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Knowing which bankruptcy to file can make or break your financial life. That’s why it’s essential to choose the right partner to help you through one of the most critical moments in your life.

The pandemic brought an inevitable impact where the people were hit hard the most – their finances. Although it may seem like a scary option, when a significant medical expense strikes you and you’re unable to meet the rest of your outstanding debts and other financial obligations, sometimes the only way out of this unfortunate conundrum is to file for bankruptcy. 

For cases of bankruptcy in San Diego, the Law Offices of Ronald E. Stadtmueller provides professional consultation and Chapter 7 and 13 bankruptcy services, debt reorganization services, debt discharge services, and general bankruptcy services, including free one-hour consultations to the San Diego, California area.

Bankruptcy law is federal law, thus the same throughout the country. However, each state can choose their own exemptions (i.e. property you can keep when filing bankruptcy) and each District has their own rules and procedures. As of 2021, although California’s number of filed bankruptcies took a dip and declined, the state remains a frontrunner with the highest number of bankruptcy filings, with over 45,831 filed cases as of June 2021, the majority of which are for Chapter 7. 

There’s that undeniable foreboding ring when thinking about bankruptcy, so it’s always good to be prepared when we find ourselves within this so-called financial danger zone and consider if bankruptcy is the way to pull us out towards a safer zone. 

Chapter 7 vs. Chapter 13

Two of the most commonly filed bankruptcies for individuals are Chapter 7 and Chapter 13 bankruptcy. Each of these legal tools provides you with that debt relief suitable for your financial condition. Until you have that bankruptcy discharge paper that releases you from your debts, you must carefully consider which legal route works to secure that much-needed fresh financial reboot and earn you that bankruptcy discharge (forgiveness of debt) document. 

Why go for Chapter 7? 

Chapter 7 bankruptcy is also known as “liquidation” bankruptcy, with the aim to wipe out debts completely. The people going through this type of bankruptcy keep the assets they can claim exempt. In California, there are laws that allow debtors to keep some assets that will enable debtors to continue with their life after the debt has been settled, such as household goods, furniture, etc. 

Passing the Bankruptcy Means Test, or income test, is essential to avail of Chapter 7. This means that the income should be below a particular median, and in the case of California, it’s generally about $65,000 for a household of one and increases for each other member in the household. 

Chapter 7 is the preferred legal tool if a significant portion of your debt includes unsecured debts such as medical bills, credit card debts, personal loans, or debts not held as collateral. Aside from that, Chapter 7 is the best choice if your income is insufficient to cover your basic necessities and other expenses such as housing, food, and so on. And, the proceedings for a Chapter 7 takes typically about 3 months before you are issued that Chapter 7 bankruptcy discharge. 

Why go for Chapter 13?

Chapter 13 bankruptcy is also referred to as a repayment plan. This legal tool allows adjustment of debts for those individuals with regular income, allowing the debtor to keep their properties and settling the debts usually over an installment payment period of three to five years.  

What makes Chapter 13 a good option for filing bankruptcy is that although it takes longer to pay off debts, the debtor will have more time on their hands to make payments. Bankruptcy trustees, persons who are appointed to represent the debtor’s estate in bankruptcy proceedings, can be flexible on the payment term plan. 

Chapter 13 is also not covered by the Bankruptcy Means Test, which favors those whose income exceeds the state’s median income. And if you want to save your house from foreclosure or stop repossession of your car, then Chapter 13 is the best bankruptcy file option. 

Unsure whether to file for bankruptcy?

The thought of filing for bankruptcy can be stress-inducing. The filing process is complicated enough without the mental anxiety that comes with debt collection, creditor harassment, potentially losing properties, being behind on rent or mortgage payments, using loans as bill payments, and so on. 

But these are the same signs that would tell you that it’s high time to consider filing for bankruptcy. Choosing the right form of bankruptcy with the help of a professional legal team such as the Law Offices of Ronald E. Stadtmueller is the first step towards that much-needed financial freedom. Applying for bankruptcy can not only help you attain that desired fresh financial start, but it will also be a complete reboot of your financial perspective and financial life.

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