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Unlock Financial Freedom Understanding Bankruptcy in California

Unlock Financial Freedom: Understanding Bankruptcy in California

Debt has always been a big problem in our country—even before we became a country. When our nation was still a collection of colonies, people borrowed against future expected earnings to buy the things they needed. They were in trouble if the future earnings didn’t come in as planned.

That pattern continues today, primarily through the use of credit cards. We get used to being in debt. Then if a disaster strikes or the debts pile up to the point where they become crippling, repayment becomes impossible.

That’s where bankruptcy comes in. Bankruptcy can provide a fresh start, but you need to understand how it works and its future implications.

Two Forms of Bankruptcy Filing

When an individual files for bankruptcy, as opposed to a business, they usually file under Chapter 7 of the Bankruptcy Code or Chapter 13. Overall, a Chapter 7 filing permits most people to keep all of their assets, and most of your debt is “discharged,” meaning they go away.

In a Chapter 13 filing we develop a payment plan that enables you to pay off your debts without harassment from creditors. A chapter 13 filing is often useful for people who are facing foreclosure on their house; with this form of bankruptcy you can repay your mortgage arrears over a 60-month period, keep your house, and clear your debt.  A bankruptcy attorney can review your financial details and determine which form of bankruptcy makes the most sense or help you find alternative ways to rebuild your finances and credit.

Which Debts Are Covered and Which Ones Are Not?

A bankruptcy can clean the slate to a large degree, but it doesn’t wipe away everything. Child support debts and many court-ordered debts will not usually be removed by bankruptcy. Student loans are becoming easier to discharge in some circumstances, but the majority of student loan debt remains non-dischargeable.

However, bankruptcy can discharge medical debt, one common reason people file for bankruptcy. A medical crisis can be extremely costly, and even people with insurance soon learn that there are limits to what their policies will cover.

Essentially, bankruptcy helps with unsecured debts, meaning debts that are not guaranteed by the value of an asset. Examples of unsecured debt are credit cards, personal loans, payday loans, medical debt, utilities and other debt of that nature.

Secured debt, on the other hand, would be your mortgage or car loan.  Those debts are secured by the house’s or the vehicle’s value. If you don’t pay the debt, the bank can take them back to get their money.

Bankruptcy can stop foreclosure, stop collection lawsuits and prevents or stops wage garnishment and other collection actions.

Need a Fresh Start? Let’s Talk About Bankruptcy Options

When you are deeply stuck in debt, getting out of that hole takes serious planning. I focus my practice on helping people protect their financial futures, and one way I do that is by counseling clients on bankruptcy and available alternatives. You won’t feel overwhelmed and weighed down when you have a way out. And you don’t have to reach rock bottom before finding solutions.

If creditors are harassing you or feel hopeless about your debt situation, call me. I’m here to help.

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Estate Planning Attorney Eric Ridley