If you’re struggling with debt, you may be wondering whether bankruptcy is the right move. Unfortunately, there is no easy way to answer this question. The only way to obtain the most sound, customized recommendations is to sit down with an experienced attorney to discuss your situation.
In the meantime, there are a few questions you can ask yourself to determine whether bankruptcy may be something to seriously consider. Here are some thoughts from our team at Nguyen Law Group—as always, please do not hesitate to contact us so we can give you the personalized attention you deserve.
1. Is my debt dischargeable?
People generally file bankruptcy because of the possibility of a debt discharge. When the court discharges your debt, you are no longer legally obligated to pay it, and creditors can no longer attempt to collect it.
While bankruptcy is capable of wiping out substantial amounts of debt, the most important factor to consider here is what type of debt you owe, as bankruptcy does not treat all debts equally.
Generally, bankruptcy discharges unsecured debt, meaning debt that is not backed by collateral.
Unsecured, dischargeable debt typically includes:
- Credit cards
- Medical bills
- Utility bills
- Unsecured loans (e.g. payday loans)
Secured debt, meanwhile, includes debt like mortgages and automobile loans, which are generally not dischargeable. In limited cases, Chapter 13 may be able to cramdown (i.e. reduce) an automobile loan to your car’s fair market value or even discharge a second and/or third mortgage after stripping the lien(s), but be sure to discuss this with our attorney before counting on these results.
Keep in mind that some types of debt (e.g. child support, alimony, fines, penalties, etc.) are listed as non-dischargeable in the Bankruptcy Code. Under certain circumstances, student loans and tax debt are technically dischargeable, but it can be very difficult to do so.
2. Do I have any assets?
Whether bankruptcy threatens your property ownership depends largely on the type of bankruptcy you file. Chapter 7 involves an asset liquidation process, in which the trustee sells your nonexempt assets to repay some of your debt. Chapter 13, meanwhile, does not involve a liquidation process, so you generally would not have to worry about losing your property simply from filing bankruptcy.
Even if you file Chapter 7, however, state and federal bankruptcy exemption laws allow you to protect some or all of what you own from the liquidation process. In fact, most Chapter 7 filings are “no asset” cases, meaning the filer can receive a debt discharge without losing any of their property.
When you file Chapter 7 in California, you can use either state exemptions or federal exemptions to protect your property from liquidation.
3. Do I need immediate relief from creditors?
Besides the debt discharge, one of the biggest benefits of bankruptcy is the automatic stay. As soon as you file, a court order takes effect that prohibits creditors and debt collectors from contacting you, attempting to collect debt, and seizing collateral. This is particularly helpful if you are facing repossession, foreclosure, or a lawsuit, as it gives you several months or years (depending on the chapter you file) to get your finances in order and protect your property.
4. Have I tried or considered any alternatives?
While bankruptcy is a powerful solution to overwhelming debt, it is not your only option. Strategies like loan modifications and debt settlement can be effective alternatives to bankruptcy for many people, and our team at Nguyen Law Group can help you assess all options at your disposal before moving forward.
Let’s Get Started on Your Case Today
Are you ready to achieve freedom from unmanageable debt? If so, we are ready to assist you. At Nguyen Law Group, our attorney has handled hundreds of cases, and he looks forward to putting his skills to work for your future. Whether we help you file bankruptcy or implement a suitable alternative, you can trust us to put your best interests first at every turn.
Give us a call at (909) 328-6280 or contact us online today. We can begin with a complimentary case evaluation.