If you are considering filing bankruptcy, the bankruptcy code provides two options. Chapter 7 and Chapter 13 both address filing for personal bankruptcy. Chapter 7, otherwise known as a liquidation bankruptcy allows the bankruptcy court to liquidate your assets to pay back your creditors. Going through the Chapter 7 bankruptcy…
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Understanding Chapter 7 Bankruptcy in California
Bankruptcy is designed to help people and businesses resolve their debts so they can have a fresh start. It is considered a legitimate way to clear your debts and begin again with a clean slate. Bankruptcy laws may vary from state to state. In California, there are bankruptcy rules that you need to follow when you file for bankruptcy. A reliable Santa Rosa Bankruptcy lawyer can help you abide by the state laws to ensure the success of your bankruptcy case.
Before you declare bankruptcy, you must know how to choose the most appropriate bankruptcy type that will solve your financial problems. Chapter 7 and Chapter 13 are the two common types of bankruptcy. The article will focus on Chapter 7 bankruptcy filing in California. Here are some of the questions that you might have in mind as you think of ways to pursue debt settlement:
1. Is Chapter 7 bankruptcy right for you?
2. How Do I Qualify for Bankruptcy?
3. How Do I File for Chapter 7 Bankruptcy?
4. Where Do I File My Bankruptcy Paperwork?
5. What Debts Are Discharged in Chapter 7 Bankruptcy?
6. How Do I Keep My Property When Filing Bankruptcy?
7. What is the Role of a Bankruptcy Attorney?
Is Chapter 7 bankruptcy right for you?
Chapter 7 bankruptcy is considered the fastest and most common type of bankruptcy. It allows liquidation of assets to pay creditors. However, a Chapter 7 bankruptcy stays on your credit reports for up to 10 years from the filing date. Although it can affect your credit score, there are various ways on how to recover over time. Chapter 7 can be your best option when:
- You don’t have many assets
- Your debts amount to a total of more than 50% of your annual income
- Your debts can be discharged or forgiven by Chapter 7 (medical bills, credit card debts, personal loans, or payday loans)
- It would take five years or more to pay off your debt
How Do I Qualify for Bankruptcy?
Chapter 7 bankruptcy doesn’t necessarily work for everyone. There are a few requirements you’ll need to meet to file for a Chapter 7 bankruptcy:
- Take credit counseling sessions from an approved credit counseling agency within 180 days before filing.
- Pass the means test. (The average of your monthly income during the previous six months must be less than the median income for the same-sized household in your state. This test will determine if your disposable income is high enough to make partial payments to unsecured creditors. If you don’t pass the means test, you may still be able to file a Chapter 13 bankruptcy).
- You can’t have filed a Chapter 13 bankruptcy during the past six years.
- You can’t have filed a Chapter 7 bankruptcy during the past eight years. (If you tried to file a Chapter 7 or 13 bankruptcy and your case was dismissed, you have to wait at least 181 days before trying again)
How Do I File for Chapter 7 Bankruptcy?
Filing bankruptcy can be financially, physically, and emotionally draining. A qualified Santa Rosa bankruptcy lawyer can guide you throughout the bankruptcy process. Here are the steps in filing bankruptcy:
- Attend counseling sessions – take credit counseling sessions from an approved credit counseling agency within 180 days of filing
- Fill out bankruptcy forms – declare your finances in detail including your bank account records, credit card bills, living expenses, monthly income, assets, liabilities, debts, and all financial records on your bankruptcy form
- Send verification documents to the trustee – send documents to the bankruptcy trustee who will verify your bankruptcy forms (including recent bank statements, tax returns, paychecks, and business documents)
- Attend the 341 creditors’ meeting – attend the creditors’ meeting with the trustee and answer questions about your paperwork and situation
- Attend budget counseling – complete a debt management course within 60 days of the creditor meeting
- Wait for the discharge notice – the case will be discharged and eligible debts are forgiven (three to six months after filing your petition)
Where Do I File My Bankruptcy Paperwork?
Your case starts when you file your paperwork with the local bankruptcy court and either pay the filing fee or request a fee waiver. California has four bankruptcy courts and each location serves a particular geographical area. The state is divided into four districts: eastern, northern, central, and southern districts.
- Eastern District – Sacramento, Fresno, Modesto, and Bakersfield
- Northern District – Oakland, San Jose, Santa Rosa, and San Francisco
- Central District -Los Angeles, Riverside, Santa Ana, Santa Barbara, and the San Fernando Valley
- Southern District – San Diego
What Debts Are Discharged in Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy will generally discharge your unsecured debts (such as credit card debt, medical bills, and unsecured personal loans). The bankruptcy court will discharge these debts at the end of the process, generally about four to six months after you start. Some types of unsecured debts usually aren’t discharged through a Chapter 7 bankruptcy, including:
- Child support
- Student loans
- Some tax debt
- Homeowners association fees
- Court fees and penalties
Your creditor could also object and keep certain debts from getting discharged. Additionally, a Chapter 7 bankruptcy may discharge the debt you owe on secured loans. Secured loans are those backed by collateral, such as your home for a mortgage, or when a creditor has a lien on your property. However, even if the debt is discharged, the creditor may still have the right to foreclose on or repossess your property.
How Do I Keep My Property When Filing Bankruptcy?
Declaring bankruptcy does not mean that you will lose everything that you own; however, not all your assets can be fully protected from liquidation. There are bankruptcy exemption rules in California that determine the properties and assets that you can protect when you decide to file bankruptcy. On the other hand, some assets cannot be protected and these are categorized under a non-exempt property. If you choose to file Chapter 7 bankruptcy, your appointed bankruptcy trustee (court-appointed official assigned to manage your case) will liquidate your nonexempt assets to pay off your debts from your creditor. You need to exempt your property carefully. Some of the bankruptcy exemptions are:
- Homestead Exemption – protects a certain amount of equity in your principal residence
- Motor Vehicle Exemption – protects equity in your car, truck, motorcycle, or another vehicle
- Household Goods Exemption – protect your necessary household goods
What is the Role of a Bankruptcy Attorney?
Filing for bankruptcy entails hard work and effort. It is a progressive process that will help you solve your financial problems one step at a time. Debt repayment and reorganization of your finances shall be your priority. You must be familiar with the bankruptcy laws implemented in your state to avoid unnecessary errors and penalties in your bankruptcy filing. It is advisable to consult with one of our competent Santa Rosa bankruptcy lawyers at Provencher & Flatt to guide you on how to file a bankruptcy systematically. Our reliable attorneys will help you succeed as you start over and recover from your financial losses.
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