Bankruptcy can have an involved filing process, and it’s important to be sure that bankruptcy is the only option available to help with your financial situation. Each state has additions to bankruptcy law but the federal government determines how bankruptcy works.
What do you need to start the process in California?
Let’s take an in-depth look.
How to File for Bankruptcy in California
The first step is to speak with a professional familiar with debt settlement programs and debt negotiation. Bankruptcy may not always save your home or property, so it’s worth speaking with someone skilled in the process to see if there are other options available for you.
You should also ask about the different types of bankruptcy and how they work to alleviate your financial stress and structure your debt for repayment. There are pros and cons to each and one may be more suitable than the others.
The process of bankruptcy is the same in every state as bankruptcy law is governed by federal mandate, but each state has a different process for exemptions.
Before beginning the process, speak with a credit counseling provider to make sure all other options have been considered and consider bankruptcy as an absolute last resort.
Types of Bankruptcy
The next thing to consider when looking into bankruptcy is the type that’ll work best for your financial situation. Whether you’re a business or an individual filing bankruptcy also affects which types are available for you.
The most common form for individuals. It’s a liquidation proceeding that allows the court to sell all of your assets for cash to pay your creditors. You may be eligible to keep assets that are exempt according to federal and state law.
There are minimum and maximum requirements to qualify for chapter 7.
One of the maximums applies to your total income which must fall below a certain threshold in order to qualify. You can’t file for chapter 7 again for 6 years after completing the process one time.
A reorganization option. Chapter 11 is usually used by corporations and partnerships because of its complexity. The debtor may keep all assets and continue to operate the business while working on a reorganization plan. The strategy here is to set up the debtor with a plan to repay all debts.
A reorganization plan for individuals. It’s a repayment plan for wage earners and is often referred to as the “wage earner” option. Under chapter 13, the filer will pay debts off over a 3 to 5 year period and the individual filing may keep their property. As with chapter 7 bankruptcy, there are limits to who can qualify for chapter 13 bankruptcy.
Bankruptcy and Your Credit Score
Bankruptcy is a tradeoff. It’s an opportunity to wipe away your debt and start fresh while building better credit habits. But at the end of it, bankruptcy tells lenders that you’re a credit risk, and this reflects on your credit for 7 – 10 years. It’ll also affect your credit score and it’s likely to cause a drop.
It’s important to note that despite the bankruptcy appearing on your credit report, it’s not a direct bar on obtaining credit at some point in the time that it’s in effect. The interest rates may just be really high.
Where Bankruptcy Doesn’t Help
There are certain debts that aren’t discharged in bankruptcy and in the event you have substantial amounts of these types, bankruptcy won’t help.
- Alimony and child support
- Certain unpaid taxes and tax liens.
- Student Loans (Not impossible, but extremely difficult to discharge)
- Dents for willful and malicious injury to another person or property.
- Debts for personal injury or death caused by motor vehicle accidents.
- Debts that haven’t been listed in the bankruptcy filing.
Other Debt Relief Options
Consider meeting with your local debt negotiation specialist or looking into debt settlement services before considering bankruptcy of any kind. The effects of bankruptcy are long-lasting and may prevent you from achieving your financial goals.
Debt consolidation is a great option to look into as there’s an opportunity to restructure debt in a way that makes it easier to pay each month.
Lastly, consider credit counseling to help set up a plan of attack to tackle your debt and make montly payments more manageable.
Alleviate Finacial And Credit Counseling
Considering bankruptcy? Speak to our debt negotiation specialists to make sure you’ve exhausted all other options. Here at Alleviate Financial Solutions, we work hard every day to get the best debt relief results for individuals in situations like yours. Our debt negotiation services will deliver the relief you’ve been looking for.
You’ll be able to free yourself from your debts faster than without debt consolidation, often in a few years. When paying unsecured debt like credit card debts, the interest charges can eat up most of your monthly payment, making it take an extremely long time to pay the principal balances down.
Professional assistance from seasoned experts in debt consolidation can provide assurance that you’ll get the most significant reductions in your debt balances possible. Our seasoned negotiators deal with creditors every single day to get the lowest rates in interest charges, late fees, and over-the-limit fees that have been making it so difficult to pay off debts.
Once our team reaches an agreement with your creditors, you’ll be set up on a program with one lower yet more impactful payment into a debt repayment savings account.
No longer will you be dealing with paying multiple payments that cost you more but never move the needle on getting out of debt. One simple payment helps you budget with the peace of mind that if you stay on track until the program’s end, you’ll pay off the debt and be financially free again.
As part of our commitment to your financial well-being, we help you establish intelligent financial habits to get you out of debt faster and stay out of debt long-term. We regularly publish resources for getting out of debt on our blog and YouTube channel to help you stay out of a bad financial situation in the future. Once we help you escape the grip of unsecured debt, it’s our mission to help keep you from ever finding yourself in that stressful situation again.