Things are tough all over. The weakness of the current economy, especially in California and other hard hit Western states, has led to many people falling behind on their bills, including their mortgages. The inland areas of California, especially the Central Valley and Inland Empire, have been particularly hard hit because much of their economic growth over the past several years was tied to the housing bubble. If you are one of the many people suffering with chronic underemployment or have been unable to find adequate employment, the federal Bankruptcy laws may be able to provide you with some relief.
In California, there are four Bankruptcy Court districts: Southern, Central, Eastern, and Northern. Maps detailing the coverage area of each district are available from the respective district websites. Debtors file bankruptcy where they reside or conduct business, usually based on the debtor’s zip code.
What is Bankruptcy
Bankruptcy is a process by which the person filing bankruptcy (called the “debtor”), may file a petition in bankruptcy court asking for relief from creditors. For consumers, as opposed to businesses, there are two sections of the bankruptcy code of particular interest.
Chapter 7 is the Bankruptcy Code section that allows the bankruptcy court to discharge debts completely. After a debt has been discharged, the consumer who owed the debt is no longer required to pay it, and the court can sanction a creditor for attempting to collect on the debt. You may have to relinquish property to pay creditors what you are able. The Court will appoint a trustee to administer the bankruptcy estate and to decide how much creditors can be paid back. The bankruptcy estate is comprised of the debtor’s assets, subject to certain exemptions.
Chapter 13 is the Bankruptcy Code section that allows the court to designate a payment plan that permits debts to be repaid over time. Generally, under the payment plan, debts must be repaid within five years.
The bankruptcy filing fees are established by the Bankruptcy Court. The fee is based on which Chapter the debtor is filing under. At the time this article was written, the fee for Chapter 7 is $299, and the fee for Chapter 13 is $274. These fees are subject to change and you should check with an attorney or the local Bankruptcy Court to find out the current fee. Fee waivers and payment plans may be required. However, fee waiver and payment plans are at the court’s discretion.
In additional to the filing fees, you should probably hire an attorney to represent you in bankruptcy court. Attorney’s fees may range widely depending on the complexity of your case. You may be able to save on attorney’s fees by keeping your paperwork organized to minimize the amount of work the attorney has to do. It is recommended that you consult an attorney prior to filing bankruptcy. A lot of detailed paperwork is required for bankruptcy, and if any of your paperwork is incorrect or missing, your bankruptcy case may be dismissed.
For those experiencing economic stress, bankruptcy can provide some relief. Bankruptcy may prove to be the best option for those who are unable to pay their debts. Bankruptcy can provide debtors with an opportunity to get their finances in order and move on with their lives. Consult a bankruptcy attorney to find out whether bankruptcy may be right for you.
Jason G. Hall practices Bankruptcy in Fresno, California. Jason is particularly attuned to the needs and concern of valley residents in these tough economic times.