Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a tool that can be used to discharge unsecured debt such as credit card debt, personal loans, medical debt and other type of debt without losing certain assets. There is no payment plan as with a Chapter 13 bankruptcy. Your debt just disappears, which is why Chapter 7 bankruptcy is referred to as “fresh start” bankruptcy. Here is an explanation of Chapter 7 bankruptcy in California:

1. Qualification: To file for Chapter 7 bankruptcy, you must meet certain eligibility criteria, including passing the means test. The means test compares your income to the median income in California for a household of your size. If your income is below the median, you generally qualify for Chapter 7. If your income is above the median, further analysis is needed to determine eligibility based on expenses and disposable income.

2. Credit Counseling: Before filing for Chapter 7 bankruptcy in California, you must complete a credit counseling course from an approved agency within 180 days prior to filing.

3. Protection of Assets: Bankruptcy exemptions are like protective shields for certain types of property when someone files for bankruptcy. In California, these exemptions are the things you can keep even if you're going through bankruptcy. Here are some common ones:

   • Homestead Exemption: This protects the equity you have in your home up to a certain value. It means you can keep your house, to a certain extent, even if you file for bankruptcy.

   • Personal Property Exemptions: These cover things like furniture, clothing, household goods, and certain personal items. You're usually allowed to keep your personal property unless you have one thing that is worth a lot of money.

   • Vehicle Exemption: This protects your car up to a certain value. So, you won't lose your vehicle if it's within that value limit.

   • Retirement Accounts: Certain retirement accounts like 401(k)s and IRAs are usually protected from creditors during bankruptcy.

   • Wildcard Exemption: This is like a bonus. It allows you to protect any property you want, like cash or other assets, up to a certain value.

4. Automatic Stay: Upon filing for Chapter 7 bankruptcy, an automatic stay goes into effect. This prohibits creditors from taking any further collection actions against you, including lawsuits, wage garnishments, foreclosure proceedings, or harassing phone calls.

5. Discharge of Debts: Chapter 7 bankruptcy allows for the discharge of most unsecured debts, such as credit card debt, medical bills, personal loans, and certain tax debts. However, some debts, such as student loans, child support, and certain tax obligations, are generally not dischargeable.

Navigating Chapter 7 bankruptcy in California requires careful consideration of state-specific laws and regulations. Consulting with a knowledgeable bankruptcy attorney in California is essential to ensure that you understand your rights and obligations under Chapter 7 bankruptcy. So do not hesitate and calls us for a FREE consultation!