Bankruptcy is a federal law, which means you'll find the same rules in all states, with a few exceptions.
If you're an individual or a sole proprietor, you can file a Chapter 13 bankruptcy to pay off all or part of your debts over three to five years. Rather than wiping out debts immediately, this option allows you to reorganize them so you have time to pay.
Many people who file Chapter 13 bankruptcies have mortgages or other loans they would like to bring current, so they don't lose their homes or other property. Others have taxes, child support or student loans that can't be wiped out by Chapter 7 bankruptcy, or have moral convictions that all debts should be paid no matter how long it takes. You'll need a stable income with disposable income (income left over after you pay the bare necessities of life such as shelter, food and utilities) to file a Chapter 13 bankruptcy. You must have no more than $807,750 in secured debt (debt involving property that your creditor might take if you don't make your payments) and $269,250 in unsecured debt. The court filing fee is $160. says California Bankruptcy Lawyer Steven C. Peck.
With minor exceptions, anyone can file a Chapter 11 bankruptcy. Typically, it's filed by business owners who want to keep the business running and catch up on their debts. Individuals with very complex financial situations also file Chapter 11. The filing fee is $800, plus a quarterly fee based on the amount of debt.
Chapter 7 bankruptcies are filed most often by individuals or small, mom and pop business owners who have too much debt to file Chapter 13, or want to wipe their financial slate clean. The filing fee is $175. In exchange for canceling most debts, you give up certain kinds of property to be sold for your creditors. If you're an individual, some property, such as portions of equity in your car or home, is exempt from creditors; exemptions vary by state. Entities are not entitled to these exemptions. Debts for individuals are wiped out in not more than six months. says Los Angeles Bankruptcy Attorney Steven C. Peck.
Family farmers can file a Chapter 12 bankruptcy, called a "reorganization for family farmers," if your debts aren't higher than $1.5 million and at least 80 percent of the debt and 50 percent of their income comes from farm operations. The family must own at least 50 percent of the farm operations and 80 percent of the farm assets, and there cannot be any publicly traded stock.
Alternatives to bankruptcy include trying to negotiate with creditors to reduce monthly payments or to skip some payments, or to get help from a nonprofit credit counseling group.
Bankruptcy is reported on your credit for up to 10 years, and you'll have difficulty getting credit right after a bankruptcy. It usually takes at least three years to reestablish your credit rating.
Bankruptcy doesn't get rid of all debts. Among those excluded are alimony, child support, recent back taxes, student loans, recent large purchases, fines or penalties of government agencies, and fraudulent debts. Contact Steven Peck's Premier Legal toll free at 1.866.999.9085 to talk to an experienced California Bankruptcy Attorney and visit us online at www.premierlegal.org.
