Chapter 7 bankruptcy is an effective form of personal bankruptcy because in as little as five to six months you can have your qualifying debt eliminated.
Qualifying debt usually includes unsecured debts such as credit cards, medical bills, payday loans, and utility bills. Chapter 7 may not discharge current taxes, some student loans, penalties and fines to government agencies, or debts not listed in your bankruptcy paperwork.
Some debt that will not be discharged include:
∙ Debts with the intention of causing injuries.
∙ Debts incurred by fraud.
∙ Child support.
Credit card companies may make accusations of fraud. The purpose is to scare honest consumers to agree to pay the debt. If the creditor takes you to court and loses, the judge may order the creditor to pay your lawyer fees.
If you have a large amount of credit card and other unsecured debt, you may want to talk to an Elk Grove bankruptcy attorney to find out how you can have that debt legally eliminated.
When you are behind in debt and worry every day whether you can pay your bills or not, you may want to consider filing bankruptcy. Chapter 7 bankruptcy cases are usually the shortest form of personal bankruptcy. You can file Chapter 7 if you live in, have property, or a business in the United States.
Most people lose little to no income in a Chapter 7 bankruptcy. Your trustee will evaluate your assets, and if you have property that is not exempt and very valuable, it may be sold and distributed to your creditors. Due to the generous exemption allowance, most people do not lose much property. Exemptions can vary by state, so be sure you seek counsel from a local bankruptcy attorney to guide you through the exemption process.
In order to qualify for bankruptcy, you also must pass the means test. The means test will determine if your income is at or below your state's median income. If your income is at or below the median income, you will pass the means test. If you make more than your state's average income, the bankruptcy court may turn your case into a Chapter 13 instead.
If your trustee feels that you are abusing the bankruptcy system, they may ask the judge to dismiss your case. Reasons for dismissal could be because you are using bankruptcy to harass your creditors or if you used your credit cards to purchase a large amount of non-essential items just before filing bankruptcy. Additionally, if you received a bankruptcy discharge within the last eight years, you will be disqualified from receiving another discharge in Chapter 7.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a type of personal bankruptcy permits you to maintain possession and ownership of your assets. In return you agree to pay a reasonable percentage of the debt through a payment plan. The trustee will distribute the monthly payments you make to the court to your creditors. Repayment periods last usually three or five years, depending on your income and level of debt. At the end of Chapter 13 bankruptcy, any remaining qualifying debt will be eliminated.
Also called the “liquidation” bankruptcy, Chapter 7 is the quickest and easiest form of bankruptcy. In three to six months, all of your qualifying debt can be eliminated.
Anyone can file Chapter 7 bankruptcy that lives in the United States or has property in the U.S. if they meet eligibility criteria. In order to qualify, you must pass the means test for your state. The means test is used to evaluate whether your income is at or below your state’s median income. Those who pass the means test may qualify for Chapter 7. If your income exceeds the median income of your state, you may be directed to file Chapter 13 bankruptcy instead.
In your initial bankruptcy filing petition, you will file a statement of your finances, your property, income, and expenses. A list of all your creditors and their addresses needs to be listed, and which debt(s) you intend to eliminate in bankruptcy. Your attorney will help you complete these forms and review whether some of your property meets exemption laws.
When you file your petition with the court, an automatic stay will immediately go into effect. Once an automatic stay has been filed, creditors are not allowed to contact you regarding your debt. All collection actions must stop, which includes foreclosures, evictions, utility shut-offs, and repossessions.
Your court-appointed trustee is there for the interest of the creditors. The trustee will determine if you have any non-exempt property that can be sold to satisfy the creditors. The trustee will only sell items that exceed the limits of the exemption benefits. Most, if not all, of your assets will usually be covered under the exemption laws, helping you prevent the loss of your assets.
If the trustee does find something that falls under the non-exemption rules, you can contest the sale, or pay for the value of the item at that time and not the original sale value. Exemptions laws vary by state, and some states allow you to take the federal exemptions instead. Your bankruptcy lawyer will help you decide which exemptions will work best for your unique situation.
Meeting of the Creditors
The meeting of the creditors is usually held inside of the courthouse but outside of the courtroom. The trustee goes over your paperwork and will ask you some routine questions. You, and if you are filing jointly, your spouse must attend this meeting. Creditors rarely attend these meetings, but might attend if they are contesting the discharge. This meeting will last for about five to thirty minutes.
If there are no objections to your case, the court will discharge your debt without a hearing. You will receive the order in the mail. You will no longer be legally responsible for the eligible debt you listed in your original paperwork.
If you have more questions about bankruptcy, contact a Sacramento bankruptcy attorney today.
One advantage of a Chapter 7 bankruptcy in California is the short amount of time a debtor can obtain debt relief through a bankruptcy discharge. How fast is a Chapter 7 bankruptcy in California you may ask? While the amount of time a Chapter 7 bankruptcy can be different for everyone depending on their circumstances, here's a general time table that one can expect.
Before you can file for Chapter 7 bankruptcy in California, you must complete a mandatory credit-counseling course. This course can be completed online and generally takes a few hours. Once completed, debtors can immediately file their bankruptcy petition with the California Bankruptcy Court and can expect a reply from the bankruptcy trustee with the time and date of your 341 Meeting of Creditors within 30 days. A large number of bankruptcy cases, holidays, and even a government shutdown can impact this time somewhat.
341 Meeting and Creditor Notification
The meeting of creditors or 341 meeting, is usually the only court appearance that individuals filing for bankruptcy in California must attend. While creditors seldom attend meetings, they will be notified of the meeting and afterward will have 60 days to file an objection to bankruptcy discharge. If a creditor or the bankruptcy trustee filed an objection to discharge, the court must go through the discovery process and set a trial date to decide the matter. An objection to discharge will obviously delay your Chapter 7 bankruptcy case.
Receiving Your Bankruptcy Discharge
Assuming that none of your creditors object to any of the debts you aim to discharge, then the court will create and mail you a written debt discharge within 2-3 months of your creditors' meeting. Therefore, assuming you provide the bankruptcy trustee with all requested information promptly and no additional motions arise during your bankruptcy case, you can expect a discharge of your eligible debt as soon as 90 days after you file. By obtaining the assistance of an Elk Grove bankruptcy attorney, debtors can also ensure that they will be able to foresee any issues that might arise during the course of the bankruptcy case which might slow down or dismiss a bankruptcy proceeding.
When you file Chapter 7 bankruptcy, certain types of unsecured debt, such as credit card debt and medical debt are discharged (wiped out). You are also granted bankruptcy exemptions, which protect certain assets from entering into the "bankruptcy estate". Items in your bankruptcy estate are known as non-exempt and will be sold off by the bankruptcy trustee who will pool that money together and make payments to each of your creditors. There are some situations where you may be able to keep the nonexempt property.
Once your Chapter 7 bankruptcy is confirmed, the bankruptcy trustee will review your bankruptcy petition, identify any non-protected assets and collect and sell them. The proceeds from selling non-protected property are divided up among creditors while also charging a nominal fee for the trouble. Trustees are paid by commission according to how much they sell. Bankruptcy trustees will usually enlist the assistance of an auctioneer or broker to sell off assets. They may also publish a public notice about an item for sale, to be sold to the highest bidder.
Keeping Nonexempt Property
In some instances, if a non-exempt asset has a relatively low value or is difficult to sell the trustee may abandon selling it, allowing you to keep it. While you shouldn't ever expect to keep the non-exempt property if it isn't worth the bankruptcy trustee's time and effort to liquidate the property you may actually be able to keep the non-exempt asset. In addition, you may be able to bid for your own non-exempt property. If the trustee accepts your offer, you could find yourself keeping your assets after all.
Contact a California Bankruptcy Attorney
As previously stated, an experienced Citrus Heights bankruptcy attorney will be of invaluable in helping to make sure that you protect as much property as you can use in your state's exemptions. Additionally, by enlisting the help of a bankruptcy lawyer, you'll gain insight into how the bankruptcy court and bankruptcy trustees operate in your jurisdiction, which can vary from state to state and district to district.
One of the highest “worry factors” surrounding filing for Chapter 7 bankruptcy in California is wondering if you will pass the "means test" required of all consumers filing for bankruptcy protection. As a Sacramento Bankruptcy Attorney firm, it's one of the most common concerns we hear. Many individuals are surprised to hear that you are not required to be flat broke and penniless in order to pass the means test and qualify for Chapter 7 bankruptcy protection, however, knowing more about the qualifications will help you resolve some of the fears associated with the bankruptcy process.
Median Income in California
The Chapter 7 means test was instituted by Congress in order to make it more difficult for individuals to discharge their debts without paying back the majority of their creditors. The test is designed to ensure that those that do successfully file Chapter 7 bankruptcy can't pay back their debts. To begin, the means test average income over the previous 6 months before filing a Chapter 7 bankruptcy petition in California is compared with the median income of the state, considering your household size.
These numbers are constantly evolving, therefore, you should ask your Sacramento Bankruptcy Lawyer about what figures the US Bankruptcy Court in your district is using. If your income is less than the median income of California, then you automatically pass the means test and you aren't required to fill out the remaining information.
Chapter 7 Means Test
If your income is higher than the median income in your state, you may still qualify. The income calculation takes into account all payments from not only your wage or personal business income, but also income from investments. The means test works by considering monthly expenses such as mortgage or rent, car payments and insurance, food, electricity, internet, and cell phone bills, and deducting these from your average income over the 6 months prior to bankruptcy. Once your current monthly income is established and subtracted from your eligible expenses you are left with your disposable income, and the bankruptcy court will decide if you have enough money left over to pay back your creditors. If you do, then you may be required to convert your Chapter 7 to a Chapter 13 bankruptcy case.
If You Do Not Pass the Means Test
If you do not pass the means test in California, it's not the end of the world, but you will have a few decisions to make. Consult your bankruptcy attorney as to whether it is sensible to convert your bankruptcy case to a Chapter 13 bankruptcy. This alternative form of bankruptcy lasts longer and will require you to live on a fairly strict budget for up to 5 years in order to pay back your creditors, but should leave debt free at the conclusion. Additionally, if you do pass the means test, it may not be in your best interest to actually move forward with your Chapter 7 bankruptcy. Only a California bankruptcy attorney is qualified to give you advice on how to fill out your bankruptcy forms and whether you should move forward with filing or not.