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Deciding whether to file for bankruptcy

People in California who are struggling to pay their bills might wonder if they should file for bankruptcy. First, they should make sure that their debts can be discharged in bankruptcy. While many types of debts are dischargeable, exceptions include child support debt, most student loans and income tax debt.

Another consideration is whether it is even possible for creditors to seize income or property. Some people are what is called "judgment proof." This usually means they do not have enough for creditors to seize. In some cases, judgment proof people may still want to file for bankruptcy so that these debts are no longer hanging over their heads. Other people could have their wages garnished for unsecured debt, such as credit card debt and medical debt. In those situations, bankruptcy may be the right choice.

People who have assets they are not willing to give up may want to look into a Chapter 13 bankruptcy. This type of bankruptcy allows a person to keep some property. However, Chapter 7 bankruptcy is a short process of just a few months that may be appropriate for people who have few assets or assets they do not mind giving up.

An attorney may be able to help a client decide whether bankruptcy is the right step and which chapter would be appropriate. For example, in order to be eligible for Chapter 7, a debtor usually has to make under a certain income. Chapter 13 is a process that can last three to five years because it requires creating a debt repayment plan and paying off some creditors. Filing for either type of bankruptcy puts an immediate stop to any creditor actions, including harassing phone calls and foreclosure.

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