If you are among the many people in Los Angeles dealing with mounting debt and difficulty paying it back, you may be interested in the options offered by bankruptcy. Los Angeles is home to the United States Bankruptcy Court for the Central District of California. A knowledgeable Los Angeles bankruptcy attorney can help you examine your options to see whether bankruptcy is best for your particular situation.

Bankruptcy is usually a last resort. It may be appropriate if you are in dire financial straits, with no possibility of loan modification, perhaps facing foreclosure or wage garnishment, and dealing with unrelenting creditor harassment. Bankruptcy laws were fashioned to give honest debtors a fresh start by wiping the slate clean of their prior debts. It is important to be aware of which type of bankruptcy is right for you.

There are two types of bankruptcy that are of primary interest to an individual facing a difficult financial situation and mounting debt, Chapter 7 and Chapter 13. Chapter 7 is a faster way to alleviate financial stress than Chapter 13 because it has a short duration (3-6 months), after which you receive a fresh start. In contrast, if you file under Chapter 13, you must have a job or other income that allows you to stick to a debt repayment plan over a long period of 3-5 years. Both types of bankruptcy try to ensure that lenders are repaid as much of the debt they are entitled to receive, if any.

What Kind of Bankruptcy?

Not everyone qualifies for Chapter 7 bankruptcy. To qualify you must pass a means test, which is designed to ensure that your income is not so high as to disqualify you from Chapter 7. If you qualify, you may be able to keep basic necessities to get started after your debts are discharged. However, the trustee appointed to your case will work to find a way to pay off as much of your debt as possible. Chapter 7 bankruptcy is a sound choice for those with smaller incomes and few assets to protect. It may not be the right choice for someone with a large income or significant assets such as a house or car which has a lot of equity in it.

Chapter 13 bankruptcy laws require filers to repay their debts, at least in part, by sticking to a debt repayment plan. It is the appropriate chapter under which to file for debtors who face foreclosure or car repossession and want to keep their property, but simply need more time and structure to pay their lenders.

Bankruptcy can affect your credit for a set period of time. It may affect your FICO score for up to 10 years until it is removed from your record. However, the impact of a bankruptcy is reduced over time. Assuming you try to establish good credit by sticking to a debt repayment plan under Chapter 13, and making future payments on time after bankruptcy under either chapter, you may be much better off after a bankruptcy than you were saddled with large, numerous debts.

An experienced Los Angeles bankruptcy lawyer can look at your goals, help you claim all your debts and assets, and make sure that you are left with at least enough to start over once your debts are discharged. Contact Devin Sawdayi at 310-475-9399 or via our online form for help with this process.