While it is painful for almost anyone to contemplate, bankruptcy can be an important tool for individuals or families seeking to recover from a desperate financial situation. Bankruptcy can erase debts, protect valuable assets, and help people begin to rebuild their credit records. Here’s a quick look at what bankruptcy can do:
Chapter 7 Liquidation
In so-called "Chapter 7" bankruptcy, individuals and couples ask the Bankruptcy Court to discharge their debts in exchange for giving up any non-exempt property. Fortunately for those in financial peril, Congress and the states have made numerous assets exempt from bankruptcy cases, including:
Under California's so-called "wild card" exemption, as much as $30,000 of any type of property a person can think of. In Oregon, by comparison, approximately $10-15,000 in any property may be exempted per person.
Under California's "homestead" exemption, $300,000 or more (depending upon the county or residence) of the equity in a person’s home may be preserved in a bankruptcy. In Oregon, the protected home equity amount is less -- $40,000 to $50,000 -- but still significant.
Also, federal law provides that all of the funds in an individual’s tax-qualified pension plan, and up to $1,000,000 in a properly set-up Individual Retirement Account (IRA), may be kept by an individual who files bankruptcy.
In fact, less than five percent (5%) of all individuals and families who file Chapter 7 bankruptcy ever lose any property to their bankruptcy case. With over three (3) decades of bankruptcy work behind him, Arnie Wuhrman can offer you the very best advice and representation if you are contemplating a Chapter 7 bankruptcy.
Chapter 13 Rehabilitation
For some individuals and families, a Chapter 7 bankruptcy is not enough. Perhaps they have a home rapidly heading towards a foreclosure sale, or a car loan that is several months in arrears. Or maybe they owe substantial amounts of taxes which would not be dischargeable in a Chapter 7 bankruptcy. This is where Chapter 13 comes in.
Chapter 13 includes all the benefits of Chapter 7 which are discussed above, as well as the ability for individuals and families to catch up or payoff debts which are not discharged in Chapter 7. This is done by the bankruptcy filer entering into a "Chapter 13 Plan," which provides for payment of delinquent or nondischargeable (among other things) debts over a three (3) to five (5) year period. The payments are made to a Chapter 13 trustee, who then distributes the money to the appropriate creditors. Once all of the payments have been made, the filer receives a discharge, just as in Chapter 7.
The formulation and presentation of a Chapter 13 Plan is more complicated than the usual Chapter 7 paperwork, and so many attorneys who handle Chapter 7 bankruptcies do not handle Chapter 13 cases. Arnie Wuhrman has handled literally thousands of Chapter 13 cases both in his own private practice and while serving as a Staff Attorney to the Inland Empire's (Riverside County's and San Bernardino County's) local Chapter 13 trustee from 1995 to 1997.