North CA, Chico, Redding, & Northern California Area Estate Planning Attorney

Bankruptcy: a Fresh Start After Unforeseen Disasters; CARES Act Bankruptcy Response to COVID-19

The world is full of economic uncertainty right now. Thanks to the novel coronavirus disrupting local and global economies, like those in East Quincy, Orland, and Dunsmuir, as governments, like in California Pines, Hayfork, or Chester, seek to curb this pandemic, financial turmoil is the name of the day. Countless businesses in areas such as Willows, Chico, and Loyalton are closed or running with skeleton crews, impacting both workers and employers, residing in Susanville, Arbuckle, Orland or Paradise, from earning a living and exposing them to the possibility of excessive debt. This effect ripples outward, from businesses to employees to tenants to landlords in Weaverville, Yuba City, and Westwood, creating a situation where the more prolonged the pandemic, the more debt everyone is going to accrue.

Yet even if we weren’t facing a pandemic of global proportions, there are plenty of circumstances where debt can become unmanageable. Good people, like those in Hamilton City, Lewiston, or Etna, get into bad situations every day and need a way out. Workers living in Redding, Red Bluff, and Live Oak can lose their jobs, become sick, and accrue medical debt. Small businesses in Sutter, Corning, or Susanville with payroll tax problems can see themselves overextended to the point where financial liabilities threaten to overcome their business. No matter what the source of this economic instability, though, there are ways for bailing yourself out, with the most obvious one being filing for bankruptcy.

There’s a lot of uncertainty that surrounds bankruptcy law, though, not to mention some severe (and undeserved) stigma! Is bankruptcy right for you? What, exactly, goes into a bankruptcy filing? What are the requirements? What types of bankruptcy are there, and what do they do? Will they eliminate all of your debt or just some of it? Am I ever going to get out from under this debt and be able to take care of myself and my family again?

It’s time to take a deep breath. Here’s your guide to bankruptcy and how it can provide you a fresh start to unforeseen financial disasters.

What Bankruptcy Is — and What It Isn’t

Bankruptcy is known as the “fresh start” law, and that’s because it does precisely that: provide you an opportunity to start fresh after running into financial difficulties. It offers individuals or businesses, like those located in Anderson, Hayfork, Alturas, and Dorris, a way out from under debts they can’t pay. Bankruptcy is a court-adjudicated effort to settle the outstanding debt fairly and feasibly.

Several things can happen during a bankruptcy proceeding, depending on the type of bankruptcy for which you’re filing. In rare cases, such as when filing for Chapter 7 Bankruptcy, you may need to relinquish a portion of your assets to your creditors in return for keeping the rest. Don’t worry, much of your property is likely to be exempt in this case. It’s been our experience that approximately 98 percent of bankruptcy petitioners lose nothing but their debt, especially when working with a qualified attorney.

There’s much more specificity when it comes to debt and bankruptcy, of course. Some kinds of debts are dischargeable; some, sadly, aren’t. Yet in the long run, filing for bankruptcy and having it granted by the courts is an overall net gain for your financial stability, as it helps you manage with the remaining debt much more easily. It also provides you an opportunity to rebuild your credit, which has likely suffered in the meantime, and as such, it’s often the first step you can take on your journey back to financial stability and success.

A Chapter for Every Story

No two people’s debt story is ever alike. Bankruptcy law takes this into account by providing options from which to choose, depending on your specific circumstances. Appropriately enough, we call these different “chapters” of bankruptcy. In most situations, three different bankruptcy chapters are likely to be most appropriate for your needs. Let’s get into each one in turn and explain how they work, who they’re suitable for, and what you can expect if you decide to pursue this particular type of bankruptcy filing.

Chapter 7

Chapter 7 bankruptcy is a type of bankruptcy known as either straight bankruptcy or liquidation bankruptcy. It can clear a variety of personal, unsecured debt, and it’s an excellent choice for anyone that’s fallen far behind on their bills and no longer have the ability to pay their monthly living expenses and debt payments. In this case, filing for Chapter 7 bankruptcy may be the best way to essentially “reset” your financial situation. For a minority of petitioners, there are a few negative repercussions from filing for Chapter 7, and this can include not just having a black mark on your credit score but also having to relinquish some of your personal property.

Chapter 7 bankruptcy works straightforwardly: filing triggers an automatic stay on all your current debts, enables the court to take legal ownership of your property, and appoint a trustee who reviews your financial situation and oversees your bankruptcy.  You’ll have your assets sorted into the non-exempt and exempt property, with the non-exempt property sold off by the Trustee to help pay your creditors. You’re also required to attend an event called a “meeting of creditors” at a courthouse to answer some questions. This event is, as advertised, a meeting between you and representatives from your creditors, but very few creditors ever attend this meeting.

How much of your property, in communities like East Quincy, Yuba City, Colusa, or Sutter, is exempt will vary by state, as different jurisdictions have different views on what should be exempt and what shouldn’t be. Yet in most cases, Chapter 7 bankruptcy cases are often referred to as “no asset” cases because your assets are all non-exempt. Other times, even if you have an exempt asset, your property in Dorris, Alturas, Red Bluff, or Cedarville might already have a valid lien against it and is therefore ineligible as well. The ability to plan and strategically use exemptions is one of the best things about Chapter 7 bankruptcy since 98% of filers lose nothing but their debt. Either way, the entire process typically takes around three months to have your remaining debt discharged. Be aware, however, that some debts are not discharged in a Chapter 7 bankruptcy, including most student loans and some tax debts, court fees, and alimony or child support payments. This type of non-dischargeable debt will still be your responsibility afterward.

Chapter 13

If Chapter 7 is simple, straightforward, and meant for individuals, from Weaverville, Corning, Shasta Lake, or elsewhere. Chapter 11 is complex, expensive, and intended for corporations, and Chapter 13 bankruptcy lies somewhere between these two extremes. Like Chapter 11, Chapter 13 is a reorganization-style bankruptcy, and all that entails, including coming up with a reorganization plan. However, like Chapter 7, Chapter 13 is open, available, and suitable for individuals like those in Oroville, Sutter, Westwood, and Redding, instead of just companies. The flexibility of  Chapter 13 makes it a useful hybrid between Chapters 7 & 11. It has some of the advantages, as well as the disadvantages of each.

For whom is Chapter 13 bankruptcy ideal? Any individual with a mix of secured and unsecured debt can benefit from this reorganization. However, there are upward caps on how much liability you can have to be eligible. Secured debt, such as car loans and mortgages, can’t exceed more than roughly $1.1 million; unsecured debt, the kind you accrue from personal loans or credit cards, can’t exceed around $395,000. Either way, you won’t be able to get rid of debt from student loans, alimony payments, or child support; those usually remain, as they’re not considered dischargeable debt.

Chapter 13 bankruptcy, like Chapter 11, requires you to submit a reorganization plan that’s considered fair and feasible by your creditors, and the courts approve that. Once this plan is accepted, you don’t have to worry about your creditors seeking to collect on your debts, losing your home in Chico, Janesville, or other areas or other assets for nonpayment. However, you will be required to submit a monthly payment to a debt trustee who then submits that payment to your creditors. There’s no wiggle room here — you need to make each of these payments on time as part of the debt agreement.

Chapter 11

If Chapter 7 bankruptcy is perhaps the most straightforward and comparatively simple type of bankruptcy filing, Chapter 11 bankruptcy is, in many ways, the opposite. Chapter 11 is designed to provide an opportunity for debtors in areas like Anderson, Alpine, Shasta Lake, or Susanville to reorganize their business finances. Chapter 11 is used primarily by companies and corporations, although individuals use it in some circumstances. Businesses in Sierra Brooks, Cedarville, and Downieville, as well as real-estate holding organizations that need time to undergo a debt restructuring to continue to function. Just like in Chapter 7 bankruptcy, the debtor receives a fresh start in return for filing a Chapter 11 after the process is over and done with, but there are several strings attached. All of these strings will differ in specifics according to the debtor’s reorganization plan and whether it meets the approval of both the courts and the debtor’s creditors!

These plans, as mentioned above, are all custom-designed to both satisfy a company’s creditors and enable the company in locations like Lake California, Portola, Oroville, and Williams,  to continue to conduct business. There are as many different conditions as you can conceive, with some examples including reducing expenses by downsizing business operations, debt renegotiation, or even liquidating a portion of a company’s assets to repay outstanding debt. If the court accepts conditions as fair and feasible, the plan commences, and both the company and creditors bound by the agreement.

Don’t Navigate the World of Bankruptcy Law By Yourself

The fear and stress that come from dealing with runaway debt can be debilitating. These fears are even more prevalent today, what with the global economy reeling from the COVID-19 pandemic. There are many of us quarantined in Yuba City, Live Oak, and Arbuckle, furloughed in Sierra Brooks, Willows, and Paradise, or otherwise facing an extreme reduction in our earning capacity. With customers, clients, or tenants being out of work, this leads inevitably to acute financial distress.

In some cases, declaring bankruptcy may be one way of navigating this brave new world in which we find ourselves. Yet the idea of finding your way through the labyrinth of bankruptcy law on your own, not to mention having to weather the needlessly negative stigma that comes along with declaring bankruptcy, is nearly as bad as being in financial distress in the first place. This complexity is why you should never go it alone, even more so now, and no matter if you’re facing medical bankruptcy, business bankruptcy, real estate debt, or any other possible calamity.

That’s where we come in. Thanks to our experience helping thousands of people just like you, we have the skills and the expertise to ensure you come out the other side of bankruptcy safely and in a better, more stable financial shape than you were when before you began the process. We have robust and detailed resources available for you. If you’re looking to learn more about the filing process and want a free copy of our 256-page Bankruptcy Answers and Issues guide or you want a sympathetic ear to discuss your options, contact us. We’ll show you how we can help you get back on the road to financial recovery.

Don’t go it alone, especially not in this economic landscape! Rely on Bottom Line Lawyers for your bankruptcy law needs. Call us today!