What Bankruptcy Can and Cannot Do, Part 1

October 16

bankruptcy lawyer san diegoBankruptcy is a powerful remedy to shield debtors from unfair debt collection and offer them debt relief. However, it doesn’t solve all financial problems. For example, in some situations, Chapter 13 can help, while Chapter 7 cannot. Before you file for bankruptcy, discuss your debts and possibilities with a bankruptcy lawyer San Diego residents trust. In the meantime, read on to find out what you can accomplish through bankruptcy.

What Bankruptcy Can Do

Here are some of the things that filing for bankruptcy can do:

Eliminate unsecured debts. Bankruptcy can wipe out unsecured debt such as personal loans, credit card debt and medical bills. Unless you have a special, secured credit card and the creditor doesn’t have a lien on your property, the creditor doesn’t have the right to any of your items if you fail to pay the debt.

Chapter 7 has a greater capacity to eliminate your unsecured debt than Chapter 13. When a debtor files Chapter 13 bankruptcy, they agree on a debt repayment plan. Though secured debts have priority, the debtor will usually pay back a portion of their unsecured debts, as well.

Wipe out certain types of liens. A lien is a creditor’s conditional right to retain possession of a debtor’s property. Bankruptcy cannot get rid of most creditor liens but judgment liens can qualify for “avoidance” if they meet certain conditions.

A judicial lien is a lien that resulted from a judgment entered against you in a legal procedure. Chapter 7 can allow you to have these judgments removed in the court proceedings. If you decide on Chapter 13, you could include the judgment in a repayment plan, ending in a discharge of the lien. Contact your San Diego bankruptcy lawyer, who will assess if the lien can be handled in the court process.

Reduce secured debt. Chapter 7 bankruptcy cannot help you with secured debt. If you want to keep the property and its market value is less than what you owe, Chapter 13 may allow you to lower your secured debt. You will then pay off the reduced amount through your repayment plan.

There are limitations to secured debt reduction when the property is acquired within a certain time period near the filing. The time limitation depends on the type of loan the debtor wants to cram down. Nevertheless, Chapter 13 is a powerful remedy that can provide huge savings.

Keep certain assets. In a Chapter 7 filing, the debtor can keep certain assets, which are called exempt property. Property that is free from liquidation includes items that are necessary for living and working.

Chapter 13 bankruptcy can prevent a foreclosure and allows you to keep all of your property, including non-exempt assets. In this case, the debtor agrees to make a monthly payment and follow through their repayment plan. The plan can last between three and five years, which is determined by the debtor’s family income.

Stop creditor harassment and collection attempts. Filing bankruptcy can prevent unsecured creditors from taking further action to collect their debt. The Fair Debt Collection Practices Act (FDCPA) shields debtors from unfair or abusive tactics and practices by debt collectors.

In case you are experiencing creditor harassment, consult an experienced bankruptcy lawyer San Diego, who will explain your rights and make sure that your debts are collected in accordance with the law.

Consult a bankruptcy lawyer San Diego

Whether you are considering bankruptcy or are in the process, having a knowledgeable bankruptcy lawyer in San Diego by your side can save you time and money, ensuring that your bankruptcy filing and the ensuing process go smoothly.

Reach out to Chang & Diamond, APC for a free consultation at (619) 312-4900 or (800) 718-8118. Together we will go through your options so that you can start fresh the best way you can!