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Los Angeles Bankruptcy 101: Understanding the Basics

October 21, 2012

When people first consider filing for a Chapter 7 bankruptcy in Los Angeles, it's unfamiliar territory. pileofbooks1.jpg

Los Angeles Chapter 7 Bankruptcy Attorney Vincent Howard of HOWARD LAW knows that bankruptcy statutes are complex and often changing and truly require a lawyer who understands the laws inside and out.

Fortunately, with this kind of experience on your side, you won't have to worry about delving into a deep understanding of all these legal complexities. However, it doesn't hurt to have a basic knowledge if you are considering filing for either Chapter 7 or Chapter 13 protection.

Some of the key points of which you'll want to have a decent grasp are these:

1. If it is possible to solve your financial troubles without a bankruptcy, try that first. Although this may sound like odd advice coming from a bankruptcy lawyer, we certainly don't want you to go down a path that would be financially reckless. Bankruptcy is for those individuals who need a fresh start. When the bills and the debt has simply gotten to be too much. So if you have simply ran up a few thousand dollars on your credit card - and that's the only thing you're struggling with - you may want to consider if you can negotiate with the credit card companies for a low-interest repayment program or if there is any way you can simply buckle down and pay it back.

2. Don't wait too long to file a bankruptcy. This goes hand-in-hand with the first point. While it's important not to file if it isn't necessary, many people don't understand when they have actually reached the point where it's become not only a viable but a prudent solution to their financial woes. Too many of our clients have come to us only after draining their savings and retirement funds and their home has been foreclosed upon. If you are using credit cards to pay for your basic necessities, if you are only paying the minimum on your debts or if you are getting calls from creditors about late payments, the time has come to explore bankruptcy.

3. Consider waiting to file until you have addressed the problem. Again, this may seem odd coming from a bankruptcy law firm, but this is important because if you haven't fixed the issue, going through a bankruptcy is going to be a waste. So let's say the problem is that you were laid off from your job. If you are still unemployed, filing at the current moment may be pointless because you still won't be able to pay debts when you emerge. Every situation will be different, but it's probably advisable to wait until you have found work - even if temporary - so that you will be able to cover basic expenses when you emerge from the bankruptcy process.

4. Understand your options. There are two kinds of bankruptcy that you have available to you. One is a Chapter 7 (which is either a full or partial debt liquidation) and the other is a Chapter 13 (which is a debt reorganization repayment plan). A Chapter 7 allows you to walk away from most of your debts, while a Chapter 13 will require you to pay them back either partially or in full over a certain period of time. Which one you choose is going to depend largely on how much you make. New, more stringent bankruptcy rules enacted in 2005 heighten the requirements for a Chapter 7 filing, so if you make too much for a Chapter 7, you will have no choice but to file a Chapter 13. However, the vast majority of bankruptcies are in fact Chapter 7 filings. Your bankruptcy lawyer can advise you on what is possible and also what makes the most sense.

5. Meeting with a bankruptcy lawyer before you file can help you avoid headaches later on. People make the mistake of believing that because they are broke, they can't afford an attorney and therefore need to try to file it alone. But this leaves them vulnerable to potentially making a mistake that might cause them to lose their home or vehicle (if one of their goals is to hang onto this property). At the very least, take advantage of an initial consultation, at least to get your bearings on what the process will entail if you do try to go through it alone.

Los Angeles Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
Get the facts on bankruptcy, June 16, 2008, By Dana Dratch,

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Los Angeles Jobless Rates Deceiving, Oct. 12, 2012, Los Angeles Chapter 7 Bankruptcy Lawyer Blog