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In 2011 alone, California filed a total of 234,443 bankruptcies, making it one of the top seven states with the highest rate of bankruptcy. After filing, the average personal bankruptcy case takes about four months to finalize and up to five years to pay out debts. Although frequent, filing for personal bankruptcy is no easy task. By contacting a Pasadena bankruptcy attorney, learning about the law, weighing options, and understanding the consequences, an individual is more informed and ready to go forward with their decision. Before personal bankruptcy can be filed, the debtor must take credit counseling from an approved budget credit-counseling agency within 180 days before filing and another financial education class within 45 days after. They also have to pass a number of requirements beforehand, including a Means Test, to see if they are eligible for filing. A Means Test takes a look at an individual’s income to determine if a debtor can afford to pay 25% of unsecured debt and compares it to the median income for the state. If it falls below the state average, the individual may file bankruptcy under Chapter 7 (liquidate their assets). If their income rises above the state median, they have the option to file under Chapter 13, meaning they can remain in control of their assets and work out a repayment plan. Of course, there are exceptions to these requirements and it is best to consult a Pasadena bankruptcy attorney before proceeding. If a debtor is approved to file under Chapter 13 of the bankruptcy law, he or she must disclose all their expenses and debt to the creditor and also to their Pasadena bankruptcy attorney. Next, a repayment plan must be devised and approved by creditors. If approved, the debtor must remain true to the plan and pay the required amounts over the agreed period of time. Money is generally withdrawn directly from an individual’s wages. A trustee oversees the case and ensures creditors are paid. There is a meeting of the creditors approximately one month after filing in which the debtor, attorney and trustee attend; this is done to review the case and discuss any objections the creditors might have. If the Means Test forces a debtor to file bankruptcy under Chapter 7 of the bankruptcy law, the individual and their Pasadena bankruptcy attorney meet to determine what assets are liquidated and which are exempt from liquidation by filing a court petition in the debtors district. Meeting with an attorney helps a debtor remain protected from liquidating certain assets, such as their home and car. If there are no objections to the proposed petition by creditors, certain debts may be discharged. In California, there are some debts that cannot be discharged, including alimony, back child support, fraudulent debts, some taxes and student loans. Bankruptcy is a last resort. Other alternatives should be discussed with a Pasadena bankruptcy attorney and thoroughly considered before moving forward. Alternatives include: debt consolidation, forming a debt management plan with the help of a debt consolidation agency, informal debt negotiation with creditors, or do nothing in hopes that creditors will write off debt because they cannot pursue payment if the debtor has no assets or savings. Filing for bankruptcy can be a complicated process, starting from the decision to file to passing state requirements and devising a payment or liquidation plan. Contacting a Pasadena bankruptcy attorney will ensure the debtor gets a trustworthy and experienced attorney, who will present them with all their options before they make their decision. Get in touch with our Pasadena bankruptcy attorneys to explore different options to come out of the debt burden. To know about the steps for choosing the right bankruptcy attorney, you may visit About.com.
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