Bordered by Torrance, Hawthorne, and several other cities in Los Angeles County, Gardena’s population is 57,546. The city is racially diverse, with a large percentage of people between the ages of 25 and 64. There is a fairly even split between people who are homeowners and people who are renters. As with most communities in America, a significant percentage of residents worry about finances and debt. Bankruptcy should be your last resort, but it can help if you are excessively worried about debt.

A common misconception is that your credit is irreparably damaged after bankruptcy. However, there are realistic ways to rebuild your credit after bankruptcy. Successful approaches include always paying your bills on time, starting an emergency fund, continuing to make use of plans developed during credit counseling in the bankruptcy process, disputing false charges on your credit report, and getting new credit cards (but making sure you pay them off each month). An experienced Gardena bankruptcy attorney can help you file for bankruptcy and put you on the path towards a fresh start.

Developing a Chapter 13 Bankruptcy Plan

Currently, your secured debts cannot exceed $1,149,525 and your unsecured debts cannot exceed $383,175 if you want to file for Chapter 13 bankruptcy. These figures are periodically adjusted. Secured debts include such things as home loans, car loans, and income tax debt. Unsecured debts include most credit card debt and medical bills.

If you are eligible to file for Chapter 13 bankruptcy, your Chapter 13 plan will pay a certain percentage of your debt in full over the duration of your bankruptcy, which will last between 36 to 60 months. Once you have completed your plan, the rest of your unsecured debt will be discharged. It is also possible to file a Chapter 13 in which you do not pay any portion of your unsecured debt with your disposable income. This type of Chapter 13 is know as a “0% plan”.

Under a Chapter 13 plan, you must be able to show the bankruptcy court that you have enough income after expenses and required payments like a mortgage to meet your obligations to repay creditors. Once bankruptcy is over, you can continue to use the plan developed in credit counseling as a guide for how to spend in order to ensure you do not end up in the same situation again.

Special Tools Available Under Chapter 13 Bankruptcy

Chapter 13 can be a better option than Chapter 7 for those who own property because it allows you to use certain tools. Tools available under Chapter 13 include what are called “cram downs” and “lien stripping.” You can cram down certain secured debts like car loans or investment property mortgages, or debts for items you purchased on a payment plan like a stereo system, refrigerator, or a washer/dryer. For example, suppose you bought a washer/dryer three years ago for $3,500 and it has significantly dropped in value. It is now worth $1,000. You can cram down the debt and the creditor will only be entitled to $1,000, the replacement value of the washer/dryer.

You cannot use cram downs for your principal residence. However, you can use lien-stripping if you have multiple mortgages. In Chapter 13 bankruptcy, if you have multiple mortgages, the senior mortgages take priority over the junior mortgages. A common problem in Gardena and elsewhere during the recession was that houses dropped significantly in value while mortgages remained the same. If the total value of your house is secured under a first mortgage, you can ask the bankruptcy court to “strip” the junior liens.

Tools like the ones described above can help make debt repayment more manageable. If you are thinking of filing for bankruptcy, retaining legal assistance can make a world of difference both in utilizing tools like these and rebuilding your credit once the debt repayment is over. Contact the trustworthy Gardena bankruptcy lawyer Devin Sawdayi at 310-475-9399 or via our online form for help.