Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

I remember watching the Wizard of Oz movie every Thanksgiving Day as a child growing up here in the southland.  After sticking my fingers into the black olives and then eating them from my fingertips and stuffing my belly fully of all the trimmings that make up every traditional holiday meal, the family would then gather around the television and watch the Wizard of Oz. I always looked forward to eating my piece of pumpkin pie with whipped cream while watching this classic film.

Now, as a bankruptcy lawyer, I find myself breaking every illusion I can find about money, the banking system, wall street and the government. Last week, I was pointed to the Secrets of the Wizard of Oz and Our Current Economic Crisis. This article breaks down the symbolism presented in the original book and the movie and explains the entire illusion and how all the systems play a roll in keeping the American people in slavery (Debt).

I see a sequel to this: Dorothy (a baby boomer) is dying and her children take up her cause and become the hero protagonists that lead the munchkins (American public) out of debt and liberate the masses from the wicked witches (banks and wall street) through bankruptcy. In order to do this, they must break the illusion that bankruptcy is the worst thing for their credit scores because the masses still believe FICO is really important.  They must learn that the only thing their credit score tells them is how well they manage DEBT (how ridiculous is this illusion now?).  If there is no individual debt then what importance does their credit score hold?

One of Dorothy's children is a bankruptcy lawyer in southern California (I volunteer to be a hero) who, through her blog, continues to break down the walls and expose the lies being told about bankruptcy and one client at a time, she leads the people to FREEDOM (financially speaking). The moral of the story is that the banks won't win in the end and the monetary system as we know will implode if the Wizard does not retire and if we don't kill the Wicked Witch of the East (again).

Bankruptcy is a valuable tool that dates back to the Bible. Financial freedom from debts permanently is the level of transformation that is needed here. If the American people take back Oz by refusing to do business with them (MasterCard and Visa) then they will "melt."

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As a consumer debtor, you will usually have two options when deciding to file bankruptcy; Chapter 13 or 7 under the Bankruptcy Code.  The question is which is better?; and which one should you file?  The answers to these questions are as unique as your individual circumstances.

Under Chapter 7 of the Bankruptcy Code, you are declaring that you have no ability to pay your debts at all.  You are, in a sense, liquidating your estate.  From the moment you file your case under chapter 7, the trustee takes control and has the right to take any assets available to pay your debts.  However, you have certain rights to retain assets under California Code of Civil Procedure Sections 703 or 704.  This means, that you will be able to keep your home, cars, retirement accounts, personal belongings, up to the limits pursuant to the law. These cases usually conclude within about six (6) months.

Under Chapter 13, you are declaring that you have some disposable monthly income to apply toward your debts and you are asking the Court to allow you to restructure that debt over time and allow you to pay only what you can afford. 

Chapter 13 is, in my opinion, the best choice to save your home, dispute debts owed, and otherwise hold your creditors accountable for any mistakes in your debt obligations, accounting, collection activity, fraud or abuse.  These cases require a longer period of time, usually up to five (5) years, and there are additional reporting duties involved.  You are strongly discouraged from filing a chapter 13 bankruptcy without an attorney because of the additional local rules, accounting and reporting requirements. 

Most everyone has thought of filing bankruptcy as simply filling out a bunch of forms.  I would have said that before the BAPCPA in 2005.  Now, with the sub-prime mortgage meltdown and their complex financial contracts; scams, despair and desperation of the banking industry; and the complexities of the Bankruptcy Laws, you need to consult with your personal bankruptcy lawyer before your case is filed.  Your bankruptcy lawyer will save you time and money by reviewing your current financial situation and create strategic plan to eliminate your debt with the least amount of money out of your pocket.

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When closing a small business, there are advantages to using Bankruptcy as a means to winding up your small business.  If you're Going Out of Business and are looking for alternatives to Bankruptcy, or a more detailed discussion on bankruptcy advantages, then you must read Gordon Eng's recent article in the Los Angeles Lawyer magazine of the Los Angeles County Bar Association entitled, Going Out of Business. 

The advantages of using Bankruptcy as a means of closing your small business include having the Court judicially assist in winding up the financial affairs of the business by providing a single forum for contesting the validity of creditor's claims.  The Court also provides a valuable mechanism for the liquidation of the debtor's assets and determining the allocation among the creditors based upon their priority in a chapter 7 bankruptcy.  After the business has been liquidated and distributed among the creditors, any remaining debt is usually discharged.

Debts that cannot be discharged in a bankruptcy are

• Federal, state and local taxes
• Family support; i.e., spousal and/or child support
• Student Loans, absent undue hardship
• Secured debts
• Government imposed fines or penalties
• Fraud and punitive damage claims

A small business may file a chapter 7 bankruptcy as a corporation or LLC., otherwise the business owner must file a personal bankruptcy.  If the business is not incorporated and the owner files a personal bankruptcy, they are subject to the means test in determining whether they qualify for a chapter 7, or if they must file under chapter 13. 

Business owners who are shutting their doors would be wise to consult with an attorney who can help them work through the issues of closing a business in the most efficient manner that limits or eliminates their financial and legal exposure. 

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