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Our Team of Bankruptcy Attorneys Can Help

While our office are located in Irvine, California, our attorneys are able to assist with bankruptcy related cases throughout the entire state of California.

 

Bankruptcy is defined as a legal finding that declares the inability or impairment of ability of a debtor whether an individual or a business entity, to pay its creditors.

An insolvent individual debtor, that is a debtor with more liabilities than assets, can use the personal bankruptcy process to legally avoid paying almost all of his or her personal liabilities either temporarily or permanently.

 

Bankruptcy law in United States which is codified in Title 11 of United States Codes as Bankruptcy Code aims to give an honest debtor a "fresh start" in life unburdened by most of his former debts. An individual debtor can seek relief by filing petitions according to the chapters in the code that deal with personal bankruptcy. For individuals, the two most relevant chapters in the code are Chapter 7 and Chapter 13.

 

Chapter 7 gives a discharge to the debtor by allowing a court appointed trustee to liquidate the non exempt assets of debtor and distribute the proceeds among the creditors. Chapter 13 allows the debtors to payoff whole or part of their debts through a trustee according to a court approved repayment plan usually lasting from three to five years.

 

The debtor has to decide which method suits him best. While debtor can get a discharge fairly promptly by filing under Chapter 7, this method might entail losing important personal property like the home, if it is not exempted. On the other hand, Chapter 13 bankruptcy allows a debtor the use of property and consolidates his debts together. However since the debtor has to stick to a repayment plan, he must have a regular income and accept the fact that full discharge can only come at the completion of repayment plan.

 

CONCERNS OF THE DEBTOR
Another advantage to the debtor that results from a personal bankruptcy filing is that all actions already started against the debtor must cease and no further actions can be initiated by creditors once the petition is filed, due to the 'automatic stay' that comes in to effect.

 

Bankruptcy filing is a matter of public record, but in practice hardly anybody will find this out unless they are personally involved in the case. However, the bankruptcy filing will be on the debtor's credit record for ten years.

 

Debtor can hope to obtain fresh credit fairly quickly after he is discharged, in comparison to a heavily burdened debtor. Decision of course depends on the new creditor and is fairly complex with many other factors also contributing.

 

Whether a personal bankruptcy filing will affect the husband or the wife of the debtor will depend on the State the filing is done and on whether some of the debts are secured.

 

In 2005 Congress made several changes to bankruptcy law to prevent abuse. These include, 'means testing' and filing of tax returns to see whether debtors can in fact pay the debts instead of avoiding them, a two year residency requirement in the State concerned to prevent debtors taking advantage of differences between states as to property exemptions etc., and mandatory debt counseling before filing among others.

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by Victor Hobbs