Filing for bankruptcy can be likened to a financial makeover, releasing you from a crushing debt load and, ideally, making you a better and more efficient steward of your finances. Bankruptcy is not a birth that happens overnight. It may take several months or even years—as well as a significant amount of time, effort, and money—before you feel the relief of paying off most or all of your debts.
Nevertheless, hundreds of thousands of customers file for bankruptcy every year. This is a step-by-step guide for anyone who wants to know how to file bankruptcy in California under Chapter 7 or Chapter 13.
Filing for Chapter 7 bankruptcy
For several reasons, filing for bankruptcy under Chapter 7 is frequently the first option. The completion time is short—just a few months. Moreover, it’s affordable. Creditors receive no payment from you.
For those who primarily own the necessities for survival and employment and not much else, Chapter 7 bankruptcy is a good option. Since the Chapter 7 trustee, the person handling the case sells pointless luxury goods and gives the revenues to creditors, those with greater assets may lose them in Chapter 7. If you have more equity than you are permitted to keep, you may be forced to give up your house, automobile, timeshare in the Bahamas, baseball card collection, or recreational vehicle.
Filing for Chapter 13 bankruptcy
Chapter 13 refers to the use of a 3-5 year repayment plan to pay back creditors some or all of their debt. All assets are retained by Chapter 13 registrants, and the payment plan offers solutions for difficult financial circumstances.
One way to prevent foreclosure on your house or repossession of your car is to make up for missed payments. Additionally, you can use Chapter 13 to compel a creditor to agree to a payment plan and refund the remaining amount over time if you require additional time to pay off a debt that you are unable to abolish or “discharge” in bankruptcy.
What is this chapter’s main drawback? It might cost a lot. Many people struggle to make the monthly payment. Businesses are unable to file this type of bankruptcy.
Can filing bankruptcy delete your debts?
Numerous debts are eliminated through bankruptcy, including credit card balances, medical expenses,past-due energy bills, personal loans, and more. You can even eliminate your mortgage or automobile bill payment if you’re ready to give up the house or vehicle that secures the loan. Collateralizing an asset creates a “secured debt.” The lender reclaims the property if you fail to make your payments.)
However, you can only pay off some loans. Make sure filing for bankruptcy will eliminate enough debt for it to be beneficial.
Filing for bankruptcy is a drawn-out, difficult, and demanding procedure. But the relief it offers from heavy debt might be priceless. If you are unable to pay off your debts, filing for bankruptcy may provide you relief and a route to a better, more secure future.