Filing a Chapter 7 or Chapter 13 bankruptcy in California can either give filers a completely fresh start or reorganize and reduce debts to a point where debt becomes manageable again. While these benefits are still attainable, changes in the bankruptcy code put in by Congress several years ago have made the process quite a bit more complicated. For that reason, it is critical to take the following steps to ensure an outcome which provides the greatest benefits with a minimum of surprises.
1. Hire an Experienced California Bankruptcy Attorney
This is the first and most important step to ensure the best outcome from either a Chapter 7 or Chapter 13 bankruptcy filing. A Chapter 7 bankruptcy, also known as liquidation, typically results in the discharge of unsecured debts, freeing the filer from further payment obligations on unsecured balances listed in the bankruptcy. A Chapter 13 bankruptcy, also known as reorganization, typically results in the establishment of a court-approved plan to repay some of the unsecured debt over a period of three to five years. Some of the benefits of working with a qualified California bankruptcy attorney include receiving counsel on which of these bankruptcy formats will provide the most benefits, completion and submission of all the necessary documentation, and executing the best strategy to win the best financial outcome.
2. Get Your Payment Dates Right
This is extremely important in terms of payments and asset transfers to business partners, friends, and relatives as well as the purchase of certain assets. The bankruptcy court, in addition to assessing a filer’s current financial situation, also looks back in time at certain transactions, specifically where money or assets are paid or transferred. The court can and will reverse these transactions if certain time-related criteria aren’t met. Another instance where an exact date can be important concerns the purchase of automobiles. In a Chapter 13 filing, an action known as an auto “cram-down” can reduce a borrower’s car payments and the total balance due on a car as long as the purchase was made 910 days prior to the bankruptcy filing. As mentioned in point #1, an experienced California bankruptcy attorney can make sure that these criteria are met before a filing takes place.
3. Paperwork and Documentation
A bankruptcy filing requires extensive paperwork and documentation, both provided by the court and required from the filer. Financial documentation required from filers includes bank statements, verification of income, a list of liabilities, and a detailed list of assets.
4. Pre-Bankruptcy Counseling
A pre-bankruptcy counseling session with an approved credit counseling organization is required prior to filing for bankruptcy. The single session usually lasts an hour to an hour and a half and be completed on the premises of a credit counselor, by phone, or online. The session will likely include an assessment of financials, alternatives to filing for bankruptcy, and development of a budget plan. A certificate as proof of completing the credit counseling session must be submitted at the time of the bankruptcy filing. A California bankruptcy attorney can provide a list of court-approved credit counseling agencies.
Despite the relatively new complexities involved in navigating the bankruptcy process, the benefits provided by both Chapter 7 and Chapter Bankruptcies are still substantial. Start with an experienced bankruptcy attorney, follow the remaining steps listed above, and eliminate the burden of excessive debt once and for all. For a free bankruptcy evaluation, call the experienced California bankruptcy attorneys at Zhou & Chini.
