Tag: Bankruptcy Consultation California

Bankruptcy filers can make use of federal and state exemptions to protect their assets. However, choosing between them is confusing. Some states like California do not allow citizens to choose federal exemption but offer two different sets of exemptions to protect your property during bankruptcy, say Lawyers of Los Angeles based bankruptcy law firm Recovery Law Group. To know more about California’s bankruptcy exemptions, call 888-297-6023.

Bankruptcy exemptions in California

Amongst the two sets of exemptions provided by the state of California, System 1 is preferred by debtors with substantial home equity, while System 2 is preferred by debtors who have valuable property other than home equity. It is important to know that double exemptions are not available to married couples filing for a joint bankruptcy in California.

Objections can be raised by the bankruptcy trustee to your exemptions and you might end up losing the property if you aren’t careful. You need to list your protected assets on form Schedule C along with other official bankruptcy papers to keep your exempt property. Schedule C is reviewed by both court-appointed official and the bankruptcy trustee to ensure that the claims in the papers agree with the exemption set. In case it is not the case, an objection is filed in court with the judge deciding whether you can keep the property or not.

Trustees generally object in case a debtor is trying to fraudulently get some of their assets exempted. If a minor exemption problem is encountered, then an informal arrangement can be made to rectify it. supplying factually incorrect financial statements in a bankruptcy case can have serious implications. Bankruptcy fraud is a punishable offense with a fine of $250,000, 20 years prison term or both.

Exemption system 1 of California

The exemptions are updated every three years to factor in rising inflation. The various exemptions in this system include:

1. Homestead

Some amount of equity in your primary residence can be protected. This covers a community apartment, mobile home, stock cooperative, planned condominium or boat. The amount of equity you can cover is up to $75,000 for single and not disabled individuals; $100,000 in case of a family; $175,000 if you are 65 years or older or are physically or mentally disabled; $175,000 if creditors are forcing the sale of your home and you are either 55 or older, single and earning $25,000 per year; or are 55 or older, married and earning $35,000 per year.

2. Motor vehicle

You can protect $3,325 worth of equity in motor vehicle exemption which includes motorcycle, car, truck or any other vehicle.

3. Personal property

• Household items and personal belongings;
• The residential building material for repairing home up to $3,500;
• Jewelry and heirlooms including art up to $8,725;
• Health aids;
• Bank deposits due to Social Security payments up to $3,500 for a single payee and $5,250 for husband and wife payees;
• Bank deposits from other public benefit source up to $1,750 for an individual and $2,600 for husband and wife payees;
• Cemetery and burial plots;
• Personal injury and other claims which are essential for support.

4. Wages

• Public employee vacation credits (minimum 75% in case payments are made in installments)
• 75% of wages paid within 30 days prior to a bankruptcy

5. Pensions and retirement accounts

• IRAs and Roth IRAs limits;
• Public retirement benefits;
• Tax-exempt retirement accounts including 401(k)s, 403(b)s, SEP and SIMPLE IRAs, profit sharing and money purchase plans, etc.;
• Public employees
• County employees
• County fire fighters;
• County peace officers;
• Private retirement plans and benefits like Keogh and IRA.

6. Public benefits

• Public assistance benefits;
• Student financial aid;
• Workers’ compensation benefits;
• Relocation benefits;
• Unemployment and disability benefits;
• Union benefits as a result of labor

7. Tools of trade

Any tools which are essential for you to continue your job/livelihood are exempted up to $8,725 or up to $17,450 if both spouses, in the same profession use them. These include books, instruments, equipment, tools, materials, implements, uniforms, a commercial vehicle, and furnishings.

8. Insurance

• Unmatured life insurance policy up to $13,975 or a matured life insurance benefits of unlimited value;
• Fidelity bonds;
• Life insurance policy in case policy specifically prohibits its use to pay off creditors;
• Disability or health benefits;
• Homeowners’ insurance for 6 months after received, up to the amount of homestead exemption.

9. Miscellaneous

• Trust funds up to $1,600;
• Business or professional licenses;
• Property of business partnership.

Exemption system 2 of California

This system can be used only in bankruptcy and does not work to compensate creditors outside of bankruptcy and includes:

1. Homestead

You can have an equity of $29,275 in a personal property which can be used as a residence.

2. Motor vehicle

Up to $5,850 equity in motor vehicles is exempted.

3. Personal property

• Health aids;
• Jewelry up to $1,750;
• Burial plot up to $29,275 in place of homestead exemption;
• Wrongful death recoveries essential for support;
• Household goods, clothing, appliances, animals, books, furnishings, musical instruments, and crops up to $725 per item;
• Personal injury recoveries up to $29,275.

4. Pensions and retirement

• ERISA-qualified pension, annuities, and benefits essential for support;
• Tax-exempt retirement accounts including 401(k)s, 403(b)s, money purchase and profit-sharing plans, SEP and SIMPLE IRAs, and defined benefit plans;
• IRAs and Roth IRAs with limits.

5. Public benefits

Crime victims’ compensation, unemployment compensation, Social Security, Veterans’ benefits and public assistance.

6. Tools of trade

Any books, tools, and implements essential for a job up to $8,725.

7. Alimony and child support

The amount essential for the support of spouse and child.

8. Insurance

• Unmatured life insurance policy;
• Unmatured life insurance accumulated interests, dividends, loan, cash or surrender value up to $15,650;
• Disability benefits;
• Loss of future earnings payments essential for support.

9. Wildcard

$1,550 apart from any unused burial or homestead exemption in any property. In case no homestead exemption is used, up to $30,825.

Debt is never a great idea but sometimes, it becomes inevitable. When the interest mounts up with debt, there looks to be no way forward. If we consume more debt than we can repay, it becomes a crushing situation. U.S Bankruptcy code is certainly the last hope that can save your boat from drowning. This code has been set up to protect honest and hardworking people from a vicious cycle of debt. The code sets free businesses or individuals by releasing the debt/liability after educating them and by following a legal process of settling as much debt as possible. If you are unable to determine if you should file for bankruptcy or you shouldn’t, consider visiting Recovery Law Group to clarify all your questions about bankruptcy and how to make the right decision.

Broad reasons for bankruptcy

The reasons for bankruptcy can be many. Some are forced while others are just reckless financial management and indecision. Forced reasons could include medical costs, sudden loss of a job, pay cut, divorce, business failure, etc. While the financial reckless or indecision includes spending or buying luxury items from a credit card or pay day loans. Spending excessively or availing more loans beyond the ability to sponsor the EMI with the paycheck. Unplanned retirement can also be one of the reasons where you find out your expenses are way higher than the social security benefits and savings.

Businesses have different sets of reasons. These can be classified into two types. Internal reasons could be equipment failure, change in management, poor planning/forecasting, inefficiency, lack of investment, etc. External reasons are usually uncontrollable reasons like fluctuation in the currency market, government policies, increased taxes, increase in competitors, etc.

Basics of Bankruptcy Chapters

Bankruptcy can be filed across different chapters. There are different thresholds, eligibility criterions, advantages/disadvantages of each Chapter. There is no perfect way of determining which Chapter is best as it varies on a case to case basis. For an individual Chapter 7 might be appropriate while for the other person, Chapter 13 might be a better alternative. To seek the best solution on what suits you or your business, reach out to some of the best attorneys in town at 888-297-6203 now!

• Chapter 7
Chapter 7 is a bankruptcy code which is available for qualifying individuals as well as businesses. This is also referred to as a liquidation Chapter because it is all about liquidating the assets to pay out the debts on the basis of priority. The court has exemptions and other regulations that allow it to classify exempt and nonexempt assets. The nonexempt assets are auctioned, sold, or disposed by the bankruptcy trustee on behalf of the creditor. The common misconception about Chapter 7 bankruptcy California code is that a business or the person might lose all assets when filing Chapter 7 bankruptcy. However, it isn’t true. Using various exemptions and other settlement alternatives, businesses or individuals can safeguard their non-luxury assets.

• Chapter 11
Chapter 11 is similar to Chapter 13 but is available for businesses as well. It is pre-dominantly used by corporates and businesses. But it can be used by individuals who have many complex transactions and do not qualify for Chapter 13. The fee for Chapter 11 is slightly higher and it deals with putting forward a plan to settle the debts in the near future. On the basis of the proposed plan, the debt is restructured.

• Chapter 13
Chapter 13 is a future-oriented payment plan that has certain debt type thresholds for eligibility. It is a plan that focuses on debt settlement based on the disposable income available for the filer in the future 3-5 years. This ideal for home mortgage bankruptcy filers and other filers who had like to retain most of their assets.
Still confused on what you should do, which Chapter, is bankruptcy ideal for me, if yes when now or later? These are some common questions that keep revolving in a financial crisis situation. Seek professional help and let them take over all your troubles and concerns. Dial in 888-297-6203 now for the right answer!

Chapter 13 is a code which allows you to repay debts as per a payment plan over the next 36-60 months. The payment plan focuses on retaining assets and debt pay off from disposable income. Chapter 13 can be advantageous, but you need to know many things about the same. The in-depth details about Chapter 13 will be discussed shortly.

Eligibility

Chapter 13 bankruptcy has some eligibility criteria just like other criterions. Firstly, there is a debt threshold for secured and unsecured debt. You might want to know about the threshold at Recovery Law Group. If you exceed the threshold, you are not eligible to file for Chapter 13 bankruptcy. There are ways and exceptions to achieve eligibility to Chapter 13 also, which you will learn only when you get in touch with a qualified attorney.

Apart from the debt threshold, one should also have a steady and consistent income in order to qualify. Since Chapter 13 is all about a future payment plan, steady income is the basic requirement for the plan to prosper. An ideal candidate would be who is not near the retirement age and is getting a W-2 wage salary every month consistently. With this flaw, businesses do not qualify to file for bankruptcy via Chapter 13. This is suitable only for an individual filer.

The process involved for filing bankruptcy under Chapter 13

To be honest, Chapter 13 bankruptcy is beneficial sometimes but far more complicated than Chapter 7 another alternative available with the individual filers. To begin with, you need to pay for a credit counseling fee and get counseled on your irresponsible financial management that has led to bankruptcy. This course has to be completed from the recognized facility and a certificate of complication has to be presented when filing for bankruptcy in California. The fee can range between $25-$35 or maybe even higher. The sad part is that Chapter 13 filers rarely get any discount or rebate or free counseling classes. Adding salt to wounds, you shall pay a bankruptcy filing fee with the certificate of completion to begin your process of bankruptcy.

The big, fat repayment plan

The repayment plan is under the spotlight in Chapter 13. Every lender wants to get maximum debts restored while as a bankruptcy filer, you want to release as much of debt possible. The good thing is that the filer first proposes a repayment plan and it not enforced on the filer by the court or the lenders. However, due to the contradicting interests of the lenders and the debtor, the plan may always be in a controversial space. The filer has to sit and analyze his/her disposable income and arrive at the net monthly payouts he can make for the next 36-60 months in order to clear as much debt as possible. There are three basic requirements for the plan to be approved-

• It should be practical and feasible. Your entire income cannot be payout towards the debts, nor a small chunk of disposable income shall be satisfactory for all debts. So, the plan should not only look excellent on paper but should also be feasible and practical to implement in the future.
• The plan should be put forward in good faith and there should be no intention of releasing the debt. There no way to demonstrate good faith perfectly but definitely it should put forward all facts and should be focused on creating a reasonable and practical settlement option.
• Finally, the plan should be compatible with the bankruptcy law book. There are some rules to be followed irrespective of whether the lender and debtor have compromised. Such comprises have to be sorted out outside the court and rules need to be followed strictly in the bankruptcy court and the bankruptcy trustee keeps you on your toes for that.

Keeping up with the plan

After getting the payment plan approved, it is important to keep up with the monthly payments as indicated in the plan. If your income has changed (decreased) the plan might need to be modified and under the hardship exemption, a certain portion of debt can be discharged. The hardship could be illness, change in work location, significantly higher cost of travel or any other expense related to the income generation activity, etc. Depending on circumstances you may or may not be exposed to interest charged by the lenders. For better advise and suggestions contact 888-297-6203 right now!