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Considering Alternatives to Bankruptcy in California: Debt Consolidation Plans

California Debt Consolidation as an Alternative to Bankruptcy

The decision to file for bankruptcy, notwithstanding the chapter it is filed under, is a significant step which requires considerable thought process before coming to a conclusion and taking action. As such, filing for bankruptcy should be considered only as a last resort, rather than the quickest solution in dealing with debts. With the help of a bankruptcy attorney, one could be guided to seek alternative ways of dealing with debts before filing for bankruptcy.

The availability of bankruptcy alternatives depends mainly on your employment and the assets that you have. Consolidation companies would most likely look at these factors when contacted regarding late repayment.

One of the most common alternatives to bankruptcy in California is debt consolidation. Debt consolidation involves the procurement of a new loan to finance the payoff of several others under your name.

California creditors often offer debt consolidation through two types of loan plans.

The first type of consolidation loan plan that the creditors would always offer is one that is not secured by your home. In such an instance, the company will simply loan you money to pay off the debts. All you need thus is to make one monthly payment to the consolidation company, and they will handle your creditors from there.

With the second option, the company will offer a consolidation plan involving home equity security. With this plan, you would need to take a second mortgage or a home equity line of credit with your home as the collateral to lower your credit costs and improve financial circumstances.

The problem with a debt consolidation plan that involves home equity is the risk of losing the property in case your current financial situation fails to improve. Many California debtors seeking debt consolidation through this plan have lost their properties after falling back on their payments to the consolidation company.

The situation is even worse when one is considering Chapter 7 bankruptcy as the alternative due to the ease of losing your home as a result of limited-equity exemptions. However, the option would suit you if you are considering a Chapter 13 bankruptcy as it allows you to restructure your debts when you have more equity than would be protected under Chapter 7.

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California Laws on Foreclosure and Bankruptcy

Foreclosure and Bankruptcy Claims in California

One of the scariest prospects when undergoing dire financial constraints is foreclosure. Foreclosure refers to the legal process whereby a lender, especially when it comes to mortgage, seeks to recover part of their loan balance by selling the asset used as collateral for the loan. The process, besides rendering one homeless most times, usually knocks down points in your credit score by a considerable margin. It is thus understandable why people panic at the thought of foreclosure on their assets.

A common question that people ask is whether a filing for bankruptcy would save you from foreclosure in this aspect.

In California, a foreclosure would typically take approximately 120 days to process. The length of time, however, varies depending on the type of foreclosure used by the lender to claim your property.

California laws allow for both judicial and non-judicial foreclosures on a property. The most common, however, is the non-judicial form, where the lender does not have to file for a lawsuit before proceeding with the acquisition and sale.

Fortunately, a bankruptcy claim could stop these plans either temporarily or permanently depending on the court’s assessment and the chapter you file under.

Ordinarily, a Chapter 7 bankruptcy will not protect you from foreclosure in California as it encompasses fewer options and has a lower limit to the value of properties that it could exempt. A Chapter 13, however, may be effective against a foreclosure given the multiple options it affords the debtor.

That notwithstanding, the automatic stay that the bankruptcy claim imposes on the creditor would effectively shield you from an immediate auction or foreclosure attempt by the creditor. Though the creditor may dispute the automatic stay through a court process, what it does is that it delays the action of the creditor at least for some time.

Thus filing for bankruptcy when under threat of foreclosure, even if it may not be successful, would buy you precious time allowing you to renegotiate payment times with the creditor and therefore avoiding the foreclosure and its impacts.

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The Role of a United States Trustee

The office of the United States Trustee is a component of the United States Department of Justice tasked with overseeing the administration of bankruptcy cases and private trustees.

A United States Trustee is appointed for each of twenty-one geographical regions for a five-year term by the U.S. Attorney General.

The office maintains and supervises a panel of private trustees for Chapter 7 bankruptcy cases.

Each of the twenty-one regional U.S. Trustees has an office in each judicial district within the trustee’s region, with the exception of Alabama and North Carolina.

Although the office does not have prosecution powers, the U.S. Trustee is required by law to forward information regarding potential criminal violations of bankruptcy laws to the United States Attorney.

In Chapter 7 cases, interim trustees may be appointed by the U.S. Trustee. They are then randomly assigned to cases and automatically appointed as the “permanent” case trustee after the first meeting of creditors.

Chapter 13 bankruptcy cases are usually overseen by Standing Trustees in their judicial districts.

The U.S. Trustee’s office conducts the first meeting of creditors in a Chapter 11 case. Most of Chapter 11 cases do not require the appointment of a trustee.

The office may also take over a case if, for any reason, all standing trustees are disqualified or unable to perform.

The U.S. Trustee, together with the creditors committees, acts as the primary “watchdog” to ensure compliance with the bankruptcy code.

The U.S. Trustee’s office also reviews all debtor filings, and monitor trustee and attorney fees in all bankruptcy cases.

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How to Obtain Bankruptcy Case Information

Information about bankruptcy cases is available publicly to anyone. All one needs to do is to visit the Clerk’s office where the case was filed. You can visit the office during regular business hours.

Unless sealed, all documents filed in a bankruptcy case are also available online on the court’s Electronic Case Filing System (ECF). This information can also be retrieved through the Multi-Court Voice Case Information System (McVCIS) and Public Access to Court Electronic Records (PACER).

Credit reporting agencies regularly collect and disclose bankruptcy data to the public.

To find out if someone has filed for bankruptcy, one can use a search tool called the US Party/Case Index on PACER. Anyone with a valid PACER account can search the entire country or for a specific debtor. The search results will provide the party name, the case number, and the jurisdiction in which the case was filed.

If you find out that an individual or a business that owes you has filed for bankruptcy, you are advised to consult with a qualified bankruptcy attorney. Thereafter, you can complete and submit a proof of claim form with the Clerk’s office.

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How California Courts Cushion Creditors in Bankruptcy Proceedings

Rights of the Creditor in California Bankruptcy Claims

In a bankruptcy claim, the courts often look at the means of protecting the debtor from actions of the creditor in recovering their debts. As such, the debtor gets relief from the burden of repaying the creditor due to the automatic stay order that the bankruptcy claim institutes. In such an instance, the creditor becomes powerless against the debtor in recovering their debts.

Whether filing for Chapter 7 or Chapter 13 bankruptcy, what many people forget or just plainly overlook, is that the creditors have a right too. Thus they should not be seen as the villains in the entire situation as is most often seen in these situations.

Due to the circumstances surrounding bankruptcy proceedings, creditors in California are often wary of advancing an individual loans or property on loan terms, fearing the consequences when the debtor is unable to repay them. A primary win for the creditor though, is that the courts will consider their welfare when processing a bankruptcy claim.

In California, a debtor is allowed to file for either a Scheme 1 or Scheme 2 bankruptcy under Chapter 7 bankruptcy. In addition, they could file for Chapter 13 if they are deemed not viable for Chapter 7. A creditor is however allowed to challenge the debtor’s rights to discharge following a bankruptcy claim by their debtors.

The primary advantage would fall in a creditor with secured claims to a property in such an instance, with the courts awarding payment based on the deed agreements. Creditors with liens to the property are also entitled to receive value equal to the debt or collateral under California laws.

Also, the creditor would be in a position to stop a debtor from using cash collateral using secured debts following Bankruptcy.

If the creditor and the debtor fail to agree on the replacement value of the property, courts in California will accord the creditor a valuation hearing following debt redemption.

A creditor with unsecured debt, however, stands to lose out in case their debtor files for Bankruptcy. Courts in California and the country, in general, give the lowest priority to unsecured debts when dealing with a bankruptcy claim.

However, that is not to say that they will always lose out on their debts. As a citizen or business conducting operations in California, such a creditor will be accorded the right to file a proof of claim, attend meetings with creditors as well as to object to the discharge awarded to their client. Such measures serve to cushion the creditor from the adverse impacts of a bankruptcy claim by their debtor.

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Understanding Chapter 13 Bankruptcy in California; Merits and Demerits

Advantages and disadvantages of Chapter 13 Bankruptcy in California

One of the options for relief when facing dire financial stress and harassment from creditors is to file for bankruptcy. Whether it is Chapter 7 or Chapter 13, the bankruptcy claims, if successful, would be enough to get the creditors off your back at least for the foreseeable future. Compared to the first option, Chapter 13, bankruptcy is the most common and easily obtainable. With it also comes a range of advantages and disadvantages as we would see below.

In California, residents who have a regular income that would allow for repayment over time would easily succeed in filing for Chapter 13 bankruptcy. Additionally, an established maximum value will be a requirement in granting Chapter 13 bankruptcy in California courts.

A primary advantage that a Chapter 13 bankruptcy claim has over a Chapter 7 is that it allows the debtor to repay their creditors within a maximum of 3 to 5 years, with the rest being discharged. To accomplish this, the debts would have to be consolidated into a single plan. Additionally, the debt payment will be adjusted depending on the debtor’s income.

Chapter 13 also allows you to keep the properties you are paying for. Thus your assets will not be at risk of being sold. The accounts listed in such a bankruptcy will be removed at the end of 7 years, thus allowing you to rebuild your credit scores.  Perhaps even more interesting, the Chapter 13 claim does not require tests as would be in Chapter 7.

Despite these advantages, Chapter 13 bankruptcy has its demerits depending on your situation. Among others, Chapter 13 bankruptcy would reflect on your credit score for a minimum of 10 years, while committing you to make payments for the next five years. California residents who have filed for this type of bankruptcy before, also lament the fact that you would have to commit all your disposable income during this period towards paying off your debts. Besides, one will not be allowed to file for a Chapter 7 bankruptcy following a successful Chapter 13 for the next six years.

Despite the full range of advantages that a Chapter 13 bankruptcy has, it also has its disadvantages as we have seen, depending on your situation. It is thus advisable to seek an attorney’s help with the questions you might have before filing for a Chapter 13 bankruptcy.

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California Car Reassessment following Bankruptcy Suit

Bankruptcy and Car Repossession Claims; What You Should Know

The primary aim of filing for bankruptcy in most if not all instances in the U.S is to stop creditors from auctioning one’s property and taking other measures as wage garnishment to settle debts owed to them. Creditors are allowed under federal law to take action against a debt’s defaulter’s property through auctioning to recover the amounts owed to them. Thus, if one is undergoing financially stressing situations that put them in conflict with their creditor’s terms, the chances are that they would lose their property as a part of the recovery strategy. However, a Chapter 7 bankruptcy claim would be the easiest way to avoid such an instance.

A bankruptcy claim in California serves to effectively stop the actions of the creditor’s against the debtor. The Chapter 7 bankruptcy plan should thus stop creditors from harassing you for their debts through the automatic stay impact that it enforces.

A common question that many residents in Simi Valley and, California in general ask, however, is the impact of the bankruptcy claim on effects such as car lending.

If you are worried about your lender repossessing your car, then you ought to understand the basics of Chapter 7 bankruptcy claim.

In California, the lender would only be able to repossess your car if they obtain permission from California courts to take such an action. Otherwise, the automatic stay created by the filing of a Chapter 7 bankruptcy case is sufficient enough to stop such an action being taken against you as the debtor.

From this scenario, thus, the debtor only has to file for bankruptcy to avoid the actions of the creditor against them. However, the actual situation may be far different from that.

While filing for Chapter 7 bankruptcy may protect your property from creditor action to some extent, the creditors may exploit loopholes in the federal guidelines to frustrate you into repaying your debts despite the automatic stay. As such, one should always make sure that their obligations are secured to benefit from the automatic stay from filing for bankruptcy.

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Credit Counselling and Personal Financial Management

Credit counseling is a process used to help individual debtors with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultimately eliminate debt. Credit counseling is conducted by a counselor authorized by a United States Trustee.

All individual debtors must undergo counseling before filing for bankruptcy. Upon the completion of the credit counseling, the debtor will be issued with a certificate that must be submitted to a bankruptcy court. Failure to submit the certificate will result in the dismissal of the bankruptcy case. The credit counselor may assist the debtor in coming up with a budget and a repayment plan, which can then be submitted to the court during the filing.

Upon the conclusion of the bankruptcy case, the debtor must take a Personal Financial Management course at an agency authorized by the United States Trustee. The course is compulsory for only chapter 7 and chapter 13 individual debtors.

After completing the course, the debtor must submit Official Form B 423 to the court. In Chapter 7 bankruptcy cases, the debtors must submit the course completion certificate within 60 days of the first scheduled 11 U.S.C. § 341 Meeting of Creditors.

For chapter 13 bankruptcy cases, the certificate of completion of the personal financial management course must be submitted to the court prior to the completion of all plan payments.

Failure to present certificates of completion of the courses could result in the closure of the cases without the issuance of a discharge. The debtor will consequently be required to pay a fee to reopen the case.

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Wage Garnishment and Bankruptcy in California

Automatic Stay and Wage Garnishment in California following Bankruptcy

Federal laws in the US create an automatic stay following a bankruptcy claim. This protection serves to bar creditors and debt collectors from attempting to extract payment from you as a means to recover their debts. With the automatic stay in effect, the creditors will not be able to file collection lawsuits compelling you to repay their debts. A critical question many ask, however, is whether such orders would prevent wage garnishment following the bankruptcy.

To answer that, it is essential to understand the basics of bankruptcy in financial challenges.

Wage garnishment is the legal procedure whereby a creditor compels your employer to hold a portion of your salary to pay off your debts.  In California, wage garnishment can only occur through a court order.

The possibility of having your wages garnished is often a frightening factor for employees in California as it draws one’s employer into their personal life and finances, causing both humiliation and financial hardship. Also, such a step could push the employer to terminate one’s service if they are facing multiple debts from creditors.

While California laws protect you from retaliation following wage garnishment over a single debt, it would not save you from the same if you are having problems with several creditors seeking a portion of your wage. Thus you face an actual risk of losing your job in such an instance.

How then can you stop creditors from seeking wage garnishment?

In California, the state laws allow you to defend yourself against the creditor’s lawsuit by providing proof of your condition. You would thus be required to prove that your entire paycheck is necessary to pay your living expenses and that you qualify for an exemption. An alternative way would be to file for bankruptcy.

A bankruptcy claim, through its automatic stay orders, would effectively shield you from wage garnishment.  However, the orders will not be applicable for debts such as child support, student loans and government fines. Alimony and non-dischargeable debts will also not prevent your wage from being garnished even after filing for bankruptcy.

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Laws on Maximum and Minimum Debts for Bankruptcy 

Considering Bankruptcy Claims in California? Here are some of the things you should know.

Having debts working against you could be one of the most stressing periods of your life, especially with creditors coming after your property. In such situations, you may be considering bankruptcy as an option to protect your property from creditors seeking to recollect their debts. The process may be easy if you have had prior experience before. However, the process might pose a challenge for someone unfamiliar with the procedure. 

One of the most common questions that people ask themselves when considering bankruptcy as a step to ease the pressure of creditors is the minimum debt amount required to file for bankruptcy.

The laws in California do not specify the minimum debt required for eligibility to file for bankruptcy. Thus, you would be allowed to file for bankruptcy relief in the state notwithstanding the amount of debt that you owe your creditors. 

The decision to proceed with the bankruptcy claim would entirely depend on your circumstances. Even without a minimum debt; however, the courts in California are likely to take into consideration these circumstances in deciding whether to award or reject the bankruptcy claim.

Some of the essential factors evaluated in the decision to grant or deny the bankruptcy claim include your ability to repay the debts and the possibility of your creditors agreeing to work with you. The courts will also be interested to know if you would be able to discharge your debts if granted bankruptcy. 

On your part, you should make efforts to speak with your bankruptcy attorney to find out the options available to you before deciding to file for bankruptcy. 

Another essential point to note is that despite there being no minimum limit for eligibility to file for Bankruptcy under California laws, the state has in place a maximum amount allowed for one to be eligible. This, however, is dependent on the type of bankruptcy you are filing for.

To be eligible for a Chapter 13 bankruptcy, for instance, your debts should not exceed $1,257,850 in secured debts, and a maximum of $419,275 unsecured debts. In addition to these limits, the State of California has in place restrictions on the number of times you can receive a discharge. Thus it would be a good idea to go through all these factors with your attorney before deciding to proceed to file for bankruptcy.