When you reach out to or arrange a meeting with a California Chapter 7 Bankruptcy lawyer, we will assist you in identifying the most suitable debt relief solution for your specific circumstances. Our team at Tenina Law has successfully aided over 25,000 Californians in their financial endeavors. With a collective experience of over 20 years, our attorney are renowned in Southern California for their assertive advocacy and expert guidance.
Chapter 7 Bankruptcy: A Fresh Start
A better name for Chapter 7 is the “Fresh Start” Bankruptcy. The reason is that a Chapter 7 Bankruptcy can wipe out the most common unsecured debts such as credit cards, medical bills, personal loans, and all other debts which are not ‘secured’ against some collateral.
The biggest concern for all individuals filing for bankruptcy is the impact it will have on their assets and belongings. The biggest ‘myth’ regarding Chapter 7 is that you will be forced to sell all of your assets during the process. This is simply not true in most cases. Chapter 7 bankruptcies can get you a fresh start while maintaining your existing assets.
The biggest factor in determining whether or not you qualify to file a Chapter 7 is based on your income. In order to be eligible to file, your income must be below the ‘median income for your state. The ‘median income’ amount increases as your family size increases. The process of determining if you qualify is also known as the ‘means test. As of 2016, for example, the yearly state median income for a one-person household in California is $50,579, and $81,837 for a four-person household.
What Is Chapter 7 Bankruptcy?
Chapter 7 is the most popular form of bankruptcy. It allows a person to be free of debt by eliminating all unsecured debts.
Unsecured Debt Types
- Credit Card Debts
- Medical Bills
- Personal Loans
- Payday Advances
Chapter 7 bankruptcy is an excellent option in California, offering the opportunity to eliminate your debts within less than four months. It proves advantageous due to its swiftness and simplicity, providing the quickest and easiest path toward a debt-free life. Nevertheless, it is crucial to note that not everyone qualifies for this option.
How Does Chapter 7 Bankruptcy Work?
A bankruptcy trustee oversees your case when you file Chapter 7 bankruptcy:
- Gather and submit information regarding your debts, assets, income, expenses, and property transactions within the past two years.
- Allow the bankruptcy trustee to assess whether any non-exempt assets exist that could be sold off to benefit your creditors.
Note that, in Chapter 7 cases, it is essential that essential items for survival do not fall under trustee sale requests and California offers ample exemptions to protect assets – so most Chapter 7 cases do not require asset sales. However, if you possess valuable assets that you want to retain then Chapter 7 might not be the ideal solution.
The Means Test for Chapter 7 Bankruptcy in CA
Chapter 7 bankruptcy (sometimes referred to as “straight bankruptcy” or “liquidation bankruptcy”) can only be filed if one passes qualifying means tests created by Congress to identify individuals with sufficient finances who can use a Chapter 13 repayment plan option to repay their debts.
- The first step is to compare your income with the median income for the same size household in your county.
- You pass the means test if your income is below the median. We can qualify many clients with incomes higher than the median income.
Alternatives to Chapter 7 Bankruptcy
A Chapter 13 bankruptcy is a good option if you earn a regular salary. Chapter 13 may help save your home from foreclosure, even if the means test or valuable assets prevent protection through Chapter 7. It offers another means of protection.
Chapter 7 bankruptcy is often known as “liquidation bankruptcy”. If you wish to avoid selling any property, Chapter 13 might be the better option. Debt relief agencies may help alleviate debt without filing for bankruptcy.