In South Pasadena, 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.
For that reason, it would be prudent to speak with a good South Pasadena, 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 individual situation. This determination is highly dependent on the details of each individual case, so a South Pasadena attorney's advice is absolutely indispensable.
Types of Bankruptcy in South Pasadena, California
In South Pasadena, California, 3 types of bankruptcy procedures are in common use: Chapter 7, Chapter 11, and Chapter 13. Being governed by federal law, the procedures involved in filing for bankruptcy in South Pasadena, California will be about the same as anywhere else in America. Chapter 7 bankruptcy involves liquidation of some of the debtor's assets to pay off as much of his or her debt as possible. Once the liquidation is fulfilled, and the proceeds given to the creditors, the rest of the debt is discharged. Liquidation is essentially selling assets to the highest bidder. Only some of the debtor's assets have to be sold, and many classes of property are exempt, meaning that the debtor can keep them, including homes, cars, insurance policies, and retirement accounts. It should be noted that certain types of debt cannot be discharged through Chapter 7 bankruptcy, including student loans, child support payments, criminal fines, and recent taxes.
The other form of bankruptcy most often used in South Pasadena is Chapter 13. It allows a person to pay off their debt over a prolonged period of time, often consolidating it into one periodic payment. In this system, the amount of money the debtor owes is not actually reduced, but the payment of the debt is made far more manageable. This gives the debtor some breathing room, allowing him to continue to earn a living while gradually paying down his debts, and gives some security to creditors that they will eventually collect all or most of what they're owed. Although it can be used by individuals, Chapter 11 bankruptcy is used almost exclusively by businesses. Not unlike Chapter 13, Chapter 11 focuses on restructuring of debt, rather than discharging it. Chapter 11 requires that the debtor come up with a reorganization plan designed to reduce debt and cut costs. Before being executed, this plan must be approved by a majority vote of participating creditors.
While going through Chapter 11 bankruptcy, a business can continue operations, and its stock can continue to be traded.
How Can a South Pasadena Bankruptcy Lawyer Help?
One should not make the decision to file for bankruptcy in South Pasadena lightly. Before making any such decision, it would be highly advisable to contact an accomplished South Pasadena bankruptcy attorney.