Individuals often approach a bankruptcy attorney when they feel a sudden urgency to respond to pressure from a creditor. In Sacramento that urgency comes in many forms: loss of job, a lawsuit, increasing mortgage payment, and a number of other events that can take anyone off track. When one of these events comes unexpectedly there may be little time to respond and most people don't have the cash reserves or assets to buy enough time to get back on their feet. Most creditors are unwilling to settle with desperate borrowers. Ultimately, when the options to pay a credit card or change the interest on a mortgage are insufficient to help remedy a borrowers issues, the borrower finds themselves in an tough situation. They realize that based on their current finances they are unlikely to ever get back on there feet. With that feeling, debtors lose the motivation to earn a living, accumulate assets, and strive toward retirement and a successful financial outcome.
In turn, those individuals who wish to utilize the resources under the bankruptcy code, will file bankruptcy. Chapter 7 is more common than other types of filings like chapter 11 or chapter 13 because it tends to be the least expensive means to obtain relief from creditor action. That's because a bankruptcy attorney can prepare a chapter 7 in most cases rather quickly. In the Eastern District of California, there is usually only one court appearance, and that is at a creditors meeting, also known as a 341 meeting. In addition, a discharge in a chapter 7 case frequently can be obtained within four months of filing.
Chapter 7 is known as a liquidation chapter, meaning that most debts and most assets are eliminated. However, some debts, like students loans, are not normally discharged unless there is a hardship demonstrated. Some other types of debts are not discharged under any circumstances. Most of the time though, credit card debt is discharged if the debtor qualifies for this type of filing. This result can offer great relief for someone who is on a limited income and would be strained by trying to maintain a high interest revolving account.
Many Sacramento residents ask me whether they can keep their house or car if they file chapter 7. It usually depends on whether there is debt secured by the asset, whether the individual can afford to continue to pay that monthly payment, or whether the individual has any equity in the property. For example, if one of my clients had a mortgage of $200,000 on their home and they decided that they did not want their home foreclosed and to have to surrender it, they would need to have sufficient income to make the monthly payment. What if my client's car was worth $10,000 without any debt secured by this item? If there was a sufficient exemption value remaining, my client could probably keep the car, even one of this value.
Sometimes however, an individuals monthly income is too high for chapter 7 and therefore chapter 13 or chapter 11 might be more fitting. Other times a debtor wishes to reduce the secured debt associated with certain types of eligible property and therefore chapter 7 may not be the best fit even if they qualify.
These are just a few considerations on the subject. This is not legal advice.
