Alternatives to Bankruptcy in California

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Discover legal alternatives to bankruptcy in California with Chang and Diamond, APC. Learn about debt management, negotiation options, and more to safeguard your financial future.

Debt Relief Options to Avoid Bankruptcy in California

High medical expenses, loss of income, and unaffordable mortgages push you to consider filing bankruptcy. However, bankruptcy is only one of many debt relief options available for individuals and businesses.

Exploring bankruptcy alternatives can help you avoid the negative aftermath of going bankrupt. You can pursue a loan modification, sell off some of your assets, or seek a debt consolidation loan.

If you’re looking for alternatives to bankruptcy in California, Chang & Diamond, APC, can help. We have provided legal counsel for bankruptcy-related cases for 25 years. Let our attorneys help you explore alternatives to bankruptcy that fit your financial situation and goals.

Understanding Bankruptcy and Its Implications in California

What Is Bankruptcy?

Bankruptcy is a legal process that seeks to provide debt relief to those who cannot repay their debts. The process also aims to help creditors recover payments either through the liquidation of the debtor’s assets or debt reorganization.

As soon as a bankruptcy petition is filed, all legal suits and collection actions by creditors are paused. This automatic stay is one of the main reasons people and businesses seek bankruptcy.

In Chapter 13 bankruptcy, debtors develop a repayment plan to settle as many debts as possible within 3 to 5 years. In Chapter 7, however, a court-appointed trustee will sell debtors’ nonexempt assets to pay creditors. At the end of the process, the remaining debts may be forgiven by the bankruptcy court.

Consequences of Filing for Bankruptcy

Filing bankruptcy may help you get out of debt, but your financial freedom won’t be without consequences. Bankruptcy remains on your credit report for up to a decade, impacting your ability to get future loans with affordable interest rates. In Chapter 7, debtors will lose their nonexempt property and assets.

Fortunately, you can avoid bankruptcy in most cases. Creditors are often open to negotiating new repayment plans, as they allow for higher debt recovery. Exploring bankruptcy alternatives can help you relieve your debt burden with a lesser impact on your credit score and without losing your assets.

With our legal team acting in your best interest, you can explore favorable debt management alternatives.

Alternatives to Bankruptcy in California

You don’t always have to file for bankruptcy to eliminate or minimize your financial problems. Here are a few bankruptcy alternatives in California that may be more suitable for you:

Debt Management Plans

Debt Management Plans (DMPs) are structured programs designed to help individuals manage and repay their unsecured debts more effectively. These plans are typically offered by credit counseling agencies, and they involve a collaborative effort between the debtor, creditors, and the credit counseling agency. DMPs generally involve consolidating payments into a single monthly installment, negotiated with reduced interest rates and favorable terms.

Debt Settlement

Debt settlement involves cooperating with a debt settlement company that negotiates with the creditor to lower your total debt amount. You’ll stop paying the creditor and instead make regular payments to a designated account, and once a sufficient amount is accumulated, the settlement company negotiates with creditors. Learn more on our dedicated piece on understanding the role of debt settlement companies.

Debt Consolidation

Debt consolidation is a form of refinancing that involves using a new loan with more favorable terms, such as better interest rates, reduced late fees, and lower payments, to pay other outstanding debts. This bankruptcy alternative allows you to focus on repaying only one loan. 

Loan Modification

If you’re struggling with your car loan or mortgage, a loan modification can help. Loan modifications involve altering loan terms to offer more affordable monthly payments. Your creditor can reduce the interest rate, monthly payment, or principal balance.

After a loan modification, your debt should be easier to repay. The goal of loan modification is to provide more favorable terms for your financial situation. Modification can help you make timely payments and avoid late fees, which is critical for your credit score.

Legal Considerations and Protections

Understanding your debt relief and management rights can help you protect your interests. Here’s an overview of California laws and consumer rights and protection:

California-Specific Laws and Regulations

In California, debtors can pursue various debt relief options, including debt negotiation, consolidation, and repayment plans. For instance, the California Department of Tax and Fee Administration (CDTFA) allows taxpayers to enter payment plans to manage their tax debt.

Firms offering debt relief are limited on how much fees and interest they can charge. California regulations also protect consumers from aggressive collection actions. As such, debtors can sue debt collectors for violating FDCPA laws for harassment and abusive practices.

Consumer Rights and Protections

California law prohibits debt relief companies from using deceptive practices. This covers everything from making false promises about outcomes to changing upfront fees. Debt relief companies must also ensure clear and transparent disclosure of information.

The California Debt Settlement Services Act requires all debt settlement firms to register with the state. Such companies must also follow all guidelines provided in the act and the federal FDCPA requirements. All forms of debt collector harassment are prohibited.

How Chang & Diamond, APC Can Help

Our team at Chang & Diamond, APC, can help you with the following:

Personalized Consultation and Strategy

Each bankruptcy case is unique, so our law office follows a personalized approach to every case we handle. Our dedicated attorneys review your case and provide a personalized strategy based on your goals and situation.

Negotiation and Legal Representation

Chang & Diamond, APC, lawyers have experience in representing debtors in negotiations and legal actions. Consult with our experienced bankruptcy attorney in San Diego to start your debt relief journey.

Ongoing Support and Guidance

Our law firm is committed to exceptional client support throughout the process. We are always available to provide legal counsel and advice before, during, and after any debt relief process you go through.

Contact Chang & Diamond, APC, Today

Alternatives to bankruptcy include loan modification, debt consolidation, settlement, and management plans. You can also enroll in credit counseling workshops to learn better money habits. A lawyer can provide clarity if you need help deciding whether to file for bankruptcy.

Attorneys at Chang & Diamond, APC, have been helping California residents with bankruptcy-related matters for 25 years. Whether you’re looking for a lower interest rate or a new payment plan, our team can provide legal guidance. Contact us today for a free consultation.

FAQs

What Is the Best Bankruptcy Alternative in California?

Because everyone’s situation is unique, no single option is the best. Our lawyers can help you assess the viability of loan modifications, debt consolidation, settlement, debt management plans, and other options to find out which option is best for you.

Does Bankruptcy Eliminate My Debts?

Filing for bankruptcy can eliminate some debts, but this largely depends on the type of bankruptcy you file for. 

What Is the Bankruptcy Means Test?

The bankruptcy means test in California is used to qualify for Chapter 7 debt relief. To pass the test, your monthly household income for the last six months must be less than the median income for a similar-sized household in California, or your disposable income multiplied by 60 is less than or equal to 25% of your unsecured debt.

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