In Rancho Santa Margarita, California, bankruptcy is a court procedure in which a person or business has some or all of their debts excused (or "discharged"), theoretically allowing them to start 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 convenient 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 potential benefits.
For that reason, it would be prudent to speak with a good Rancho Santa Margarita, California bankruptcy attorney. This attorney will be able to advise you as to whether or not filing for bankruptcy is a good idea, given your particular situation. This determination is highly dependent on the details of each individual case, so a Rancho Santa Margarita attorney's advice is truly indispensable.
Types of Bankruptcy in Rancho Santa Margarita, California
There are three basic bankruptcy schemes that are most commonly used in Rancho Santa Margarita: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the procedure for filing for bankruptcy in Rancho Santa Margarita, California will be roughly the same as it would be anywhere else in the U.S. Chapter 7 bankruptcy involves liquidation of many of the debtor's assets in order to pay off as much of the debt as possible. This sounds harsh, but there is an upside: once the liquidation is complete, the debts are legally viewed as having been paid in full, whether or not the full amount was covered by the liquidation. Liquidation involves selling some personal property, and using the proceeds to pay off debt. Many types of property are exempt from liqudiation, and therefore may not need to be sold. They include homes, cars, and insurance policies, among others. You should know that some types of debt cannot be discharged in Chapter 7 bankruptcy, including taxes, student loans, and child support.
Under Chapter 13 bankruptcy in Rancho Santa Margarita, most of the debtor's debt is not discharged. Instead, the bankruptcy court, working with the debtor and participating creditors, work out a payment plan that allows the debtor to pay off most of his or her debts over a longer period of time, thereby theoretically making the debt far more manageable. Once a payment plan is approved by the court, creditors are prohibited from attempting to collect payment under their original agreements that gave rise to the debt in the first place. Though available to individuals, Chapter 11 bankruptcy is mostly used by businesses. Like Chapter 13, Chapter 11 requires the restructuring of debts. Under this system, the debtor must come up with a plan to reduce debt, cut costs, and improve operations. Once this plan is proposed, it is submitted to the participating creditors, who must approve it by a majority vote before it can be implemented.
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 Rancho Santa Margarita Bankruptcy Lawyer Help?
Filing for bankrtuptcy in Rancho Santa Margarita is a major decision with costs and benefits that must be weighed carefully. Before filing, it would be a good idea to speak with a good Rancho Santa Margarita bankruptcy attorney.