The word bankruptcy is very intimidating to many Newport Beach, Huntington Beach and Irvine, California residents.  It can evoke a bunch of uncomfortable emotions such as embarrassment, shame and guilt. In reality, it should be thought of as a positive as it can many times enable individuals, couples and families the ability to get a fresh start financially get the breathing room they need. Most people really don’t have a good idea of what bankruptcy actually is and what it involved in filing bankruptcy. It is common for Orange County residents to focus on the negatives of filing bankruptcy such as that it may prohibit them from making purchases in the future. They also focus on the fact that it can haunt their credit score or rating for years after the filing is finalized. The truth is so can months or years of late mortgage, vehicle credit card and student loan payments. If you had something repossessed or foreclosed on that follows you around as well.

So, what exactly is bankruptcy?

Chapter 7

The most common type of bankruptcy filed in Orange County, California is a Chapter 7 bankruptcy. This form of bankruptcy is essentially a liquidation bankruptcy plan. This has to do with the fact that some of the assets a person owns may be sold, or liquidated, in an effort to repay some of the debts that they open. According to bankruptcy law there are certain properties that are exempt under state law. Anyone considering filing bankruptcy in Orange County should clearly understand what these protective properties are so that they do not face an unpleasant surprise once they are ready to file. Some of the property that is considered exempt includes things like household furnishings, and automobile, clothes, and other personal items that debtors cannot use to repay the debts that a person owes.

Secured debts, such as a mortgage or vehicle, often afford the person filing bankruptcy options regarding keeping them or liquidating  them. For instance, if you have  a car loan you can either choose to allow the bank, creditor or lender to take back or repossess the vehicle or you can opt to keep making payments under the existing contract. In some cases you can simply pay a lump sum to the creditor and maintain the property. It is important to note that the lender will have to agree to the terms.

Most people, but not everyone qualifies for a Chapter 7 bankruptcy. One example of an individual that would not qualify would be if the person had enough income at their disposal to qualify for a repayment plan under Chapter 13. It’s also important to keep in mind that bankruptcy does not wipe out every type of debt out there. While things like unsecured loans, credit card debt, and medical bills can be covered by a Chapter 7 bankruptcy, things like student loans, spousal support, tax debts, and child support will not be covered.

Chapter 13

Chapter 13 bankruptcy is a repayment plan that allows an individual to pay back their debts over the course of 3 to 5 years. How much a person has to repay will be dependent on the amount of money that they earn, the amount of money that they owe, and the amount of money that creditors would have gotten if the person had filed instead for Chapter 7 bankruptcy.

The federal government has set certain debt limits. A person cannot have more than $1,149,525 in secured debt or more than $383,175 in unsecured debt.

Individuals who have a number of secured debt may find that the fact that they can make up any missed payments so that they can avoid something like a foreclosure or repossession. In this case, considerations such as this make Chapter 13 a good option for some. These past missed payments can be included in a repayment plan, which allows a person to make up for them over an extended period of time.

Other Bankruptcies

There other types of bankruptcies including Chapter 11 and Chapter 12. Chapter 11 bankruptcy is the one used by businesses that are struggling financially who are looking for an option to help them reorganize. Individuals may also be able to use Chapter 11, but they generally don’t because of the fact that it is quite time-consuming and very expensive.

Chapter 12 bankruptcy is very similar to chapter 13, but is only available to individuals for whom 80% of the debts they have come from operating a family farm.

In Summary

Whether or not to actually file for bankruptcy is a decision that a person must carefully weigh. While it may provide some relief by allowing them the opportunity to get out from under crushing debt, it can also haunt their credit for a number of years. Individuals may find that it is quite difficult to qualify for an auto loan, a credit card, or a mortgage.

Not everyone will qualify for bankruptcy and not everyone actually wants to go through that once they learned little bit more about the terms and conditions that are placed upon them. For example, if an individual’s debts are mostly from the types of debts that are protected from bankers to filings, such as student loans or alimony payments, they may find that filing for bankruptcy really provides them no relief whatsoever. There are also other options available to individuals that are looking to get their debt under control without having to actually go through a bankruptcy filing. Repayment plans or debt consolidation are both options a person should seriously consider before making their final decision.

Lastly, it is also very important to keep in mind that filing for bankruptcy is not something that is free. An individual may find that they simply cannot keep up with their regular monthly bills so they turn to bankruptcy only to find that the filing fees add an extra expense that they may not be able to afford. Since mostOrange County California Bankruptcy Attorneys will not accept any type of payment plan, preferring instead to get paid up front before the filing actually occurs, a person will need to know exactly how much it is going to cost for them to start getting out from under the debt that is causing them so much anxiety and stress.

To learn more about filing bankruptcy in California, what it’s benefits are and how a Newport Beach Bankruptcy Attorney can help you do not hesitate to contact bankruptcy attorney Dennis Connelly. He proudly serves those in need of debt relief in Irvine, California, Huntington Beach, California and Newport Beach, California.