The goal of any bankruptcy is simple. Keep your stuff, keep your privacy, and relieve your debt. Which type of bankruptcy you file and how much debt you will be able to get rid of mostly depends on your current income. Assets matter too. If you have a lot of luxury assets they will be looked at along with your income to determine your overall net worth. If your income is relatively average and you don’t have many luxury assets you will probably qualify for a Chapter 7.
If your income is too high you can still benefit from another type of filing to help reorganize your debts, control interest and fees, make more realistic payments, and catch up on mortgages or car loans. Read on to learn a little about the different types of bankruptcy filings or just give us a call. We are happy to answer questions via phone or email. Reach a bankruptcy attorney today at 619-296-5884 or email Nicole Christilli at firstname.lastname@example.org. Nichole believes in open communication with her clients; she is widely available to them outside of office hours by cell-phone and email.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy let’s you keep your personal property, your car, your retirement accounts and between $75,000- $175,000 of equity in your home while discharging all of your unsecured debt like medical bills, credit cards, etcetera. Filers who make less than the state’s median income for their family size automatically qualify. You can find California’s median income for 2016 here: (https://www.justice.gov/ust/eo/bapcpa/20151101/bci_data/median_income_table.htm)
If your families income is higher than this it is highly possible you can still qualify but will have to show that certain expenses of yours are higher than average or that you meet one of a few exceptions.
Chapter 13 Bankruptcy
Many people file a Chapter 13 simply because they exceed the income limits for filing a Chapter 7, but a Chapter 13 is also extremely useful for catching up on delinquent mortgage or car payments. The moment you file for any type of bankruptcy the federal government requires creditors to stop all collection attempts until a bankruptcy trustee can sort out your affairs. In Chapter 13 this gives you 3-5 years (depending on your plan) to pay back arrears without accruing debilitating penalties or running the risk or having your property foreclosed or repossessed while you try to catch up on payments.
Another helpful aspect of a Chapter 13 is that it allows a skillful attorney the ability to reduce the amount you owe on property to the amount that property is actually worth. This is called lien stripping. For example: If you lease a car with a current blue book value of $10,000 but actually owe $14,000 then a Chapter 13 can reduce the amount that you owe to the actual value. In this example you would pay only the $10,000 for the car (in payments over 3-5 years) and afterwards the remaining 4,000 would be discharged. The same concept works on junior mortgages too. If you have a second or third mortgage and your house isn’t even worth the value of your 1st mortgage the bankruptcy court understands it is unreasonable to expect you to pay for additional mortgages that exceed the value of your property. While they can’t do much to modify your first mortgage, California bankruptcy courts can eliminate your liability for unsecured second or third mortgages.
Our experienced attorneys will design a plan for you to repay your debts in a way that you can actually afford. Once approved you will make your plan payments for the prescribed 3-5 years and when you have completed your plan any remaining unsecured debt is discharged.
Chapter 11 Bankruptcy
Often misnamed a business bankruptcy, Chapter 11 is in fact not “all business”. Higher income individuals can also use the provisions of Chapter 11 if they fall outside of the debt limits for Chapter 13. Debt limits in Chapter 13 are currently close to 1 million for secured debt and 350,000 for unsecured debt. If an individual owes more than this they will need to file Chapter 11 to reorganize their debt.
Chapter “20” Bankruptcy
There isn’t actually a Chapter 20 we can file, but by combining a Chapter 7 followed by a Chapter 13 we can eliminate all liability for unsecured mortgages. By doing a Chapter 7 first a debtor can be relieved of personal liability for unsecured mortgages but a junior mortgage holder would still have rights to the property should it become more valuable in the future. You can eliminate a junior mortgage holders rights entirely by filing a Chapter 7 first to remove personal liability for the unsecured debt and then file a Chapter 13 to have the unsecured debt discharged entirely.