Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a liquidation proceeding where all of your unsecured debts can be discharged. Unsecured debts are debts that are secured only by your signature such as credit card bills and medical bills. This does not affect secured loans, like your mortgage or a car loan, which use the property that is being financed as collateral. However, you are also able to discharge secured debts, but the condition is to surrender the property you are holding (i.e., your home, your car, etc…)
Eligibility for chapter 7 bankruptcy is determined in 2 steps. Step 1 is the means test which is determined based on your income and number of dependants versus the median income for that area. This is designed to prevent people of high income from being able to file for bankruptcy. The second step compares your gross income with your expenses and makes sure that the excess funds are low. However, if your excess funds are sufficient to pay off your debts within a 3 to 5 year period the bankruptcy trustee may change your chapter 7 bankruptcy into a chapter 13. Assuming you pass these two tests you may be eligible for a discharge.
In chapter 7 bankruptcy the bankruptcy trustee can sell your nonexempt assets in order to pay your creditors. However, much of your property may be exempt. For the majority of individuals out there, it is unlikely that the bankruptcy trustee will sell any of your assets. However, you must consult a Los Angeles Bankruptcy Attorney to determine if that is the case. Exemptions allow you to keep as much as $23,000 of your belongings, and sometimes more (this includes the equity of your home). Therefore in many chapter 7 bankruptcy filings the bankruptcy trustee does not sell any of your assets and the creditors holding unsecured debt get nothing. However, it is recommended to speak to a Los Angeles Bankruptcy Attorney for additional clarification.
As a part of any bankruptcy, you are also required to complete debtors counseling. Debtors counseling is a short 90 minute course that informs you about how to manage your debt. This is a required course that can be taken online for a nominal fee. Once your bankruptcy petition has been filed, an automatic stay is triggered which will stop any and all foreclosure sales, lawsuits, wage garnishments, bank levies and evictions.
The final steps toward receiving your discharge is the attendance at the creditors meeting and pre-discharge debtors counseling. The creditors meeting is a short meeting where the bankruptcy trustee will ask questions about your debt. Pre-discharge debtors counseling is another short course, which can be taken online, about managing your finances and rebuilding your credit. This course must be completed. Otherwise, the bankruptcy court will dismiss your case without a discharge. Once the bankruptcy discharge is granted you will be unable to file another Chapter 7 Bankruptcy for another 8 years.
Contact the Law Offices of Alon Darvish if you are considering on filing for Chapter 7 Bankruptcy and need skilled legal counsel.
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