Santa Ana Bankruptcy Attorneys
Serving Clients in California Who Are Struggling with Debt
When it comes to filing for bankruptcy, it is not the weapon it used to be. The law changed in 2005 and in net effect, less people qualify now for bankruptcy than before. Taxes, student loans, and judgment liens are most times still there after you complete the bankruptcy process. That said, it is still, by far, the most effective debt relief tool available to many people who are struggling with debt.
Large medical bills, especially when combined with a loss of employment can create a nearly impossible financial hole to climb out of. Filing for bankruptcy can help reduce or even wipe away your medical bills and can also stop harassing creditors from turning up on your doorstep, especially if they are being unfairly pushy or are fraudulently attempting to take more than you owe.
Although your student loans will generally not disappear, bankruptcy can help you to reduce the amounts owed so you can pay them off in a reasonable time frame. If you are currently facing financial issues, then bankruptcy might be the best and most logical way to get a fresh start and take control of your future.
What Is the Bankruptcy Act of 2005?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect on October 17, 2005 and provides the most significant (and controversial) overhaul of the bankruptcy system in over 25 years.
Backed by the credit card, retail and banking industries, the new legislation makes it more difficult for people to erase all of their debts in bankruptcy, while forcing others on payment plans instead.
What Is the Means Test?
The biggest impact of the 2005 law change was the “Means Test”. This test determines if debtors “qualify” for bankruptcy. The means test is a fairly complex math formula that has been created, taking into consideration where you live and the costs related to your income to determine what your “Means” are. If you are above a certain level of “Means,” it is “presumed” that you do not qualify for bankruptcy. If you are below that number, you are presumed to qualify.
As of 2020, the maximum gross annual income limits to automatically qualify for Chapter 7 bankruptcy in California are:
- One Earner: $62,171
- Two People: $82,418
- Three People: $91,605
- Four People: $105,232
Chapter 7 & Chapter 13 Bankruptcy
If you qualify and have no assets (of significant value) a Chapter 7 bankruptcy is a very effective (some debts wiped out entirely), relatively quick (3-4 months average) and financially painless process.
Chapter 7 is often referred to as a “No Asset” case and is not terribly complex, although each case is different. The only real expense is attorney fees and court costs, so it is generally far less expensive than other alternatives.
A major hurdle for homeowners, and other secured debts like autos, is that their debts are not going to be forgiven unless they are willing to give up the house or car too. If you want to keep property attached to secured debt, generally you must pay for them.
You can seek bankruptcy protection, which is why many homeowners file a Chapter 13. In a Chapter 13 bankruptcy, a “Plan” is filed, argued, and so ordered by the judge. This Plan lays out what you are going to pay and to whom. They usually last for 3-5 years.
What Are the Benefits of Filing for Bankruptcy?
Filing a bankruptcy petition can be beneficial in a wide range of circumstances, including:
- If you are at risk for foreclosure on your home, declaring bankruptcy can stop this action from going forward and even establish a payment structure that will help you pay off your arrears.
- Bankruptcy might allow you to take back an automobile that has been repossessed by a creditor.
- Large medical bills, especially when combined with a loss of employment can create a nearly impossible financial hole to climb out of. Bankruptcy can help reduce or even wipe away your medical bills.
- If your utilities have been shut off, bankruptcy will help restore services, so you do not have to live in darkness.
- Bankruptcy can end wage garnishment, which means you will be able to afford life’s necessities.
FAQ: Is Bankruptcy Right for Me?
Question #1: When should I file for bankruptcy?
A: The decision to file for bankruptcy is often one of the hardest choices that a person must make in their lifetime. Poor planning can often make the process even harder. It goes without saying that filing for bankruptcy should be a last resort and should only be done when all other methods of satisfying one’s financial obligations have been exhausted.
However, if your situation has become so severe that you are in danger of foreclosure, garnished wages, repossessions, or are facing debts that you are in no position to pay, then putting off the inevitable can have devastating consequences. Procrastination can cost you your car, your wages, and even your home. Filing your case in a timely fashion might spare you these losses.
Question #2: Will all my debts be forgiven if I file bankruptcy?
A: Many people mistakenly believe that filing bankruptcy will “wipe the slate clean” and absolve them of all their financial obligations, but that is not necessarily true all the time.
Even if you file for bankruptcy, you will still need to pay you child support, back taxes, federal student loans, or debts incurred as a result of fraud or theft (writing bad checks, for example).
If you are not clear on which debts will and will not be discharged, then you need to speak with an experienced attorney or reputable credit counselor before filing.
Question #3: What should I know about the bankruptcy hearing?
A: You must be prepared for the hearing. Failing to show up or properly prepare for your hearing will not buy you more time. If you are not present at the time of your hearing, your case could be dismissed, and you will have to re-file at a future date. You could also be forced to pay court costs.
Not having all the required forms and documents could result in not getting all your debts included in the bankruptcy, which means that you will still be responsible for them even after you file. It is very important to arrive for the hearing on time and that you bring all your supporting documentation. You will also need to bring a valid photo ID to the hearing.
Please don’t hesitate to contact Fitzgerald & Campbell, APLC so we can discuss how filing bankruptcy can impact your individual situation. Call (844) 431-3851 or fill out our online form to set up a free case consultation today.