In Covina, California, bankruptcy is a court procedure in which a person or business has some or all of their debts cleared (or "discharged"), theoretically allowing them to begin with a clean slate, and move on with their lives no longer drowning in debt (and hopefully having learned to better manage their use of credit in the process). Remember, though, that bankruptcy should not be viewed as a proper way to get out of debt that you don't feel like paying back. It is meant to serve as an option of last resort for people and businesses faced with debt that they will probably never be able to pay back. The decision to file for bankruptcy can result in negative consequences, such as damaged credit ratings, which must be seriously weighed against the possible benefits.
Accordingly, you should speak with a good Covina, California bankruptcy lawyer. Your Covina bankruptcy lawyer can inform you of the costs and benefits of filing for bankruptcy, and give his or her professional advice as to whether or not it's a good option, given your individual circumstances.
Types of Bankruptcy in Covina, California
There are 3 bankruptcy options that are commonly used in Covina: Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Bankruptcy is governed by federal law, so the procedures in Covina, California are very similar to what they will be anywhere else in the United States. Chapter 7 bankruptcy requires the debtor to liquidate some of his or her property, and use the proceeds to pay creditors. While this doesn't sound like much of a relief at first glance, the upshot is that once the qualifying property is sold, and the proceeds given to the creditors, all of the debtor's eligible debts are deemed paid in full, regardless of how much the creditors actually ended up getting. Not all of the debtor's property has to be sold off - the debtor will normally be allowed to keep things like a house, at least one car, some types of personal property, retirement accounts, and insurance policies. It should be noted that some debts are not dischargeable, and will have to be paid in full even if the debtor files for bankruptcy. This includes student loans, taxes, and criminal fines.
The other commonly used bankruptcy system in Covina is Chapter 13 bankruptcy. This allows a debtor to repay most or all of their debts in a structured manner. It reorganizes the debt into lower periodic payments that, with a bit of frugality, the debtor should find manageable. This allows the debtor to continue to earn a living, and allows the creditors to eventually collect what they are owed. Once a repayment plan is approved by the bankruptcy court, creditors are legally barred from seeking repayment under the terms of the contracts that gave rise to the debt in the first place, and will instead have to accept payment under the new plan. Chapter 13 bankruptcy is normally a better option for people who have a steady income. Though Chapter 11 bankruptcy can be used by individuals, it is almost exclusively used by businesses. Similar to Chapter 13, Chapter 11 involves restructuring of debts, rather than complete discharge. The debtor is required to come up with a restructuring plan that lays out how it plans to cut costs, streamline operations, and pay its debts. The plan must then be approved by a vote of participating creditors.
A main advantage of Chapter 11 bankruptcy is that businesses can continue their operations while going through the process. Also, they can continue to buy and sell their stock.
How Can a Covina Bankruptcy Lawyer Help?
One should not make the decision to file for bankruptcy in Covina lightly. Before making any such decision, it would be highly advisable to contact an accomplished Covina bankruptcy attorney.