Sacramento Bankruptcy Attorney serving Elk Grove discusses the similarities between Chapter 7 and Chapter 13 bankruptcy for debt relief

What’s on the top of your To Do List if your income doesn’t equal or exceed what’s needed to pay monthly expenses?  After evaluating their options for action, many people, 1,515,998 to be precise, filed a Chapter 7 or Chapter 13 bankruptcy petition, according to U.S. Bankruptcy Court statistics for 2010.  It’s a fact: people choose to file either a Chapter 7 or Chapter 13 bankruptcy as the best solution to handle their unmanageable debt.  Why?  Here’s some of the factors that are common to both.

Chapter 7 and Chapter 13 bankruptcy:  a few things they have in common:

• Both types of bankruptcies involve individuals with unmanageable debts.
• Both types place an automatic stay against creditor lawsuits and foreclosures.  The stays begin on the day that you file your bankruptcy petition, and last a few months, usually until the date that the court hears your case.  This temporary relief from creditor collection efforts may be the time you need to become current on some of your most important obligations.
• When considering either type of bankruptcy, it is a good idea to quit charging more items for at least 6 to 12 months prior to filing bankruptcy.
• With either type of bankruptcy, transferring a large asset, such as a house, to someone else, may be considered an attempt to hide assets or abuse the system.  If the transferred asset was sold for less than its market value, or if the asset is transferred to a close friend or relative, then the transfer may be presumed to be an attempt to avoid making the asset available to your bankruptcy trustee for possible liquidation on behalf of your creditors.
• Depending on which state you live in, the bankruptcy trustee will look back one year, and perhaps several years, to determine if any such transfer of large assets has occurred, and if so, the trustee will investigate further to determine if the asset transfer constitutes an improper placing of portions of your net worth out of the reach of your creditors.
• If you had a one-time increase in income, such as a substantial tax-refund, you may want to wait at least six months prior to filing bankruptcy, since your most recent six months of income is taken as an average for the purposes of calculating either Chapter 7 means test or the chapter 13 income that your proposed schedule of repayments is based on.
• Likewise, if one of the reasons that you are considering bankruptcy is that you have suffered a substantial loss of income (lost one of your jobs, took a pay reduction on current job, was laid off and collecting unemployment), you may want to wait at least six months before filing bankruptcy so that the income you are no longer getting will not be figured into your average income for either Chapter 7 means tests or Chapter 13 income calculations.

Besides similarities, there are also factors that make each person’s bankruptcy filing unique.  And it’s good to know some of these basics so you can evaluate if and when to bring a bankruptcy attorney into the picture to assist you in bringing this chapter of your life to a successful close.

Please contact our Sacramento office at 916-313-9069 or via email at info@california-bankruptcyattorney.com