Law Offices of Danny K. AgaiLaw Offices of Danny K. Agai2025-12-18T08:24:06Zhttps://www.agailaw.com/feed/atom/WordPressOn Behalf of Law Offices of Danny K. Agai<![CDATA[How to Easily Stop Wage Garnishment in California]]>https://www.agailaw.com/?p=471782023-09-12T10:01:56Z2021-10-20T08:25:12ZWhat is Wage Garnishing
In the course of recovering debt, a creditor may obtain a court order mandating your employer to garnish wages paid to you. Wage garnishment means a portion of your earnings are deducted by your employer and sent to the creditor to pay the debt owed.
Wage garnishment can constitute a real blow for you, especially if you have a lot of outstanding financial obligations, or if what is left is tremendously inadequate to sustain you and your family. If you are in debt and have had your wages garnished, you can take steps to stop wage garnishment in California.
Federal law allows for wage garnishing of the lesser of either 25% of disposable earnings, or the difference between the weekly disposable wages and 30 times the federal minimum hourly wage ($7.25).
Compared to the Federal law on wage garnishment, California offers more respite to debtors with regards to maximum legal limits.
The Law in California
The fundamentals of wage garnishment Californiaoperates are similar to the federal law on wage garnishment, with some distinction in the terms. The only way a creditor can garnish your wages is by obtaining a judgment of a court of law declaring you are indebted to them.
However, this court process is not required with regards to the following debts:
Federal or State Taxes
Child Support
Student Loans
Your wages can be garnished without a court judgment when it comes to anyone of the above.
The law requires that your creditors provide you with legal notice of garnishing. You must be presented an Earnings Withholding Order and Employee Instructions which spell out the terms of your wage garnishment. These documents highlight the process of claiming exemptions and states in plain language how much of wage is being garnished.
The Californian law sets the limits of wage garnishment as the lower amount between:
A 25% of disposable wage (wages minus legal deductions)
The difference between your disposable weekly salary and 40 times California’s minimum fee ( $11 as at January 2018)
An example, in this case, would be Mr. A.
Assume Mr. A makes $500 per week after legal deductions like taxes. If his wages are to be garnished, it would either be:
25% of $500, which is $200, or
$500 minus (40 × $11), which amounts to $60
The lower amount is the amount to be garnished, meaning only $60 will be deducted from Mr. A’s weekly paycheck.
Multiple Garnishments
No matter how many creditors you have, the maximum limit of your wages that can be garnished is 25%. If you have more than one garnishment order, only a total of 25% can be deducted, meaning creditors have to share from that.
How to Stop Wage Garnishment
Consult/Hire an Attorney
This should be your first course of action. Contact an expert in California wage garnishment and seek legal advice on the best way to resolve the situation. Your lawyer will examine the details of your cases, to spot loopholes, breaches of procedure, and craft an effective strategy.
Your wage garnishment lawyer can help you dispute the garnishment order if:
You have entirely discharged your debt to the creditor
The amount deducted exceeds the legal limits
A breach of proper procedure. For instance, your creditor failing to give notice of garnishing
You intend to vacate the original judgment granting such an order.
Your attorney will also make you aware of your rights, the exemptions you are qualified to, and help you set the plans in motion. If you also feel that the wage garnishment order represents an undue hardship to you and your family and that you are unable to supply on what is left of your disposable income reasonably, then consulting with a lawyer will expedite you resolving this case.
Negotiate Terms with Creditor
Your attorney may recommend that you renegotiate terms with your creditor, to either reduce the amount garnished or to extend your repayment period. Your lawyer can contact your creditor or their legal team using the contact provided on the Earnings Withholding Order given to you as notice.
When you negotiate a reduction or discontinuation of wage garnishing, provide tangible reasons for these request. Arm yourself with facts, documents, and a reasonable argument pleading your case. At times, as a sign of good faith, a creditor may agree to your demands if you can show how the wage garnishment is inflicting hardship on you.
Negotiations are also an effective method of Alternative Dispute Resolution, avoiding the hassle of the courtroom. You can work out a feasible repayment plan with your creditor, and reduce or stop the ongoing wage garnishment.
Ensure that you have legal representation during this negotiations and that any agreements are made in writing. Upon successful negotiations, the new deal becomes legally binding and supersedes the wage garnishment efficiently halt these mandatory deductions.
File an Exemption
The State of California has allowed for victims of wage garnishment get some remedies and solace under certain conditions. A claim of exemption is usually a plea showing how much financial hardship such a wage garnishment order is causing to you.
If your net earnings after garnishing are incapable of taking care of yourself and members of your household, i.e., providing essential amenities, like food, shelter and clothing. This sort of financial hardship can be fixed by filing a claim for exemption.
Procedure for Filing Exemption Claims
To file a wage garnishment order exemption, these are the steps to follow:
Ten-Day Limit
Begin the process of recording an exemption claim within ten days of you receiving the notice of wage garnishment, (that is ten days from receiving the Earnings Withholding Order).
Obtain Legal Documents
You will need to obtain and fill out two forms. You can either get them from a county clerk in your vicinity or download them here. The Claim of Exemption (Form WG-006) and Financial Statement (Form WG-007).
Fill out the Claim of Exemption form with details on how much of your earnings would reasonably ensure the survival of you and your family. The Financial Statement form involves a comprehensive break down of all income and expenditure.
Be sure to fill out both forms carefully and honestly as you are under oath.
File Forms
Make two copies each of both of the forms. You will submit the originals and one extra copy each to the official who initially served the Earnings Withholding Order. Keep one copy each for documentation and safekeeping.
Outcome
It is important to note that your wages will still be garnished during the period of filing a claim for exemption.
If your creditor does not dispute your claim of exemption, your employer will be ordered to either stop garnishing your wages or garnish a lower amount depending on what you filled out in your Claim of Exemption.
However, if your creditor opposes your claim of exemption, you will have to attend court proceedings. The court will consider the merits of your case and decide whether or not to grant your claims of exemption based on the details contained in your exemption forms.
Ensure that you have legal representation or at least seek legal counsel before such a court hearing. Provide the court with evidence showing how dire your financial situation is and proof of how much the wage garnishment has affected your quality of life.
The court will then either approve your claim of exemption or uphold the original wage garnishment order.
Declare Bankruptcy
Filing bankruptcy can be a weapon of last resort to stop wage garnishment by your employer on behalf of your creditors. As soon as you file for bankruptcy an Automatic Stay comes into play- your employer immediately ends garnishing your wages.
Bankruptcy may have garnered a negative connotation over the years, but it may be the best option if you have run out of options. It is an opportunity to reorganize your finances and get your debts under control. During bankruptcy, a repayment plan is created to pay off your debts. This may involve auctioning off some of your property but the silver lining is that at the end of your bankruptcy period your debts are discharged (i.e., wiped away). You get a chance to reset your finances and start afresh without a suffocating debt.
Consult with one of our learned wage garnishment lawyers who will help you understand your options and guide through the process. There are two main types of bankruptcy available for individuals: Chapter 7 and Chapter 13, which both have different procedural steps and effects.
For example, filing a Chapter 7 bankruptcy claim does not have the critical automatic stay order allowing wage garnishment to continue during the process. A Chapter 13 bankruptcy claim will trigger automatic stay immediately stopping all wage garnishment by your employer. However, your debt portfolio still has to be serviced with a repayment plan that lasts between 3-5years.
When you file for bankruptcy at a court of law, the court will typically send a notification of submitting to your creditors and employer, causing all actions, including garnishments to cease. However, this notification may take up to a week to be sent. To expedite efforts to stop the garnishment, provide your employer with the case number of your bankruptcy claim, the date and court of filing, which is enough to stop the garnishment immediately.
At the end of bankruptcy, your wages are unaffected by garnishments as your debts to creditors are usually discharged. It is essential to make adequate preparations before filing bankruptcy, consult an attorney, dig up financial records, and make prompt payments because if your bankruptcy claim fails your creditors are within their rights to continue wage garnishment.
Recouping Lost Wages
An added advantage of filing for bankruptcy is that you can recover some of your garnished wages if you meet some criteria. First, your payments must have been garnished 90 days before the date of the filing. Secondly, the amount garnished must exceed $600, and lastly, you can claim an exemption on the amount garnished.
Before attempting to recover garnished wages, you must weigh the pro and cons. You are going to have to file a lawsuit, which means incurring legal fees and other charges. Discuss your options with one of our expert California wage garnishment lawyers, to gain clarity on the most effective course of action.
Conclusion
The hassles of life, unfortunate circumstances, or emergencies can lead to you taking on more debt than you can manage. When this happens, you are at the mercy of your creditors, and they will use every tool at their disposal to collect their debt.
Wage garnishment is an especially destabilizing debt collection process as it goes directly to the source of your livelihood. In this dwindling economy, your barely sufficient income is further depleted by as much as 25%. This can cause undue strife and hardship to not only you but your loved ones.
Apart from reducing the amount available for you and your family’s well-being and sustenance garnishment also places you at the risk of unemployment. Although California law prevents your employer from firing you over one garnishment order anything beyond that is a risky territory.
At Wipe Away Debts, our legal practitioners have spent years mastering the intricacies of California and Federal laws on wage garnishment, bankruptcy, and debt collection. Together, we will take stock of your unique circumstances devise a viable plan to help you get your life back on track.
Do not let debt way you down, when you have legally guaranteed rights and options. Debts can be uncomfortable and a source of stress but ignoring or failing to act only makes it worse. Let one of our wage garnishment lawyers examine your case and help you climb out of the seemingly insurmountable financial situation you may find yourself in at any given time.]]>On Behalf of Law Offices of Danny K. Agai<![CDATA[How Does Chapter 7 Bankruptcy Affect Child Support?]]>https://www.agailaw.com/?p=471762023-08-23T08:24:14Z2021-10-20T08:21:50ZParty Making Child Support Payments
Do you have to continue payments of child support during bankruptcy, and do you even need to worry about accrued missed payments? The answer to both questions is, yes you do. Child support is of vital interest to the state and as such occupies a unique position in the hierarchy of debts. The state places a premium on the importance and well-being of the child, making child support payments a priority debt.
Chapter 7 Bankruptcy: Priority Debts
When a person starts the process of filing for bankruptcy under Chapter 7, a trustee is appointed to take charge of this process. The trustee is charged with distributing the proceeds earned from the sale of such a person’s bankruptcy estate. A bankruptcy estate is property— except exempt property—that is auctioned off to service debt.
After selling off non-exempt property, the trustee must then distribute the money to the list of creditors. But not all creditors have the same level of importance. Priority debts, due to their critical nature, are the first debts that are paid off with the earnings from the estate. These debts are usually owed to the state or its institutions and legally mandated.
This is the class of debt child support payments fall within. It is usually among the first debts to be serviced during a bankruptcy proceeding. The law recognizes the critical role these payments have on the society—going towards the upkeep of children.
Examples of priority debts in a Chapter 7 case include:
Alimony and spousal support
Child support
Contributions to employees’ benefits plans
Debts owed to farmers and fishermen (up to $6,325 per head)
Income taxes, customs, duties, penalties owed to federal, state and local authorities.
Personal injury or death claims resulting from a person’s driving while under the influence.
Priority debts have a special place in the scope of Chapter 7 cases, in the sense that even when you have been granted a bankruptcy discharge, any left-over priority debt must be paid. These debts are non-dischargeable—they must be paid in full and getting a discharge does NOT grant you reprieve from them.
The Automatic-Stay provision, which prevents creditors and collectors from coming after you to collect their debts during the bankruptcy process is ineffective with regards to child support. Agencies are still empowered to pursue you for missed payments, to the full extent of the law. Any income you earn after you file for bankruptcy leaves you eligible to a child support claim or lawsuit.
You must make prompt regular child support payments through the course of bankruptcy, by it being a priority debt. Failure to make payments or multiple missed payments will more often than not result in a lawsuit, which would only compound your financial situation.
However, despite child support being non-dischargeable, Chapter 7 bankruptcy can make your overall debt burden much lighter. If the proceeds realized from the auction of your bankruptcy estate is not enough to cover non-priority debts like credit card debts and car loans, these debts are discharged, giving you some breathing room to focus on paying off priority debts.
How Does Bankruptcy Affect Income After Filing?
Any income earned after the date you filed for bankruptcy is not a part of your bankruptcy estate—the property your trustee and creditors have access to—and as such is not governed by your bankruptcy agreement. Agencies and collectors in charge of obtaining child support payments are empowered to pursue payments from these post-bankruptcy earnings.
Party Receiving Child Support
While we have outlined the fact that filing a Chapter 7 bankruptcy will not get you out of paying child support payments, there is another side to this topic. How does bankruptcy affect child support payments, if you are the recipient of such subsidies? Is the income derived from child support payment a part of your bankruptcy estate—from which your debtor is paid off?
Any income you received from child support payments is exempt, meaning you get the total amount. This is because, the welfare of your children/dependents outweighs the needs of the other creditors. The payments are expected for the upkeep and maintenance of the child, and as such, are technically owned by such a child while you act as a trustee.
Whether or not you have spent the bulk of such payments or not, is irrelevant, any income that is accrued from child support payments is yours to keep in its entirety. Unspent child support payments are still exempt in the majority of state in the USA.
Child Support Income Earned Before Bankruptcy
For child support payments in your possession, before you file for bankruptcy, the court will deem it a part of your bankruptcy estate. However, the difference between child support income and the majority of your other assets is what action the trustee can take on them. The trustee in charge of your bankruptcy will not disburse money to your creditors from your child support income. Such income is classed as an EXEMPTasset.
What is Exempt Property?
Under bankruptcy law, you can classify some of your assets, property or otherwise, as exempt assets—for some reasons. Exempt assets belong wholly to you—the trustee cannot utilize/sell these assets in the discharge of your debts.
Although the hallmark of bankruptcy is the power granted by the court to the trustee to sell off your assets to pay off your debt, the law still allows you certain rights. By exempting specific property from the bankruptcy estate, you still have a reasonable amount of belongings to live a reasonably comfortable life. Bankruptcy will not necessarily leave you homeless or without any clothes. Federal and state bankruptcy law has put certain exceptions in place to ensure people still have a solid foundation to rebuild from. These bankruptcy exemptions vary from state to state, but the idea is still the same across the country. Essentials belongings and benefits are all exempted from the estate.
Property that is not classed as exempt will be sold off to fund debt repayment efforts by the court-appointed trustee. The following are typical examples of non-exempt property:
Liquid cash or funds in bank accounts
Securities—shares, stocks, treasury bills, and bonds
Collectors’ items—coin and stamp collections, antiques, artwork.
Musical instruments (except they are the debtor’s instrument of trade)
Homes beside the primary residence, including vacation property.
Automobiles and luxury vehicles
These examples are deemed non-essential and can be claimed by creditors, or sold off in an auction by the trustee. Exempt property, however, cannot be claimed by creditors or sold in auctions.
Typical examples of exempt property in Chapter 7 bankruptcy include:
Homestead
Essential belongings—clothing, furnishings, and household fixtures and appliances (up to an amount deemed reasonable by the court)
Motor vehicles (up to a fair amount)
Sure jewelry, up to an amount considered reasonable and appropriate.
Tools or instruments of trade deemed necessary.
Unpaid Wages
Injury claims
Pensions
Social security, welfare, unemployment benefits held in a bank account
Child support has been classed by Congress and the legislative arms of the majority of states as exempt property. The interest of the child is paramount, and as such will not be hindered by the claims of the creditor. While declaring your estate, you should list existing child support payments as an asset and class them as exempt property.
If a trustee attempts to utilize your child support payments or other exempt property to pay off creditors, you are within your rights to start legal proceedings to halt such actions. Speak to a Chapter 7 bankruptcy attorney to get a comprehensive scope on what your rights are, and the extent of the trustee’s authority. By speaking to a learned Chapter 7 attorney Los Angeles, and by extension, Californian laws will be adhered to, to avoid further complications.
Generally, your income from child support payments is exempt from the bankruptcy process, as it is deemed necessary for the wellbeing of the child.
Income Earned After Bankruptcy
Like the majority of income earned after the date of filing Chapter 7 bankruptcy, you can keep the income earned. Child support received after the bankruptcy process is not part of your bankruptcy estate and is not affected by any bankruptcy-related actions. If your creditors are attempting to claim this income, if you can establish the source and date of such income you get to keep the entirety of such payments.
The backlog of Child Support Payments after Filing
What happens when you finally receive unpaid child support payments from before you filed for bankruptcy? Are there Chapter 7 bankruptcy child support provisions that cater for such a scenario?
Yes
Throughout the United States, back child support payments are considered exempt, allowing you to keep it in entirety. These funds are viewed as necessary for the welfare and survival of the child and are left with the parent/guardian.
While most states have specific laws and provisions for this scenario, a vacuum in the state laws is compensated by the fact that the vast majority of trustees will ‘abandon’ income derived from child support payments. Abandonment of property, in this sense, means that such property is deemed inconsequential to disburse to creditors, and as a result, is returned to the debtor.
Getting Professional Help
It is important to seek a professional opinion before navigating through your bankruptcy case, especially with regards to child support payments and other exempt property. In some cases, trustees may embark on a miscarriage of justice and an overstepping of their powers by trying to dispose of exempt property. This may be due to negligence on the debtor’s end—failing to file such payments as assets and exempt property or an act of ineptitude on the part of the trustee. Speak to one of our Chapter 7 bankruptcy attorneys to get all your bases covered today.
Conversely, certain unscrupulous individuals may attempt to skirt their responsibility to their kids, by hiding behind the curtain of bankruptcy to avoid paying child support. Since the majority of Americans are ignorant of the intricate details of federal and state bankruptcy laws, they may successfully abscond on their obligations. Speak to an attorney today, if your ex-spouse or significant other misses child support payments by a bankruptcy.
Conclusion
Debt management and trying to reorganize one’s financial situation can be challenging and often confusing, especially with the state of the economy. Bankruptcy, despite its negative connotations, can be a smart and financially responsible decision to get yourself out of the seemingly endless abyss of debt.
At WipeAwayDebts we are committed to helping residents of California understand their rights—allowing them to make more financially sound decisions going forward. We have experienced Los Angeles bankruptcy attorneys, working hard to help our clients turn a new financial leaf. Contact us today, to speak to one of our experts, and begin the process of filing for bankruptcy. We will discuss your options, with regards to child support, comprehensively, detailing state-specific rules, and other details that may arise in the future.]]>On Behalf of Law Offices of Danny K. Agai<![CDATA[Find Out How To Tackle Credit Card Debt In Los Angeles]]>https://www.agailaw.com/?p=471692023-09-11T22:06:14Z2018-07-17T08:10:38Zranking in the top 20 of debt burdens across the country.
This ungodly debt profile has made life in the LA vastly different from the new utopia depicted in Hollywood, and actually, living in Los Angeles leaves you continually worrying about servicing your mounting debts. From student loans, auto loans, and the long-term commitments of mortgages, you are stuck in a merry-go-round of obligations.
A massive credit card debt can transform your life into a highly regimented routine, with monthly minimum payments making it impossible to make any meaningful long-term financial commitments.
Missing your monthly payments makes it even worse, as you are liable to anyone of the following consequences:
Late Fees: Missing a monthly payment, or paying below your minimum will cause your credit company to charge a recurring late payment fee for every instance of a missed payment.
Higher Interest Rates: After 60 days of missed payments, rather than your standard rates, you are charged an exorbitant penalty rate. The penalty only extends your repayment period as you have an even more significant burden to pay off under the same limited period.
Negative Credit Report: Unpaid or missed credit card payments are all reflected on your credit report. This negative detail is visible by anyone who does a credit check on your social security number—employers, mortgage brokers, landlords—and these missed payments paint an image of financial irresponsibility and risk.
Credit Score Impact: Missed credit card payments can impact your credit score—the all-powerful figure that can influence multiple aspects of your life. A lower credit score leaves you with higher interest rates, difficulty in sourcing loans, and employment.
Harassment: With multiple missed payments credit card companies sometimes transfer their recollection processes to specialized debt collection agencies. These collection agencies employ some disruptive and uncomfortable methods—all perfectly legal—to regain their unpaid money.
In spite of the tremendous fallout from the crippling debt burden, there are still some effective debt relief Los Angeles residents can employ to get rid of credit card debt. These avenues for debt relief can help you greatly ease the burden of perpetually mounting credit card debts.
Obtaining Credit Card Debt Relief in Los Angeles
If you are burdened by credit card debt, it can feel like an unending journey—with monthly minimum payments, stringent payment deadlines, and usually high-interest rates. If your credit card debt has become untenable or impossible to manage, there are many avenues for you to obtain some form of relief in the state of California and the city of Los Angeles.
Speaking to one of our legal and financial experts to determine what debt relief option is most suitable for your specific circumstances. The following are some of the credit card debt relief options available to you in Los Angeles:
Debt Consolidation
If your credit card debt is on a very high repayment rate, it may be smart to consider debt consolidation to eliminate such a debt. Debt consolidation, in simple terms, means getting a new loan—on a much lower interest rate—to pay off the original credit card debt. Since the consolidation loan is on a lower interest rate, you save a lot of money in the long run, compared to paying off your credit card debt with its original rates.
However, it is inadvisable to jump into debt consolidation without speaking to your financial adviser, since many offers of debt consolidation are structured in a manner to keep you in debt for a more extended period. Also, debt consolidation rates can fluctuate and change, leaving you paying even more than you would have had to frequently.
Debt consolidation is not freedom of debt and anyone who claims that is probably trying to scam you of your hard-earned income. Debt consolidation combines your debts—loans, credit card debts, student loans—into a new single loan. This new loan must still be promptly repaid to prevent default and subsequently higher rates.
It is essential to carry out careful and comprehensive research into consolidated loan providers, as this is a particularly popular hunting ground for unscrupulous agencies. The Federal Trade Council reports that debt consolidation providers and other debt management companies continually top the list of consumer reports.
Debt Settlement Agencies
You may engage the services of a debt settlement agency to help rid you of credit card debt. These third-party companies approach your credit card provider and negotiate a more convenient repayment plan on your behalf. In most cases, the debt settlement agencies arrange a one-time lump payment, which when paid, discharges your obligation to your creditors.
Like debt consolidation, debt settlement should be considered with wariness. There are hundreds of fraudulent debt settlement agencies looking to prey on desperate and vulnerable individuals seeking to gain some form of debt relief. Speak to one of our financial experts for a recommendation on trustworthy settlement agencies. You can also consult the American Fair Credit Council and ensure that your agency of choice is duly licensed and registered.
Debt Renegotiation
Some creditors can be open to renegotiating the terms of your credit card payments—changing your monthly minimum, due date, or even your interest rate—to give you a more flexible payment plan. While most creditors may not be open to renegotiating the terms of your contract, it never hurts to try to reason with these credit card companies.
Bankruptcy
Although bankruptcy has a negative connotation to it, it can be a financially sound decision, if your debt portfolio is getting increasingly cumbersome. Filing for bankruptcy should not be rushed into, as there are many procedural and statutory steps to take before such an action succeeds. Bankruptcy is not a magical solution to financial difficulties but it can give some assistance with regards to personal loans like credit card debts.
The advantages of filing for bankruptcy include the following:
Automatic Stay: Automatic stay is a provision in the bankruptcy code that prevents creditors from repossessing your property or continuing any debt recollection processes as soon as you begin the bankruptcy process. This is especially beneficial if the credit card company has employed a debt collection agency.
Discharge: Depending on the type of bankruptcy you choose to file (Chapter 7 or 13) your obligation to repay certain non-priority or unsecured debt is discharged, wiping away your debts. Credit card debt often falls within this class of unsecured debt, and at the end of your bankruptcy process, you should have gained debt relief.
Financial Recovery: If you diligently keep to the terms of your bankruptcy repayment plan, you should be able to, in a manner of speaking, hit reset on your financial life. Without the suffocating weight of debt on your neck, you can start to make smarter and more productive financial decisions.
If you are looking to wipe away credit card debt by filing for bankruptcy, you have two options to pick from; Chapter 7 and Chapter 13 bankruptcy. To help you decide what course of action is most beneficial to you speak to one of our experienced bankruptcy attorneys.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common bankruptcy process in the United States of America, with many people besot with debt choosing liquidation as an avenue to escape liability. To file chapter 7 bankruptcy you must adequately collect and organize certain financial documents to show the court your current economic standing. The documents required are:
Income Slips
Bank statements
Credit card statements
Taxation records
Loan documentation
A full list of creditors
Assets and liabilities declaration
After providing this documentation, you are obligated to speak to a counselor to fully understand the risks and full implication of filing a chapter 7 case. The next stage is what is called the Means Test, which is stipulated to prevent an abuse of the bankruptcy process to defraud creditors. The means test compares your income to the median income of the state you reside in, in this case, California. The point of this test is to ensure debtors do not misrepresent their financial capability in their bid to avoid paying unsecured debts like credit card bills.
If your bankruptcy trustee rules that you are eligible to a file a Chapter 7 bankruptcy the entire process usually takes between 3-4 months for your debt portfolio to be discharged. The trustee will take your non-exempt property, sell them and distribute the proceeds to creditors that have filed appropriate claims. Non-exempt property in this instance includes everything not contained in California’s exemption list.
Chapter 13 Bankruptcy
While organizations, as well as the individual, can file chapter 7, Chapter 13 can be submitted exclusively by individuals. Eligibility for Chapter 13 bankruptcy is significantly stricter and has more restrictions compared to a Chapter 7 claim.
To qualify for a Chapter 13 claim, you must have:
A steady income source
Secured debts (loans obtained with collateral) not exceeding $1,010,650
Unsecured debts (loans without collateral, like most credit card debts) not exceeding $336,900
Filing Chapter 13 bankruptcy means a debt repayment plan is created for you to pay off your debt portfolio. This repayment plan can range from 3-5 years depending on the determination of your bankruptcy trustee after examining your income level.
The most significant advantages of filing a chapter 13 bankruptcy claim include the opportunity to stretch the more cumbersome debts, like your mortgage plans, over the length of the process—three to five years—and also prevent foreclosure of the property. Over the course of your bankruptcy process, you do not even have to meet your creditors, and all their recollection efforts, along with that of their agents must cease.
It is important to note that, while credit card debt can be eliminated, bankruptcy does not provide state or federal tax debt relief, or even relief from student loans, and legally mandated payments and fines. So while you can escape the burden of credit card debt, you cannot file bankruptcy to avoid the amount of child or spousal support, parking tickets, and fines.
Conclusion
Credit card debt is capable of restricting and almost ruining a person’s life, but it does not have to be that dire. At Wipe Away Debts, our team of experienced and fully qualified Californian bankruptcy lawyers will help you navigate your way from the seemingly endless abyss of debt. With years of experience helping thousands of Californians, and residents of Los Angeles especially, get out of debt, we guarantee an experience that will make your path to financial security and stability easy and stress-free.
The structuring of credit card payments can be challenging, with interest rates and monthly payment deadlines that may not line up with your income schedule. Rather than remaining in a debt rollercoaster that can last for years, take steps to break free of the burden of credit card debt, with the help of one of our practitioners. Contact us today and let one of our attorneys manage your case. We will provide guidance, support and sound legal advice as you embark on this journey to a debt-free life.]]>On Behalf of Law Offices of Danny K. Agai<![CDATA[The Best Advice For Bankruptcy In Los Angeles]]>https://www.agailaw.com/?p=471722023-09-11T22:12:23Z2018-06-21T08:14:54Zrіght dіrесtіоn tо ѕhоrе uр thеіr fіnаnсіаl futurе. And whо wаntѕ tо lіvе wіth сrеdіtоrѕ соnѕtаntlу саllіng‚ trуіng tо gаrnіѕh wаgеѕ аnd lіvіng undеr ріlеѕ оf сrеdіt саrd dеbt.
Bankruptcy іѕ соnfuѕіng, nоt tо mеntіоn еmоtіоnаllу dеvаѕtаtіng. It’ѕ a ѕеrіоuѕ dесіѕіоn, аnd wе dоn’t wаnt уоu tо hаvе ѕurрrіѕеѕ аlоng thе wау. Hеrе аrе ѕоmе thіngѕ уоu nееd tо knоw bеfоrе уоu tаkе thе fіrѕt ѕtер.
Yоu dоn’t hаvе tо fіght thіѕ bаttlе аlоnе. If уоu’rе оvеrwhеlmеd bу dеbt аnd саn’t fіnd a wау оut, іt’ѕ tіmе tо tаlk wіth a bаnkruрtсу attorney Hеrе іn Lоѕ Angеlеѕ. Thе ѕоlutіоn tо уоur fіnаnсіаl рrоblеmѕ mау bе rіght іn frоnt оf уоu.
Crеdіtоrѕ аnd dеbt соllесtоrѕ dоn’t wаnt уоu tо knоw thаt hеlр іѕ аvаіlаblе, but wе dо. Thаt’ѕ whу wе mаkе іt еаѕу fоr уоu tо соnnесt wіth a bankruptcy lawyerаnd gеt thе іnfоrmаtіоn уоu nееd tо mаkе роwеrful, еduсаtеd dесіѕіоnѕ аbоut your futurе.]]>On Behalf of Law Offices of Danny K. Agai<![CDATA[How To Save Your House From Foreclosure in Los Angeles]]>https://www.agailaw.com/?p=471662023-09-11T22:12:41Z2018-04-19T08:06:05ZIntroduction
The effects of the 2008 financial crisis still linger, even a decade later. The crisis is considered one of the worst economic meltdowns in human history, and a mortgage crisis fueled it.
While people try to get their lives back in place, by trying to build a sustainable growth after the crash, financial commitments like mortgage payments keep piling up.
The number of Los Angeles foreclosures has reduced marginally. However, it still represents a significant amount of households getting their homes taken from them. Regardless of reasons, failure to make prompt mortgage payments can lead to an entire family losing their home and experiencing a sudden lifestyle change.
Reasons such as illness, divorce, and loss of employment are just some of the causes you might be unable to make a mortgage payment. The high-interest rates and late fees are all specially designed to make mortgage payment a long and persistent process.
To prevent losing your home as a result of foreclosure, it is essential to have the basic understanding of the way foreclosures operate in Los Angeles. Also, you should consult with a professional foreclosure attorney in Los Angeles to successfully navigate through the more technical aspects of the process. Take action today to prevent foreclosure since every day counts in a mortgage dispute.
Los Angeles Foreclosures Process
The foreclosure process in Los Angeles is in line with what is obtained in the state of California. There are two broad types of foreclosure. The first type is non-judicial foreclosure, which is the most common and cheaper option and the second type is judicial foreclosure which is a more expensive and slower process.
The majority of home foreclosures in Los Angeles are non-judicial,meaning, there is no court process involved in the entire foreclosure process. The bank is empowered to repossess and sell homes in default without getting a court order. In non-judicial foreclosures, your debt is cleared as soon as the house is sold regardless of whether or not the bank received the value of your outstanding mortgage in the sale.
Judicial foreclosures are uncommon since they are lengthier, complicated, and more expensive. If a home is foreclosed judicially, you are still responsible for mortgage deficiency. Deficiency is the difference between the amount you owe and the amount the bank gets from auctioning your home.
The foreclosure process in Los Angeles is as follows:
Late Payment
Failing to pay your monthly mortgage payments will lead to a default on a mortgage. Generally, in mortgages, a loan becomes default if you are 90 days late in monthly payments. There are some reasons why people miss mortgage payments: illness, divorce, a significant life event, and sometimes carelessness.
The structure of mortgages makes it hard to make up for missed payments. The interests, fees for late payment, and other restrictive terms make defaulting on mortgage payments a recurring theme in households today.
If you have missed mortgage payments and are worried about defaulting, you can speak to one of our foreclosure experts who will provide you with a variety of options that are available to you. It is better to act fast before it becomes a stressful and full-blown case.
As soon as your mortgage becomes the default, which is usually when you are 90 days late, the Californian foreclosure process begins.
Notice of Default: 90 Days After Late Payment
When your late payments make your mortgage default, your bank is required by law to file a formal Notice of Default in a court. You also have a right to be informed, which your bank must notify you of such filing within ten days.
A Notice of Default is a legal instrument that outlines the standing of your loan- a state of default. The notice also informs you on steps on vetting your investment out of default back into a current state. Usually, the announcement will set out terms for your repayment of late payments with accumulated interest and fees.
It is best to consult with a Los Angeles bankruptcy lawyer upon receiving a Notice of Default to begin preparations to prevent foreclosure on your home.
Notice of Trustee Sale: 90 Days After Notice of Default
When you receive a Notice of Default, you have a grace period of 90 days to try and settle your late payments and remove your mortgage from default. If you can make payments with the accrued interest and late fees, your defaulted loan becomes current, and the foreclosure process ceases immediately. If you cannot make the investment present the bank is within its rights to hold an auction on your home. A mailed Notice of Trustee Sale is forwarded to you with the date of the auction included.
Auction: At Least 20 Days After Notice of Trustee Sale
The bank can set an auction date where your home is sold to the highest bidder. Auctions can be moved to a later date by a court or by the bank itself. The auction can be postponed for one year, and a new Notice of Trustee Sale must be sent to you before a new auction can hold. It is disheartening seeing the number of foreclosure auction Los Angeles holds annually.
The entire duration from the first late payment on your mortgage to losing your home in a foreclosure auction can be as short as 200 days which is a little over six months. It is paramount to contact a licensed bankruptcy attorney before or as soon as you get a Notice of Default. This allows you and your attorney enough time to make adequate preparations to avoid losing your home.
Preventing Foreclosure with Bankruptcy
Given the state of the economy, it can be hard to meet the monthly mortgage requirements. When this happens, you eventually default on your mortgage and are targeted by the banks for property repossession and foreclosure. You stand the risk of losing your home as the bank will attempt to auction it off to regain the value of their loan.
Have you received a Notice of Default from your bank informing you that your home stands a risk of foreclosure? It is essential to keep calm and not panic. Consult with a foreclosure attorney Los Angeles, like other places in America, have viable strategies to help you keep your home, and effectively manage your debt.
California’s Homeowners Bill of Rights, 2013, was passed to provide some respite to Californians struggling with their mortgage payments. The bill prevents banks and creditors from foreclosing property when the homeowner was in the process of loan modification or refinancing. Despite this bill, Los Angeles foreclosures still trend upwards. People still fall behind on mortgage payments leaving them at the risk of homelessness and damaging more than just their credit rating.
It is essential to act fast as once the foreclosure auction is concluded; there are no options available to prevent your home being repossessed by the bank. Meet with one of our highly qualified Los Angeles bankruptcy attorney who will examine the merits of your case and draw up an effective strategy to keep your home. Time is of the essence in cases of foreclosure as creditors can decide to expedite action, leaving you blindsided and unprepared for the future.
If you have defaulted on your mortgage payment and the foreclosure process has started there are only two options to halt the proceedings. The first option is making a significant amount to clear your entire debt accounting for the accrued interests and late fees. As soon as you make a payment that makes your loan current, rather than the default, the bank stops the foreclosure process immediately.
However, most people find it impossible to make such a huge cash payment at once. The best option available to you, in this condition, is filing for bankruptcy. Bankruptcy has a robust legal implication that halts all foreclosure or debt recollection processes, automatic stay.
The automatic stay stops banks, creditors, and other debt collectors from trying to repossess your property or foreclose your home due to default.
Automatic stay kicks in as soon as you file for bankruptcy anytime before the conclusion of Los Angeles foreclosures process. You can live in your home, without harassment, and relative peace of mind, during the entirety of the bankruptcy procedure.
Two chapters of bankruptcy law that effectively halt all foreclosure actions are, Chapter 11 and Chapter 13. Although a Chapter 7 bankruptcy will stop a foreclosure, it is only a temporary fix. After a period of 2 months, the automatic stay lapses and banks can continue the process of repossessing and selling your home.
Chapter 13 provides a more comprehensive and effective anti-foreclosure strategy. Under this plan, you can repay your mortgage arrears over a period of up to 60 months. You have up to 5 years to settle your substantial mortgage arrears while living in your home and working on getting your finances back in order. While your arrears are paid with your approved payment plan, you must continue regular mortgage payments during the bankruptcy period.
A Chapter 13 will also help you get rid of unsecured debts such as second or third mortgages on the same property. These junior mortgages or home equity line of credit (HELOC) are stripped- allowing you to pay off such debts at highly reduced costs. At the end of your bankruptcy process, any outstanding junior mortgages are wiped off as unsecured debts.
A Chapter 11 case, although more complicated, can also provide respite against losing your home due to foreclosure. Unlike a Chapter 13 case, your creditors can choose whether or not to accept your proposed debt repayment plan when you file for Chapter 11. Our highly qualified Los Angeles bankruptcy attorneys can help you pick the right bankruptcy plan depending on your specific circumstances.
Bankruptcy is a form of refinancing that allows you clear off vast chunks of debt without losing your property. Declaring bankruptcy can help you hit reset on your financial life, getting a fresh start, free from the substantial debt and mortgage arrears you may have accrued.
Bankruptcy lasts for up to 5 years during which you clear off secured debts like your primary mortgage arrears. Other mounting debts like second or third mortgages that you may have taken on the same property are stripped of their lien and are usually wiped off your slate. Take advantage of this period to get a new lease of life, build better habits, and make smarter financial decisions.
Conclusion
Contact us today to speak to one of our foreclosure attorneys in Los Angeles. You do not have to lose your home because you made a few late mortgage payments. At Wipe Away Debts, we are committed to helping you manage your debts smartly, reposition your finances, and help you better plan for the future.
We have years of experience dealing with Los Angeles foreclosures, successfully staving off the advances of creditors and debt collectors for our clients. Speak with one of our experts today to decide on what the right part of the action in your foreclosure case. We can help you decide on whether Chapter 13 or Chapter 11 represents the best values for your short-term and long-term finances. Understand your options to make informed decisions and prevent making a regrettable financial decision.
A foreclosure brings a massive change for you and your family. We will be with you throughout the entire journey helping you get your finances in order and ensuring you do not lose your home in the process. Our bankruptcy, foreclosure, and debt management services are unparalleled as our team is made up of professional and highly qualified Los Angeles foreclosures attorneys.
Bankruptcy does not have to carry a negative connotation. It is a legitimate move which shows your readiness to take responsibility and take back control of your life. Our experts will provide you with not only professional support but the motivation to push through this period and come out on the other side repurposed and financially sound.
]]>On Behalf of Law Offices of Danny K. Agai<![CDATA[Advantages & Disadvantages of Declaring Bankruptcy Under Chapter 13]]>https://www.agailaw.com/?p=471742023-09-11T22:11:58Z2018-03-20T08:18:13ZWhat is Chapter 13 Bankruptcy?
Individuals looking to declare bankruptcy may choose to file a Chapter 13 bankruptcy claim. Filing Chapter 13 bankruptcy allows the debtor consolidate his debts and get a discharge after making monthly payments for a period of 36-60 months. Any individual with a regular income, with less than $394,725 in unsecured debts and less than $1,184,200 secured debts is eligible to file a Chapter 13 bankruptcy claim. Secured debts are loans that have a property attached as collateral, a creditor has a right to repossess the property in cases of default, while unsecured debts do not have collaterals like credit card debt.
A debtor who files for Chapter 13 bankruptcy is obligated to make monthly payments to the appointed trustee for the entirety of the bankruptcy period, three to five years. The Trustee is then tasked with settling the debtors existing debts, settling creditors claims on his behalf. Throughout the duration of the process, the debtor need not come into contact with his creditors. The creditors are also prohibited from contacting and harassing a debtor who has filed a Chapter 13 bankruptcy.
Chapter 13 bankruptcy prioritizes secured debts, debts that have a collateral, and over unsecured debts. Payments from the repayment plan first go towards settling all secured debts first, then the balance, usually very little or none, is paid to creditors of unsecured debts. This usually results in a huge chunk of debt getting wiped off and discharged at the end of the bankruptcy period. However, some unsecured debts have priority status as well. Domestic payments like spousal and child support payments, and taxes are priority payments under a chapter 13 bankruptcy repayment plan.
Chapter 13 bankruptcy is essentially a reorganizing of the debtor’s finances in order to settle debts. The debtor experiences a change in lifestyle, as all disposable income is directed towards the monthly payment plan established and administered by a Trustee. Disposable income is calculated by subtracting a debtor’s reasonable and essential expenses from his total income, whatever is left after the subtraction is the monthly payment.
Filing a chapter 13 bankruptcy claim triggers a ‘stay’ on all debt recollection action. This is most often done in cases of house foreclosure. Filing bankruptcy under chapter 13 immediately stops the foreclosure proceedings, as long as it is done before it has been concluded. Chapter 13 bankruptcy gives you the leeway to make up for a missed mortgage or car payments without the house or car getting foreclosed or repossessed. Regular monthly payments will then continue either within the Chapter 13 Bankruptcy payment plan or independent of it.
The duration of a chapter 13 bankruptcy plan is determined by the debtor’s average income compared to his state’s median income. If a person’s average income over the six months that preceded the bankruptcy is higher than the state’s median income his bankruptcy will last for five years (60 months). If the average income is below the state’s median the bankruptcy can last from three to five years. Chapter 13 has a minimum duration of 36 months and cannot last more than 60 months. All debts that remain after the bankruptcy period is discharged and forgiven.
Advantages of Chapter 13 Bankruptcy
Individuals looking to enter bankruptcy are usually met with two popular choices, filing under Chapter 7 or entering bankruptcy under chapter 13. Chapter 7 bankruptcy usually lasts for 6 months and then the debt is discharged but chapter 13 bankruptcy lasts anywhere between 36 to 60 months. Despite this seemingly long period of time in bankruptcy the benefits of chapter 13 bankruptcy are numerous and can help a person take control of his financial life.
The following are some of the advantages of chapter 13 bankruptcy:
1. Prevents Home Foreclosure
Families or individuals may fall short of their mortgage monthly payments due to a number of reasons. With chapter 13 bankruptcy they are able to keep their homes while they try to get their finances in order for the duration of the bankruptcy. Mortgagers are usually quick to foreclose a property and sell it to recoup the balance they are owed. ‘Automatic Stay’ is triggered upon filing for chapter 13 bankruptcy. Banks or other lending institutions cannot foreclose and take possession of your property while you are in bankruptcy.
Chapter 13 bankruptcy gives you the chance to make a comfortable repayment plan for your mortgage arrearage. Mortgage arrearage is the sum of the missed mortgage payments you have incurred, these payments are then stretched across a 3-5 year period. Rather than get your house for closed, filing under chapter 13 will allow you the chance to pay the backlog of mortgage payment over a longer period of time.
However, it must be noted that your normal mortgage obligations remain intact. You must still make prompt monthly payments to your mortgage lender as they still have a lien, a legal right to foreclose your property if you default. Chapter 13 helps you catch up with accumulated missed payments but does not discharge your mortgage.
2. Altering Additional Mortgages
If you have more than one mortgage on your property, chapter 13 can help get rid of the extra mortgages. The first mortgage cannot be altered due to the provisions of the bankruptcy code, but the subsequent mortgages can be altered and transformed into dischargeable debt. You can successfully dispose of the second and third mortgages using a bankruptcy strategy called ‘lien stripping’.
Lien stripping is revoking the mortgage lenders legal right to repossess your property upon default on payments. This is done by weighing the worth of your property with the balance of your first mortgage. If your property is worth less than the first mortgage you can then apply to change the second and third mortgages into unsecured debts.
When you have stripped the liens of the second and third mortgages, you can then convert them to unsecured loans, since they do not have any collateral. Given their unsecured status, these mortgages join the rest of your other non-priority debts, receiving little to zero payment over the course of your bankruptcy. At the end of the bankruptcy period, the balance of the mortgages is wiped and discharged.
3. Ease Car Loan Payments
Filing chapter 13 bankruptcy immediately triggers an ‘Automatic Stay’. Your car loan creditors cannot be repossessed or make any debt collections actions. This allows you continued use of the automobile for the duration of your bankruptcy.
You can also vastly reduce the amount to be repaid by employing a process called ‘cramming’. Cramming down the value of a car loan means you reduce the balance of your debt to the current value of your car. Since cars are usually constantly depreciating this can shave a significant amount off your normal payments. If the car loan balance exceeds the current value of your car, you can create a repayment plan that only considers the present value of the car as the secured debt that will be paid off. The difference between the car’s current value and the car loan becomes an unsecured debt and receives minimal to zero payment and eventual discharge at the end of bankruptcy.
To employ cramming and cut down the of your debt, your car must have been bought not less than 910 days, that is two and half years, before the filing of bankruptcy. After successful chapter 13 bankruptcy, the lien on the car is removed and you gain full, unrestricted ownership of the vehicle.
4. Prevents Taxation Problems
Taxes cannot non-dischargeable and must be paid in full but with a chapter 13 bankruptcy filing, you can ease your issues with the tax collectors significantly. You can add your back taxes to you repayment plans, allowing you to repay your owed taxes without constant hounding and harassment from the IRS. Also, all fines and penalties resulting from prior taxation issues can be written off and discharged as unsecured debts.
5. Automatic Stay
This feature protects you from the constant pestering of creditors and collection agencies. As soon as bankruptcy is filed, all collection activities are required by law to cease immediately. Creditors cannot contact you or your cosigners over the repayment of a debt or even repossession of property. With chapter 13 bankruptcy, you do not ever have to communicate with a creditor for the entire period of bankruptcy.
6. Consolidated Debt
Chapter 13 bankruptcy allows you some form of succor, as your debt is managed by a court-appointed trustee. You make monthly payments to the trustee and they distribute the money among all creditors that have been listed and those who have made successful claims. All you need to do is make your monthly payments and you can be assured that the trustee is handling the creditor selling aspect. This way you do not have to keep track of each creditor individually at the risk of an oversight and failing to pay one of them.
7. Pause Student Loans Payment
Student loans are one of the largest debts Americans have today. While student loans cannot be discharged by law unless, in very rare circumstances, it is possible to delay or reduce payments.
You can choose to add your student loans to your chapter 13 bankruptcy repayment plan. If you do this, it is classified as an unsecured debt, but it is different from other unsecured debts as upon completion of bankruptcy you still continue payments once it is non-dischargeable. By adding it to your payment plan you greatly reduce the monthly payments you make, since it would barely get any servicing during the period of bankruptcy.
While you delay or make reduced payments on your student loans, you are able to get better employment or secure an additional source of income to help you pay up the debt after bankruptcy ends. You can get a discharge of your student loans when you file for bankruptcy using the ‘hardship’ clause. If you are able to prove that you have no means of student loans payment currently and that is not going to change in the future, a court can discharge and wipe of such a debt. You must show good faith during the proceedings in order to succeed, that is, you must show that you made reasonable steps to make payments towards the debt.
8. Retain Your Property
Compared to filing bankruptcy under chapter 7, chapter 13 allows the retention of all property. The courts only allow a person keep ‘exempt’ property when filing a chapter 7 bankruptcy claim. The definition of exempt is any property that is essential to starting afresh, making all nonessential or luxury belongings nonexempt and free to liquidate. All nonexempt property is sold in order to pay off the debt in chapter 7, but in chapter 13 your repayment plan is based on the monthly payments you pay to your trustee. You are allowed to keep your property and belongings without fear or repossession or foreclosure.
9. Cosigner Protection
Cosigners to your loans and your debts can be protected from creditors using chapter 13 bankruptcy. Since your cosigners are also liable to pay your debts, creditors have a right to go after them for payments of the amount owed. However, if you include the cosigned debt in your chapter 13 bankruptcy repayment plan, the ‘automatic stay’ extends to them. Creditors carry out any actions to recover debt form cosigners as long as the debt is contained in the repayment plan.
10. Discharge and A Clean Slate
After successfully completing your 3-5 years of bankruptcy, any balance on your unsecured debts is wiped off and discharged. This is a great way to get rid of insurmountable debts that may have been incurred due to mismanagement, bad luck, poor financial decisions, fraud or a myriad of other factors. A chapter 13 bankruptcy allows you time to get your affairs in order, repay your priority debts and wipes the slate clean after you adhere to the terms of your bankruptcy diligently.
The truth about bankruptcy is, you never pay more than a tiny portion of all your debt. Only priority debts like secured loans, mortgages and taxes are paid off during bankruptcy, the rest are paid with whatever money remains after the secured debt have been dealt with. This effectively frees you from the obligation to pay debts incurred from credit cards, utilities, and medical procedures, payday loans, parking tickets, fines and all other unsecured debt.
Declaring bankruptcy will also prevent you from getting stuck in perpetual indebtedness. Certain debts, like a credit card, have obscenely high-interest rates that only serves to build up the debt portfolio of such individuals. A lot of people are stuck paying off the interests on their debts rather than the actual original debt. When you declare chapter 13 bankruptcy interest stops running on debts. Meaning your debt portfolio can only drop rather than growing larger.
Bankruptcy might seem like low point and a dark period but it can also be a chance for a fresh start. Since you are free of draining financial burdens, you can commit to more profitable ventures, while learning from past experience and managing debt wisely.
Disadvantages of Chapter 13 Bankruptcy
Despite the many benefits of filing chapter 13 bankruptcy, there are still some drawbacks that come with the process. People looking to declare bankruptcy must consider the disadvantages of chapter 13 bankruptcy before filing.
Here are some of the cons and demerits of committing to the extended bankruptcy period filing chapter brings with it. Consider each carefully and weigh it against the benefits and your individual circumstance before making a decision.
1. Long Bankruptcy Period
Filing chapter 13 bankruptcy will take a minimum of 3 years to successfully complete and get a discharge. This extended period of time can be unnerving for people looking to get rid of their debts hastily and get back to their lives. For comparison, a chapter 7 filing will see the bankruptcy period last for only 6 months. The length of bankruptcy, coupled with the risk of dismissal due to a breach of terms can make a chapter 13 filing a risky endeavor. People who do not want to spend up to 5 years in bankruptcy should consult with an advisor to consider alternative plans.
2. Damaged Credit
A chapter 13 bankruptcy will stay on your credit report for 7 years, significantly reducing your credit score and also depleting your creditworthiness. This drop in credit score, which can be as much as 200 points, will have a huge impact on any transactions that require a credit check before a conclusion.
Declaring bankruptcy will make it almost impossible for you to get a mortgage unless you already have one. If you do get a mortgage you will be given really high-interest rates as you are flagged as a high-risk borrower. The conventional mortgage institutions will most likely fail to grant you a mortgage, you are going to be forced to seek out specialized institutions that cater to potential customers with poor credit scores.
A damaged credit will also make it impossible to obtain a new line of credit, like a loan or new credit cards. Borrowing or extending other lines of credit to people who have declared bankruptcy with the last 7 years makes it impossible. Most lines of credit would be accompanied by really high-interest rates and the need for cosigners and collateral.
3. Ruined Chances of Employment
Employers usually carry out extensive background and credit checks before employment. Declaring bankruptcy is usually considered to indicate poor management skills, below par decision making and a risky decision for such potential employers. Securing a gainful employment with the presence of a chapter 13 bankruptcy filing in the immediate past is highly probable.
4. Restrictive Lifestyle
For the duration of the bankruptcy period, your finances are effectively administered by the court-appointed trustee. Filing a chapter 13 bankruptcy leaves you with little or no financial freedom. Every earning, no matter its nature, is reported to the trustee who decides whether to adjust the monthly payment. People who are in chapter 13 bankruptcy commit their entire finances towards clearing their debts, there can be no spending on activities considered nonessential. All of your disposable income is handed over to the trustee for conversion into bankruptcy repayment plan.
5. High Administrative Costs
The cost of filing and successfully declaring chapter 13 bankruptcy can be quite high. The bankruptcy trustee, appointed by the court, takes 10% of your bankruptcy repayment plan as a commission for services rendered. The costs of hiring an attorney for the duration of 3-5 years can also constitute a significant portion of your repayment plan. In essence, the costs from the trustee’s commission, attorney fee, and court filing processing form a substantial percentage of the total cost, reducing the actual amount that goes to your creditors and extending the duration of payment.
6. Incomplete Discharge
Chapter 13 bankruptcy will not avail a person seeking to discharge any of the following debts- child and spousal supports; taxes; student loans; injury claims due to intoxication and driving under the influence; and mortgages. Chapter 13 bankruptcy merely extends the time allowed to pay these debts but does not offer a permanent solution towards the discharge of the entirety of person’s debt.
Recommendations
Filing a chapter 13 bankruptcy claim can be the first step towards reclaiming your financial life and pulling you and your household out of large, seemingly insurmountable debt. It is a viable alternative to a chapter 7 claim where you may have to lose your property in order to pay off debts. Filing under chapter 7 can help build good habits as you have to commit totally for the entirety of the bankruptcy period towards repaying your debts.
Before making a choice on what form of bankruptcy to file for, you must consult with an experienced professional. You will definitely need expert advice and assistance in making a smooth unhindered application for chapter 13 bankruptcy. The entire process can be quite complicated, but with the aid of experts with years of experience in bankruptcy laws, you are halfway to financial freedom.]]>