If you’re one of many California homeowners or business owners who have been struggling financially in recent years, you might be exploring debt relief options. Because everyone’s situations are unique, there’s no one-size-fits-all fix for resolving a financial crisis. However, there are valuable tools available, such as Chapter 7 or Chapter 13 bankruptcy, which often enable a homeowner or businessowner to fulfill an immediate need, as well as to restore financial solvency down the line.
Chapter 7 and Chapter 13 programs are both types of bankruptcy debt relief. Each carries its own set of eligibility requirements and regulations, which is why you’ll want to conduct thorough research before determining which options best fits your current needs and overall financial goals for the future.
Chapter 13 bankruptcy is for wage earners
You may have heard someone refer to Chapter 13 bankruptcy as the “wage earner’s debt relief program.” This is because you must demonstrate proof of a consistent, reliable income to qualify. Filing for bankruptcy under this chapter enables you to continue to pay back creditors through a restructured payment plan to which they have agreed on ahead of time.
Regarding a mortgage loan, for instance, your lenders might agree to extend the life of your loan or to temporarily lower your monthly payments until you have resolved your financial crisis. Many California petitioners have used this type of debt relief to retain ownership of their homes and businesses, while continuing to pay off debt. This program especially benefits homeowners because it creates an automatic stay against foreclosure.
Asset liquidation is a primary issue with Chapter 7 bankruptcy
If you don’t qualify for Chapter 13 bankruptcy because your income is below the median level in California, try not to lose hope. You might be eligible for Chapter 7 bankruptcy, instead. This program typically provides debt relief through asset liquidation, meaning that the court sells your assets and uses the proceeds to pay back your creditors.
While both types of bankruptcy appear on your credit report, Chapter 13 will disappear in approximately seven years. Chapter 7 remains on your report for 10 years. However, neither situation necessarily means that you cannot secure credit or get a loan, if needed. There are options available for such things.
Where to begin when seeking debt relief during a financial crisis
Information regarding how to save money or prevent a financial disaster may be helpful for the future. If you’re already in dire straits, what you need more are options that can help you right now. A first logical step to take is to speak with someone who can explain California bankruptcy laws. This same person may be able to help you determine whether filing for Chapter 7 or Chapter 13 is a viable option in your case.