About Your Social Security Numbers. This is to do with identification and ensuring it is you.

 

You need to provide all of the names and addresses of those who might try to collect debts from you. Any creditors should be mentioned. You can find these via a creditor mailing matrix.

 

You also need a credit counseling certificate requirement and a filing fee, which you might be able to pay in installments (the court can see how paying straight away can be an issue for some people who are applying for bankruptcy!)

bankruptcy lawyer

Conclusion

It can feel a little dishonest applying for bankruptcy just to stop foreclosure, but it is a common practice and it is a very effective way to buy yourself the time needed. It could be that after you have stopped foreclosure via a bankruptcy declaration you find a way to restructure your debts and you can even keep your home, this is the ideal scenario for everyone involved including the creditors, so don’t worry too much about the fact that you are deliberately delaying proceedings.

 

Emergency bankruptcy feels like a huge step to take in your life, but a lot of people go through this and come out the other side. The declaration and application can be done at a tactical time to ensure that you are not faced immediately with foreclosure, and you can live in your house while you find out what you are going to do next. 

family conflicts

7 Legal Actions to Resolve Family Conflicts Even Before They Emerge

Family conflicts are almost inevitable. Somewhere along the line, families have their issues including sibling disputes over inheritance and many other scenarios that can lead to disagreements. In this guide we’re looking at how to resolve family conflict and even avoid issues such as family will disputes altogether, setting up a fair playing field before the disputes can crop up and ensuring that everyone knows where they stand.

Ensure Everyone Makes a Will

Inheritance disputes between siblings can be incredibly common, and they are only made worse if there is no will to explain what the deceased wishes to happen to all of their estate and belongings should they pass away. This can avoid family disputes over wills as it is clearly outlined who is to receive what. The probate laws in California and elsewhere in the USA are designed to protect belongings and ensure that they are divided fairly, but it is not always that simple and there can still be a long process to resolving and settling family disputes over inheritance, ultimately leading to everything taking a lot longer. By ensuring that everyone makes a will, you can at least go some way to avoiding the arguments and disputes that can occur. The executor can help to ensure that everyone gets what is intended for them.

Use Mediation for Inheritance Disputes

Not all families have a happy and settled relationship that might be sold to us on television. Estate and inheritance disputes between siblings may not be resolved easily and in this case you might need mediation. Mediation services are a form of conflict resolution with family wills and many other aspects of family life. The goal is to make sure everyone gets what they are entitled to and create a fair outcome for everyone. Without a professional mediating then the family disputes can become very nasty. A mediator might end up using some relatively simple techniques, but the point is to resolve any conflict and make sure everyone is happy with the outcome (or at least satisfied with the outcome). It could be that you even end up drawing items or belongings out of a hat. This is not an uncommon way to resolve a conflict like this. Ultimately, if things have become a source of argument and conflict within the family then mediation services could be essential.

Dispute Resolution for Divorces

Divorces are not an uncommon scenario for people to have to go through, so how can dispute resolution make it easier for people who are looking to divide up property after a divorce, for instance? If you don’t figure out how to resolve family conflict, it may end up going to court and this can lead to an extremely long and drawn out battle over who gets what, and other issues including custody.  Dispute resolution can be much more affordable than the drawn out process of going to court. If you can reach an agreement via a dispute resolution then you are more likely to have a quick and flexible solution to the problems that come about from divorces. Even if you are on very good terms with your partner when you divorce, it is a good idea to contact a probate attorney nearby to help you to establish who is going to get what in terms of possessions, and if there are children involved, you can settle other aspects of your life moving forwards with the help of divorce attorney. These sorts of conflict resolution for families may seem extreme but they can actually prevent a lot of drama and expense.

Staging Interventions

One big issue that families can come across is when one member of the family is using drugs or has become addicted to alcohol, gambling or other harmful habits. An intervention may not be a legal issue as such, but a lot of the time, people get an intervention specialist, or a legal professional specializing in conflict resolution to be involved. Nobody really knows how someone is going to react when they have a group of loved ones staging an intervention and they can sometimes feel accused or targeted, so it is a good idea to include the help of medical professionals to resolve the conflict with minimal issues.

Use a Mediator

There are so many different things that can crop up in day-to-day life that mean you have a family conflict. Perhaps somebody has borrowed money and won’t pay it back. Perhaps there is a family-run business and this has led to a financial disagreement. Because conflict resolution for families can involve so many different disagreements, using the professional help of a mediator might be wise. Mediators know how to deal with a huge variety of different problems ranging from estate disputes between siblings to financial issues. Knowing how to resolve family conflict is their whole business. A mediator is not just about getting you to communicate with your family member, it can also be a way to avoid court proceedings being required in the future. If you don’t solve your conflict early on then eventually someone in your family might look to take things into a formal court environment. This can be costly, time-consuming, and it can damage family relationships. Mediators are recommended in so many situations. They can give a fair and impartial outlook on a situation and help you to come up with a fair solution. Because they are trained in family conflicts and mediating to keep everyone happy, it is also unlikely that the results should be questioned by any of the parties. It can be a way to get any disputes and other issues dealt with in a matter of days and weeks, rather than months or years.

Court of Law – The Last Resort

If other forms of mediation to resolve family conflicts have not worked then you may end up going to court. In these scenarios you will have a judge or even a jury deciding upon the outcome of the case. Depending upon which state you are in, it could be a small claims court that deals with your issue. This is the case in California.  Small Claims Court proceedings are rarely quick and easy, they can be drawn out and more expensive than they are worth. If you possibly can, it is probably a good idea to stay out of court. However, if there are some huge property disputes between siblings and a lot of money is at stake then you may end up having to go to court.  Probate courts are often required in the event of splitting up an estate after someone has died. The court might not be avoidable. Make sure you have as much evidence put forward as possible to support your case.

Should I Try to Resolve Conflict Myself?

You don’t necessarily have to dive straight into legal services. If you are on good terms, you may at least be able to negotiate some aspects of an inheritance or divorce on your own, rather than having to get mediation involved. The issues usually arise when there is a disagreement, and nobody can solve this. Families can be torn apart, but you should remember to be hard on the issue at hand, rather than hard on each other, and try to keep your family relationships strong.

Conclusion

Keeping your family relationships as strong as possible may involve a little bit of preparation. Creating a will, for instance, can be a great way to avoid family conflicts over property and inheritance after someone passes away. The legal system is there to support us all, and this means amidst family disagreements, too. Just try to avoid having to go to court, and bringing undue pressure on your own life.

probate process

Attorney’s Step-By-Step Guide to Probate Process in California

What is the probate process in California?

The probate process in California is similar to the process in other states. If the person had a will, an Executor files with the probate court. If there is no will, the court will appoint an administrator to perform the functions the executor would have performed.

  1. If there is a will, the probate court decides if it is valid.
  2. The legal heirs or beneficiaries are identified.
  3. The assets that belong to the estate are identified.
  4. Creditors of the estate are identified.
  5. The value of the assets is determined.
  6. An inventory of the estate is submitted to the probate court.
  7. It is a good idea to advise the heirs or beneficiaries of the fees that will be paid to the executor or administrator for their efforts to handle the estate.
  8. Assets may need to be sold (converted to cash) to pay the debts of the estate.
  9. The executor or administrator may wish to have their attorney draft a release of liability for heirs or beneficiaries to sign prior to distribution of the estate assets.
  10. Any remaining assets are transferred according to the will or intestate laws.
  11. If the beneficiaries agree, assets may be transferred in kind which means the property and not the proceeds from the sale of the property is transferred.

What California probate law code covers probate law?

The California Probate Code §9050 – §9054 sets forth probate law in California. Under common law, previous court cases also influence the handling of estates in California, including disputes.

How much does probate cost in California?

The cost of probate in California varies depending on the size of the estate. California probate fees are determined by statute unless the estate is valued at greater than $25 million.

  • 4% of the first $100,000 (up to $4,000)
  • 3% of the next $100,000 (up to $7,000 for estates valued up to $200,000)
  • 2% of the next $800,000 (up to $23,000 for estates valued up to $1 million)
  • 1% of the next $9 million (up to $113,000 for estates valued up to $10 million)
  • ½% of the next $15 million (up to $188,000 for estates valued up to $25 million)

The California probate court determines the probate fees on the amount over $25 million.

It is important to note that probate fees are not the same as inheritance taxes. There are also probate filing fees.

Which court handles probate in California?

The Probate Department of the Superior Court in the county where the decedent lived at the time of death handles probate in California. At a minimum, expect probate to take nine months. Realistically, an average estate takes closer to 18 months. Complicated estates and contested wills can take years to settle. It is also important to decide whether you need a will or a living trust.

What happens if a California resident dies without a will (intestate)?

When a California resident dies without a will, their assets will go to their closest relatives under state intestate succession laws.

Under California probate law, no will means the distribution of your estate will not take your wishes into consideration. If you cannot answer the following question in the affirmative, dying intestate means your estate will be settled in a way that is different from your wishes.

If I am married at the time of my death, I want my parents, siblings, or children to inherit some of my assets.

If I am unmarried at the time of my death, I want my parents to inherit all my assets?

I am a man who does not want to leave anything for any child I have not taken legal steps to recognize as my heir who was born out of wedlock.

I am an unmarried orphan with no children and want my siblings to inherit my estate equally.

I want the court to treat my pets as property and do not want to make any special provisions for their care after my death.

If I am unmarried at the time of my death, I want my children to inherit if I have any, my parents to inherit if living, and my siblings to inherit if I have no legal children or living parents.

The distribution of your estate depends on your status at the time of death. The cost of probate may be higher if you die intestate.

 

Is probate required without a will?

Yes. Everyone has a will that determines the distribution of their estate. When the decedent did not write a will or does not have a valid will, California intestate laws stand in as their will and spell out the rules for who inherits.

What is unique about the California probate process?

One aspect of the probate process in California that is different from most other states is the separation of community property from other assets. California is one of just a handful of community property states. When the estate is probated, community property goes to the spouse. Property that is not community property (separate property) will be shared between the spouse and, depending on which relatives exist or are living, the decedent’s children, parents, and siblings.

As long as the spouse is alive at the time of death, community property will be left to the spouse if the decedent dies intestate.

Do all assets go through probate?

No, some assets can transfer without probate.

  • If real estate or bank accounts are held in joint tenancy, they transfer to the joint tenant outside of probate.
  • If the decedent had a trust, assets owned by the trust do not go through probate.
  • Assets with a named beneficiary such as life insurance and retirement accounts do not go through probate.
  • Community property may also be exempt from probate. It is best to discuss this with a knowledgeable estate and probate attorney in Los Angeles.
  • Small estates, which currently includes estates valued at $166,250 or less, can petition to determine succession to real property and avoid probate.

Not only is administering an estate complicated with deadlines that must be met, it is also often an emotional experience for the executor or administrator and the heirs. Hiring an attorney to assist with the estate can make the process easier.

chapter-7-bankruptcy

Chapter 7 Bankruptcy in California: Exemptions and What You Should Know about Them

What is a Chapter 7 bankruptcy California CAExemptions2020? Exemptions are assets that the bankruptcy  trustee does not take to sell in order to pay creditors part of what is owed during the bankruptcy. The Chapter 7 bankruptcy exemptions you choose make an important difference in the outcome of your bankruptcy.

What are the Chapter 7 bankruptcy California exemptions (property you can keep)?

There are two groups of exemptions – 704 exemptions and 703 exemptions. The right one for a debtor depends on the types of property they own.

Under California law, you are allowed to choose which set of Chapter 7 exemptions suit your situation better. This is an important decision because the bankruptcy trustee will sell property you are not able to exempt and apply the funds toward your unsecured debts including personal loans, credit cards, and overdue utilities.

If you own a home and have equity you want to protect, 704 exemptions are probably the best choice for you, however, you should discuss your personal situation with a knowledgeable bankruptcy lawyer in Los Angeles as this decision is important.

Married couples have the same exemptions as a single person – they do not get a higher exemption than single individuals in most categories.

bankruptcy exemptions

What is the 704 Homestead Exemption?

The 704 homestead exemption in California varies by age, disability status, ownership interest, and whether your creditors are attempting to force the sale of your home. The 704 homestead exemption protects up to a specified amount of equity in your home.

AGE

  • Over age 65 – Up to $175,000 of equity is protected
  • Over age 55 with a low income – Up to $175,000 of equity is protected

OWNERSHIP

  • If the person filing bankruptcy and at least one other family member have an interest in the homesteaded property – Up to $100,000 of equity may be protected.

DISABILITY STATUS

  • If the person filing bankruptcy is not disabled – California 704 exemption protects up to $75,000 of equity
  • If disabled – Up to $175,000 may be protected

If Creditors want to force the sale of your home

In some cases, a creditor or group of creditors are able to force the sale of your home in order to pay your debts. The California 704 exemption will protect up to $175,000 of equity if you are older or disabled as noted above. It will also afford this much protection to single individuals who are age 55 who earn less than $25,000 per year and married couples who make less than $35,000 a year.

What is included in a 704 homestead exemption?

A homestead exemption is not limited to your house. It may include condominiums, mobile homes, planned developments, stock cooperatives, community apartments, and even a boat.

2020 704 Exemption Changes

California added new exemptions in 2020 that provide greater protections for deposit accounts and FEMA Benefits.

As of January, an exemption is available that will exempt deposit account balances that are necessary to support the debtor and the debtor’s spouse and dependents. Beginning September 1, 2020, $1,724 is automatically protected against a bank levy. The amount is considered the “minimum basic standard” needed to care for a family of four. If a debtor wants a higher exemption, the debtor must assert it in order to receive the higher exemption.

Additionally, as of January 1, 2020, if a debtor has received Federal Emergency aid through FEMA, the funds received from FEMA are automatically exempted. FEMA funds are typically in response to losses that occur in connection with a declared disaster, such as some of the wildfires that have ravaged California residents.

What are Chapter 7 bankruptcy personal exemptions in in California?

  • Your transportation, including a car, truck, motorcycle, RV, or other transportation is exempt up to $3,325 of equity in the vehicle.
  • Your household items and personal effects are exempt.
  • Health aids are exempt (this can include a variety of health aids such as hearing aids, oxygen equipment, glasses, walkers, canes, etc.).
  • Residential building materials for the repair or improvement of your home of up to $3,500.
  • Works of art, jewelry, or heirlooms of up to $8,725 are exempt.
  • Social Security payments of up to $3,500 for a single person ($5,250 for a married couple). This exemption is unlimited if the Social Security funds are not commingled with other funds.
  • Public benefit payments other than Social Security are exempt up to $1,750 ($2,600 if married and paid jointly).
  • If necessary for support, personal injury and wrongful death causes of action and compensation are exempt.
  • A cemetery burial plot.

Does a 704 Exemption protect wages, pensions, or retirement savings?

Yes, a considerable amount of assets may be protected.

  • IRAs and ROTH IRAs are protected up to $1,362,800.
  • 75% of the wages received during the 30 days prior to filing are exempt.
  • Tax-exempt retirement accounts are exempt. This includes 401(k), 403(b), ESOP, SEP, SIMPLE IRAs, Keogh, money purchase plans, profit sharing plans, and defined benefit plans.

Public Employee 704 Exemption Protections

Public employees are afforded extensive protections including:

  • Vacation credits (a minimum of 75% if payments are on installment)
  • Public retirement benefits

Public Benefits 704 Exemption Protections

Individuals who are receiving public assistance are also allowed exemptions to protect those benefits including:

  • Disability income benefits
  • Unemployment
  • Union benefits paid as the result of a labor dispute
  • Worker’s compensation benefits
  • Public Assistance
  • Relocation Benefits (for displaced individuals – not job-related relocation expenses)
  • Student financial aid

bankruptcy california

Tools of the Trade 704 Exemption Protections

The purpose of bankruptcy is to afford honest creditors a fresh start. It would not make much sense to deprive them of their ability to make a living as that would hinder their ability to get the fresh start. As a result, items considered the “tools of the trade” are exempt. These items generally include tools, uniforms, instruments, a commercial vehicle, and furnishings. The exemption is $8725 for an individual and double that if both spouses work in the same occupation.

704 Protections for Insurance (proceeds and policies)

Protections for insurance contracts and proceeds from insurance contracts are complex. It is best to discuss issues with life insurance, disability insurance, health insurance, homeowner’s insurance, and Fidelity bonds with your bankruptcy attorney.

Miscellaneous 704 Exemptions

  • If the debtor is a partner in a business, the partnership assets are not considered the debtors’ property and are therefore exempt.
  • Business and professional licenses.
  • For incarcerated individuals, trust funds of up to $1,600 are exempt for inmates

What is the 703 Homestead Exemption?

The homestead exemption under 703 is only $29,275, but it may be applied to either equity in real estate or personal property that is used as a residence.

Additional 703 Chapter 7 Bankruptcy Exemptions

  • Up to $5,850 equity in a motor vehicle
  • A burial plot in lieu of the homestead exemption for up to $29,275
  • A “per item” exemption of up to $725 for clothes, books, musical instruments, animals, appliances, crops, or household goods.
  • Jewelry of up to $1,750
  • Health aids (see 704 exemptions for more detail)
  • As needed for support – wrongful death recoveries
  • Personal injury recovery of up to $29,275

Does a 703 Exemption protect wages, pensions, public benefits, alimony, child support, or retirement savings?

If 703 exemptions are chosen, the amount of numerous benefits is limited to the amount “necessary for support.” This is more restrictive than many 704 exemptions and should be discussed with your bankruptcy attorney prior to choosing the exemptions you want to use.

What is the 703 Wildcard Exemption?

The wildcard exemption allows an exemption for otherwise unprotected assets of $1,550 and any unused portion of the homestead or burial plot exemption.

Can a second mortgage be discharged in Chapter 7 bankruptcy?

A second mortgage (home equity line of credit – HELOC, or other second mortgage) cannot be discharged in a Chapter 7 bankruptcy.

Can you settle a second mortgage after a Chapter 7 bankruptcy?

After your Chapter 7 bankruptcy is discharged, you may be able to eliminate your second mortgage by immediately filing a Chapter 13 bankruptcy. If there is no equity available to satisfy the second mortgage, it can be discharged by filing a Chapter 13 bankruptcy.

Filing Chapter 7 bankruptcy in California is complicated. Contact a knowledgeable bankruptcy attorney to protect your rights and assets.

chapter 7 cost

How Much a Bankruptcy Chapter 7 Will Cost You vs Chapter 13?

The reasons to choose personal bankruptcy Chapter 7 vs 13 vary based on the specifics of the situation. When someone is ready to file bankruptcy, they are usually strapped for cash, so the fact that the bankruptcy Chapter 7 cost is lower than a Chapter 13 bankruptcy may be a factor in the type of bankruptcy they file. Bankruptcy is a legal process that allows individuals who have more debt than they can pay to get a fresh start.

What is the difference between Chapter 7 bankruptcy vs. Chapter 13 bankruptcy in California?

Chapter 7 bankruptcy is considered a reorganization that allows some assets to be liquidated and the proceeds used to repay a portion of the debts and eliminate any that cannot be paid with the existing assets. The person filing can choose to exclude some of their assets using a 703 or 704 exemption. A Chapter 7 bankruptcy is faster than a Chapter 13 bankruptcy.

Chapter 13 bankruptcy combines a repayment plan that can extend across three to five years. Some debt may be discharged, and some will be repaid with the payment plan that allows you to keep your property. A liquidation test is required to demonstrate that the unsecured creditors would receive at least as much as they would have received if a Chapter 7 bankruptcy were filed.

What are the types of bankruptcies for individuals in California?

Both individuals and businesses can file a Chapter 7 bankruptcy. Individuals can also file a Chapter 13 bankruptcy, but legal business entities such as partnerships, LLCs, and corporations cannot file a Chapter 13 bankruptcy. There are also limits based on the amount of unsecured debt and secured debt a debtor can have in a Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, there are income limitations. If the person makes over the limit they may not qualify to file.

How long does it take for a discharge?

While a Chapter 7 bankruptcy could be completed in three to six months, in California, it typically takes nine to eighteen months for the court to issue the discharge letter.

Because a Chapter 13 bankruptcy involves a long-term repayment plan, it will take from three to over five years to discharge a Chapter 13 bankruptcy.

What happens to property owned by the debtor?

This is an area where there is a big difference in Chapter 7 vs Chapter 13 for individuals. In a Chapter 7 bankruptcy, the bankruptcy trustee can sell all non-exempt assets and use the proceeds to pay debts. There are two types of exemptions. You can learn more about them in this article.  There are nuances to the exemptions that can make a big difference in the outcome. A knowledgeable bankruptcy attorney is a valuable asset when making important decisions about your filing.

In a Chapter 13 bankruptcy, the debtor keeps their property but they must pass a liquidation test and repay unsecured creditors the value of their nonexempt property.

What are the benefits and drawbacks of each type of bankruptcy?

The benefits of a Chapter 7 bankruptcy include:

  • It is faster than a Chapter 13 bankruptcy so the debtor gets their fresh start quicker and can begin rebuilding their credit and getting on with their life faster.
  • Unsecured debts do not have to be repaid.
  • It costs less than a Chapter 13 bankruptcy.
  • People can qualify to buy a house two years after they file bankruptcy
  • The debtor may be able to keep their home if the equity is protected by an exemption and they are able to bring or keep their payments current
  • The debtor may reaffirm some debts in lieu of forfeiting the property associated with the debt
  • Ability to redeem property that secures a debt

The drawbacks of a Chapter 7 bankruptcy include:

  • The debtor forfeits nonexempt assets
  • It will have a negative effect on the debtors’ credit rating for a decade
  • Some people feel guilty about not paying their debts even though the process is legal
  • It does not provide a lot of time to bring a mortgage current to avoid foreclosure

The benefits of a Chapter 13 bankruptcy include:

  • Your assets are not forfeit
  • The court establishes a payment plan you can afford
  • The bankruptcy falls off your credit report seven years after you file
  • The ability to cramdown loan amounts on personal property and investment properties
  • You can eliminate second mortgages if they are not secured by equity in the home

The drawbacks of a Chapter 13 bankruptcy include:

  • If you have a closely held LLC or other business, it cannot be included
  • Chapter 13 bankruptcy costs more than a Chapter 7 bankruptcy
  • It takes years to get the discharge
    • It may take longer to buy a home

How much does a Chapter 7 bankruptcy cost?

The costs associated with a Chapter 7 bankruptcy including the filing fee, which is currently $335, and the bankruptcy lawyer fees which vary between $1,000 to about $2,500 in California. You will also have to appear in court, so if you do not have paid time off, the cost of lost wages should also be considered.

You may also be required to take a credit management course that can cost anywhere from $20 to over $100.

How much does filing Chapter 7 cost vs Chapter 13?

 

Type of Fee Chapter 7 costs Chapter 13 costs
Filing fee $335 $281 – $310
Attorney fees $1,000 – $2,500 Around $4,000

Can you change from a Chapter 7 bankruptcy to a Chapter 13 or vice versa?

Yes, before the case is discharged, you can change a Chapter 7 filing to a Chapter 13. When you switch from a Chapter 7 to a Chapter 13 filing, there are no additional court costs, however, your attorney fees will be higher.

You may also switch from a Chapter 13 to a Chapter 7 if you meet the income limitations. You will have to pay the $25 difference in court filing fees if you make this switch.

What is redeeming property in a Chapter 7 bankruptcy?

If you have an asset that secures debt, for example a wedding ring or an RV, if the asset is worth less than you owe on it, you may be able to keep it by redeeming the property. In order to redeem an asset, you will have to be able to pay the current value of the asset to the creditor in one lump sum. Even during bankruptcy, you may be able to borrow in order to redeem an asset. You may also be able to borrow from your friends or family.

For example, if you bought a travel trailer to live in that depreciated as soon as you drove it off the lot, the value of the trailer may be less than you owe. If you can come up with the money to pay the value of the trailer to the creditor, you can redeem the trailer without paying the full amount owed.

Only tangible personal property is eligible for redemption. You cannot redeem real estate or intangible property such as stocks, bonds, or life insurance contracts.

If you and the creditor do not agree on the value of the asset, the bankruptcy court will hold a hearing to determine its value.

What is a cram down?

If the amount owed on a secured debt is more than the value of the asset securing the debt, you can cram down the amount you owe as a secured debt to the value of the asset. Any additional amounts are added to your unsecured debts and balances that are not covered by your Chapter 13 payment plan will be discharged in the bankruptcy. You must not have bought the asset in anticipation of bankruptcy (2½ years for cars and a year for other personal property).

Are there other ways to keep assets when you file Chapter 7?

Yes. The one thing not to do is attempt to hide assets. If a debtor is dishonest during the bankruptcy process, they may not be successful in getting their debts discharged and may face fines or even jail time for fraud.

However, if the debtor will be able to make payments on a specific debt and they want to keep the asset that secures the debt, they can reaffirm the debt. Reaffirming the debt is a legal word for saying that they agree to make payments on the debt. They must be current on the debt in order to reaffirm the debt. If the debt is in arrears, they are not allowed to reaffirm it.

How do you pay a bankruptcy lawyer?

When you file a Chapter 7 bankruptcy, most of the work is done early in the case. Because of that, many attorneys require debtors to pay the attorneys fees before they file. Some will allow you to pay in installments but will not file the case with the court until the debtor pays the full fee. If you file bankruptcy, your obligation to pay any debts that you are not going to reaffirm ceases immediately and creditors cannot call or write you attempting to collect the debts. If you have been making large payments on your debts each month, you may be able to pay the attorney instead of your creditors with your income the month you file.

Many bankruptcy attorneys are willing to allow payment plans to cover their fees in a Chapter 13 bankruptcy because their work is spread out over several years. Your repayment plan can include your attorney’s fees.

Do you need a lawyer to file bankruptcy?

While it is possible to file bankruptcy on your own, many do-it-yourself bankruptcies fail. Filing Chapter 7 bankruptcy in Los Angeles, meeting filing deadlines, choosing the type of bankruptcy, and choosing which exemptions to use are complex decisions that novices often do wrong. It would be easy to lose more than you save in attorneys’ fees with one wrong decision.

Call our office for a 100% Free Consultation today.

order of discharge bankruptcy

Does Order of Discharge Chapter 7 Bankruptcy Mean End For your Case?

What is Order of Discharge Chapter 7?

An order of discharge is a court order that discharges (eliminates) debts the creditor owed.

What is a Chapter 7 bankruptcy discharge?

A Chapter 7 bankruptcy discharge releases the debtor from personal liability for the debts. The creditor is barred from taking any action to collect the debt once a Chapter 7 discharge letter is issued by the bankruptcy court.

The creditor’s legal obligation to repay the debts is eliminated. The creditor does not have to repay the debts discharged in bankruptcy.

After a Chapter 7 discharge, can creditors attempt to get you to pay unpaid debts that were discharged?

As long as no fraud or misconduct occurred in connection with the bankruptcy filing or debts, the debts discharged during the Chapter 7 bankruptcy are not collectable by the creditor. Debts that can be discharged include:

  • Accounts that were referred to a collection agency
  • Credit card debts (including overdue charges and late fees)
  • Personal loans from friends, family, credit unions, and employers
  • Past due utility bills
  • Unpaid medical bills
  • Dishonored checks
  • Business debts
  • Limited student loans (requires proof of undue hardship)
  • Deficiency balances resulting from repossession
  • Auto accident claims (unless the claim involves drunk driving)
  • Past due rent owed under lease agreements (includes past due rent)
  • Civil court judgments (except judgments for fraud)
  • Tax penalties and unpaid taxes past a certain number of years
  • Attorney fees (excluding child support and alimony awards)
  • Revolving charge accounts (except extended payment charges)
  • Overpayments by social security
  • Veteran’s assistance overpayments

What happens after Chapter 7 discharge?

A bankruptcy is supposed to give you a fresh start – a “do over” to begin your financial life unencumbered by debts that you cannot afford to pay. After discharge, you can begin making financial plans, budgets, and once again dreaming of a future without the weight of unsustainable debts weighing you down.

What happens to your credit rating after a Chapter 7 discharge?

Your credit rating will generally take a hit of 100 points or so when you file a Chapter 7 bankruptcy. As soon as the bankruptcy is discharged, you can begin rebuilding your credit. The discharged debts will remain on your credit report for up to seven years and the bankruptcy will remain for a decade.

What steps can you take to rebuild credit after a Chapter 7 discharge?

Recovering from bankruptcy Chapter 7 requires a commitment to build your credit. Common ways to improve your credit rating include using secured credit cards that you pay on time or buying something on credit that does not require a credit check and making timely payments.

If you are diligent about building your credit, your credit rating may be sufficient for you to purchase a house in about two years if you’ve saved enough for a down payment.

  • If you have a mortgage, pay it before the due date.
  • Monitor your credit reports at the credit agencies
  • Take action to correct errors
  • Get a secured credit card
  • Get a credit builder loan
  • Use a co-signer
  • Pay your bills before the due date

Although it will not build your credit score, saving a nest egg is one way to increase your desirability to potential creditors. Another way is to build your skills and leverage them to increase your income with a new job or a side gig.

If you went into bankruptcy while your home was in foreclosure, what happens after the discharge?

If you are able to bring your mortgage payments current while the foreclosure is delayed by the bankruptcy, you will be able to keep your home if all your equity is protected by an exemption. If you are unable to bring the payments current and maintain them, you may still lose your home to foreclosure.

A Chapter 7 bankruptcy can provide you with time to sell your home to avoid a fire sale where you will lose equity in a foreclosure. Once the Chapter 7 bankruptcy is discharged, the foreclosure process after chapter 7 discharge allows your home loan to be foreclosed if your payments are not current.

What is included in a Chapter 7 discharge letter?

  • Names of debtors
  • Case number
  • Court where bankruptcy was filed
  • Debtor is entitled to a discharge
  • Orders discharge of debts
  • Date of the discharge
  • Name of the judge

If a debt collector sends you a letter after you receive a Chapter 7 discharge, what can you do?

The Chapter 7 discharge letter also serves as an injunction that prohibits creditors from continuing collection attempts. 11 U.S. Code § 524 is a Federal law that applies when creditors attempt to collect discharged debts. Essentially, the discharge letter is a court order and creditors who continue collection efforts are in contempt of that court order. Contact a bankruptcy attorney for assistance if a creditor will not cease collection attempts.

Getting a letter from a debt collector after bankruptcy Chapter 7 indicates you should contact the creditor and let them know your debt was discharged in bankruptcy. If the creditor continues collection attempts after you advise them that the debt is discharged, you should contact a knowledgeable bankruptcy attorney nearby as the creditor is violating a court order.

If the creditor is deliberately ignoring the injunction against collection attempts, they may owe you restitution.

Do you still owe your creditor after a Chapter 7 bankruptcy is discharged?

If your debt was discharged under the Chapter 7 bankruptcy, you no longer owe the creditor any money.

Some debts are not dischargeable in a Chapter 7 bankruptcy although most of those debts do not involve creditors. The following obligations are not dischargeable.

  • Family support payments including child support and alimony. This includes debts you owe to your former spouse or children as the result of a divorce settlement.
  • Recent tax obligations (less than three years old)
  • Old taxes if a return was not filed. Time is counted from the time the return is filed, not the due date.
  • Payroll taxes withheld from an employee’s check that are due to the government.
  • Judgments related to drunk driving including liabilities for injury or death stemming from operating a vehicle while impaired.
  • Student loans (with rare exceptions)
  • Money you borrowed in order to pay an obligation that was not dischargeable. For example, you cannot borrow to pay back child support and then discharge the debt in bankruptcy.
  • Penalties the government imposes as fines or forfeitures that are punishments.

Can you reaffirm a debt when you file a Chapter 7 bankruptcy?

Yes, under certain conditions it is possible to reaffirm a debt. Reaffirming a debt means that you do not want that particular debt discharged and you are affirming your intention to continue to make payments on the debt. If you have equity in the asset, you must have an exemption to protect the equity or reaffirming the debt will not protect it from being sold to satisfy your debts.

Also, if you want to reaffirm a debt, your payments on the debt must be current.

Chapter 7 bankruptcy can be a complex process and mistakes can be costly and prevent you from getting the fresh start you need. Contact a knowledgeable bankruptcy attorney to help you through the process.

Do I Need A Will Or A Living Trust?

Do I Need A Will Or A Living Trust?

Everyone needs to take care of their estate planning needs. Deciding if you need a last will or a living trust can be a confusing thing. In California, laws allow you to use a living trust, a will, or both documents in your estate planning. To determine which will work better for your needs – a will or a living trust – you need to understand the differences between the documents so you can tell which will best suit your needs.

The Specifics of a California Will

A will is a document that leaves specific instructions for how you want things carried out after your death. These instructions will include which people and charitable organizations are to receive your property, which property, and how much of it. California law allows you to designate an executor, who will carry out the wishes and orders as you indicate them in your will. You can also appoint a guardian for your minor children, beneficiaries for any personal property, real estate, and your financial assets after your death.

The Specifics of a California Living Trust

You create a living trust – as the name implies – while you are living. You put the property into the trust, and your designated trustee manages it on behalf of the beneficiaries that you select. Living trusts allow you to pass on your property to beneficiaries when you die without needing a will or without having to incorporate the probate process. You can use a living trust to make sure an individual that you trust manages your assets if you become incapacitated before your death.

Combining the Will and Living Trust

You can use a living trust in conjunction with a will if you wish, according to California state law. There are benefits to using both. You can use the will to name a guardian and executor, which you can’t do with the trust.

The trust, however, allows you to transfer your property directly to your beneficiaries without it going through probate, which the will would require. If you have young children, you can use the will to name a guardian for the children and use the living trust to provide funds for the care of the children and any future expenses, such as educational expenses. When you have minor children, your estate can benefit by incorporating both documents.

Other Things To Take Into Consideration During Estate Planning

When deciding if you need a living trust or a will or both, you should look at your overall situation. While not all California residents need a living trust, some can benefit significantly from adding the document to their estate plans. To determine which is best for your California estate planning needs, you should consult with an attorney who handles estate planning.

Regardless of your age or assets, you need to plan so your wishes can be followed through with after your death. Proper estate planning can be very beneficial to your loved ones and help reduce their stress levels during a trying time. If you would like to learn whether a living trust or a will works best for your estate planning needs, call The Legal Reps, (855) 529-7371 today.