Before discussing more about Chapter 7, let’s talk about your other debt relief options:
(1) Continue to pay your debt.
Paying your debt off in full would be best on your credit report. However, this option is also the costliest and most difficult.
(2) Settle with Creditors.
The second option is to try to negotiate settlements with your creditors. In most cases, once the debt is sent to a collection agency, you can contact the agency to settle the debt. Almost all the time, collection agencies are willing to settle the debt for 35% off if you can make a lump sum payment. Settling is not as good on your credit report as paying in full, however, you will be in good standing with the creditor once the debt is settled. If you are in good standing with all of your creditors, then you can also start to rebuild your credit.
(3) Don’t do anything.
We do not recommend that you stop paying and/or ignore your creditors. However, in some cases creditors give up on collecting the debt. The statute of limitations to file a lawsuit against you in California is four years. If creditors try to file a lawsuit against you after the four year period, you will have an affirmative defense.
However, during the four year period, creditors can file a lawsuit against you. If they get a judgment against you, or if they already have one, then they can levy bank accounts, garnish wages, and put liens on your property. They can take all these collection actions against you for 10 years from the judgment date. After ten years, they can renew the judgment and continue to collect. Therefore, we do not advise you to do nothing.
Those are the three main options outside of bankruptcy.
(4) Chapter 7 Bankruptcy
Chapter 7 bankruptcy in most cases will be the most efficient, and least expensive way to get out of debt. Additionally, immediately after the bankruptcy is completed, you can start rebuilding your credit. This is the reason people associate bankruptcy with a fresh start.
Some people refer to Chapter 7 as liquidation. In most cases we can exempt, or in other words, save your property from liquidation. Above and beyond the ability to protect your household goods, furniture, appliances, and general personal necessary items, we can protect at least $35k worth of assets and equity.
In most cases, bankruptcy filers can keep their car and property. These cases will be more like an instant discharge of debt.
If you are thinking about filing bankruptcy, you must stop incurring debt. Therefore, you must stop using your credit cards or taking out loans.
If you have any secured debts, then you must continue making payments to keep the items they are secured on, such as a vehicle or home.
Additionally, you must continue to stay current with student loans and taxes (if you have any) because they are normally not dischargeable in bankruptcy.
If you choose to file bankruptcy, we help you with the entire process. This means that we review your documents, draft the bankruptcy petition electronically, bring you back in to make sure the entire petition is accurate line by line, and file the case electronically for you. We also appear in court with you and monitor your case until you receive the discharge and the case closes.
The two hardest parts of bankruptcy is gathering the documents and paying the attorneys fees. Once you complete those two things, we can file your case and stop all collection efforts, lawsuits, garnishments, and levies. Also, in most cases, once you decide to move forward with bankruptcy, you can stop paying your creditors.