Up to your eyeballs in debt? Behind on mortgage or car payments? Receiving harassing collection calls? Afraid of getting negative reporting on your credit?
If your answer is “yes” and when debt settlement is not an option, bankruptcy might be the best solution. Federal bankruptcy law helps individuals get a handle on their debt by allowing them to request a complete liquidation under Chapter 7 of the Bankruptcy Code and/or a repayment plan under Chapter 13.
- CHAPTER 7
Bankruptcy under Chapter 7 of the Bankruptcy Code is often referred to as “liquidation bankruptcy” or a “straight bankruptcy.” Under Chapter 7, a Bankruptcy Court can relieve a debtor of the responsibility to pay most of his or her debts but still allow the debtor to keep much of his or her property.
A debtor begins the bankruptcy process by filing a petition with his local bankruptcy court. Once the petition is filed, an “automatic stay” goes into effect and the creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossession. Along with the petition, or shortly thereafter, the debtor files various written “schedules” and “statements” to inform the Court of his outstanding debts, his current income and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. Upon receipt of the Petition, the Court appoints a Bankruptcy Trustee to handle the debtor’s case. The Trustee determines what assets, if any, it can collect from the debtor to sell to pay off the creditors. The Trustee can only collect certain assets, known as “non-exempt” assets, from the debtor. The debtor can keep his “exempt” assets if he chooses (and wants to continue to pay for as debts on those assets are not discharged). California law generally exempts a debtor’s home, furniture, furnishings, motor vehicles, and additional personal property up to a certain dollar amount. Most debtors only have “exempt” property. Once the Trustee sells the debtor’s “non-exempt” property, if any, and distributes the proceeds to the creditors, the Bankruptcy Court discharges the debtor’s remaining debt (other than alimony and child support, student loans, most tax obligations, and debts resulting from fraudulent or malicious acts) and concludes the bankruptcy proceeding.
- CHAPTER 13
Bankruptcy under Chapter 13 of the Bankruptcy Code is sometimes referred to as a “wage earner plan.” Under Chapter 13, a Bankruptcy Court can help a debtor reorganize his debts and pay them off over time. Under Chapter 13, a debtor typically keeps all of his or her property. LIGHTHOUSE LEGAL SERVICES encourages this form of bankruptcy for those who want to retain all their valuable assets in exchange for paying a small percentage of their debt over a period of about five years.
A debtor begins a Chapter 13 bankruptcy by filing a petition with his local bankruptcy court. Once the petition is filed, an “automatic stay” goes into effect and the creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossession. Along with the petition, or shortly thereafter, the debtor files various written “schedules” and “statements” to inform the Court of his outstanding debts, his/her current income and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. Within approximately 15 days of filing the petition, the debtor submits a plan to the Court detailing how he will pay off his debts. Under the plan, the debtor must completely pay off certain “priority” debts, such as the costs of administering the bankruptcy, employees’ wages and benefits, debts for undelivered services or goods, and taxes, and pay for any encumbered property he wants to keep. The debtor can plan, based on his ability, to partially pay any remaining debt and ask the Court to discharge the rest. Once the Court approves a payment plan for the debtor, a Court-appointed Trustee begins collecting the debtor’s paychecks and administering the plan. Upon the debtor’s successful completion of the repayment plan, the Bankruptcy Court discharges any remaining debt and concludes the bankruptcy.
Debt Settlement may be a viable alternative to filing for a bankruptcy. LIGHTHOUSE LEGAL SERVICES will help you negotiate with your creditors to reduce your outstanding debt. We pride ourselves in providing competent legal representation to those unfairly being taken advantage of by credit card companies and banks. Some of the advantages of DEBT SETTLEMENT include:
- Avoid bankruptcy: Bankruptcy can hurt your credit, but debt settlement may have less of an impact. You won’t have to worry about going to Court or the hassle of dealing with all the paperwork.
- Avoid unfair collection practices: We prepare letters for you to send to creditors to stop all communications and harassment from debt collectors regarding your debt. The letters will notify debt collectors of our legal representation.
- Single payment: We like to offer one lump sum to creditors when negotiating to reduce your debt. This will allow you to avoid the stress of making monthly payments and interest rates.
- Avoidance of lawsuits and other legal actions: Creditors and/or collection agencies can file a suit to get a judgment lien and garnish your wages or levy your bank accounts. You may be able to avoid these suits through debt settlement.