Modesto Bankruptcy Lawyer Blog

Chapter 7, or "straight" bankruptcy, effectively discharges all debt from your outstanding accounts by selling any property and nonexempt assets in order to pay off creditors. Although choosing Chapter 7 bankruptcy is often a last resort for most people, hundreds of Modesto residents are filing every month. According to the U.S. Bankruptcy Court's Eastern Division of California office, 265 claims for Chapter 7 bankruptcy were filed in January 2010 in the Modesto area alone.

The Advantages of Chapter 7
Chapter 7 effectively allows you to have a fresh start. Most of your debts can usually be discharged within four to six months under Chapter 7, including credit card debt and other unsecured debts. There is no minimum amount of debt needed to file for Chapter 7 and once your debts are discharged, you are completely cleared of them for the rest of your life. Your wages and possessions purchased after discharge can no longer be garnished or possessed by creditors. Chapter 7 bankruptcy can help relieve the stress of foreclosure, harassing creditor calls and general anxiety over your financial future. Although this isn't a tangible advantage, many Modesto residents find that peace of mind is an invaluable benefit of bankruptcy filing.

The Disadvantages of Chapter 7
All your eligible assets will be liquidated under Chapter 7 bankruptcy, so you may lose your home, vehicle(s), boat, etc. If you had a co-signor for your home, that party may now be responsible for your loans if they don't take action to protect themselves. Additionally, your credit rating will be destroyed. Most loans and credit accounts will not be available to you and the ones that are will likely carry high interest rates, require collateral or secured deposits and have limited lines of credit. You can only file for Chapter 7 once every eight years. Further, some debts cannot be discharged under Chapter 7, and you will still be responsible for paying them. Non-qualified debts include domestic support orders, debt obtained by fraud, most tax debt, student loans and property liens.

Serious financial hurdles can be nearly impossible to surmount without help. A qualified, experienced Modesto bankruptcy lawyer can help you decide whether or not Chapter 7 is right for your situation. Even the tiniest mistakes can delay or even disqualify bankruptcy paperwork, so it pays to have a trusted lawyer on your side.

If you're considering filing for bankruptcy in Modesto, you're not alone. According to the Federal Government's U.S. court statistics, more than 126,000 California residents filed for consumer bankruptcy in 2008. Over 60,000 of those cases were filed in Central California alone, suggesting that the Modesto area has been the hardest hit in this period of economic downturn.

The choice to file for bankruptcy is not one that should be taken lightly. Since filing for bankruptcy can stay on your credit report for up to 10 years, it can be tough to buy a home or even obtain credit after you file. There are certain chapters of the U.S. Bankruptcy Code that are designed to get you out of debt, with Chapter 7 and 13 being the most widely used in consumer cases. You must weigh your options carefully before proceeding, and bankruptcy lawyers in Modesto can help you decide which solution is right for your individual situation.

Chapter 7
Also known as "straight" bankruptcy, Chapter 7 effectively eliminates debt, along with associated collections, lawsuits, repossessions and foreclosures due at the time of filing. Although the courts may still allow eviction, repossession and foreclosure, Chapter 7 can help you start anew by wiping out most debts. A bank-appointed trustee will sell property and other assets (when applicable) to pay creditors, and then debts are discharged.

Chapter 13
According to the U.S. Bankruptcy Court in the Eastern District of California, Chapter 13 applies only to individuals whose debts do not exceed $1,347,550 ($336,900 in unsecured debts and $1,010,650 in secured debts). Chapter 13 is also known as "reorganization" bankruptcy. A bankruptcy lawyer can negotiate for a reduced settlement of your debt based on financial need. After you file, you will have a period of three to five years to pay off the negotiated amounts.

Although consumers can represent themselves in bankruptcy cases, it is not typically wise to do so. An experienced lawyer in Modesto can better serve your needs and follow all recent changes to bankruptcy law to help you achieve the best outcome in your case.

Changes in Bankruptcy Laws in Modesto

Times are tough and you might be thinking about filing bankruptcy in Modesto. With housing foreclosures, job layoffs and the effects of a crushing recession bearing down on most residents of Modesto, the number of bankruptcy filings in the area is escalating rapidly. So what do you do? Bankruptcy law is often complicated and confusing for most people, and filing incorrectly can potentially put you in a worse financial position than you are in right now.

Unless you invest a considerable amount of time in learning the critical changes to state laws, it is nearly impossible to file a successful bankruptcy claim on your own. Fortunately, there are bankruptcy lawyers in Modesto who keep up with all the latest changes to bankruptcy laws in the state of California. They can help you determine the best course of action and file the necessary paperwork in order to help you begin anew.

Bankruptcy Abuse Protection and Consumer Protection Act of 2005 (BAPCPA)
In order to understand the basic issues regarding bankruptcy claims in Modesto, you must understand the most recent history of bankruptcy law changes. The BAPCPA was the beginning of legislation that altered bankruptcy filings as they stand today. After this act was initiated, bankruptcy lawyers in Modesto had to learn an extensive set of new rules for filings in California. Since that time, adjustments to bankruptcy laws occur every year, which require lawyers to stay on top of all the most recent changes in order to serve you best.

Some of the key issues of BAPCPA may affect how or if you can file a bankruptcy claim. For example, this law limits how frequently you can file bankruptcy (now you have to wait eight years to file Chapter 7 after a bankruptcy claim and four years for Chapter 13; it used to be six and two, respectively). It also set stricter eligibility standards for individuals and classified more types of debt as "nondischargeable," meaning that you are still responsible for paying these debts, even after other debts are discharged.

Chapter 7 or Chapter 13?

One of the most confusing issues for Modesto residents considering filing for bankruptcy is the choice between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 involves the sale of your assets, exempting property that is not tied to creditor debt. The proceeds of this sale go directly to your creditors and the rest of your debts are discharged. Chapter 13 bankruptcy works with your creditors to create an adjusted repayment plan based on financial need. There are income restrictions for each type of claim and a lawyer can work with you to determine which course is best, as well as which type of bankruptcy filing will help you re-establish your credit sooner.

The community here in Modesto continues to feel the economic woes the nation is feeling. Although the country would like to think the economy is getting better, there is a growing rate of bankruptcy filings among businesses throughout the country, including Modesto. The Reuters news service reported that business bankruptcy filings were 7 percent higher in January, 2010, then in January, 2008. With so many business bankruptcy filings it is apparent the economic slump will continue into 2011. That means more bankruptcy filings in Modesto as any lawyer will tell you.

The Reason: As long as consumers are hurting, businesses will continue to hurt as well. The national unemployment rate hit 10 percent in December, 2009, and then fell to 9.7 percent in January. These numbers are probably higher in actuality given the fact that many people have given up searching for work. The national unemployment rate takes into consideration those that are actively searching for work and as we all know, many have given up entirely. Even those that have work are worried about losing their jobs, so as a result, people aren't spending like they used to. This has certainly led to many bankruptcy filings here in Modesto.

Foreclosures Enhance the Problem: Foreclosures continue as housing values plummet. According to RealtyTrac.com, there were 2.8 million foreclosures in 2009, making 2009 a record high for foreclosures. When people are unable to pay their mortgage, they stop spending on other goods that businesses thrive on, thereby increasing bankruptcy filings in Modesto and the rest of the country.

What should we do? Sadly, it doesn't look like bankruptcy filings will be decreasing anytime soon. Bankruptcy attorneys in Modesto are busier than they have ever been. The good news is that the United States has been through this many times before. The economy has cycled up and down through the years. That will certainly happen at some point in the future. People will once again increase their budgets as the housing market will soar to new heights all over again. Prosperity will soar throughout the country all over again. People will naively believe the markets are indestructible. Then, the economy will once again tank and we will be right back to where we started. Bankruptcy will soar throughout Modesto and the rest of the country. Bankruptcy lawyers will be working overtime, especially here in Modesto and the rest of the Central Valley.

We'd all like to think that the nation's economy is improving, but the rising number of business bankruptcy filings offers proof that commercial businesses throughout the country are still hurting. According to a recent story from the Reuters news service, business bankruptcy filings in the United States this January came in 7 percent higher than in the same month in 2008. An astounding total of 6,502 U.S. businesses filed for bankruptcy protection in January. At this rate, the economic slump will continue throughout the year and into 2011. That's the type of bad news that no one wants to hear.