Chapter 7 Bankruptcy: An Overview

As an individual, when you file for bankruptcy in Carlsbad, CA, you have to choose between Chapter 7 and Chapter 13 bankruptcy, which have very different structures. The type you choose determines which assets you can keep and how long the process will take before your debts are repaid and discharged.

Chapter 7 bankruptcy is often considered desirable—if you qualify to file under this chapter—because there is no repayment plan. Once assets are liquidated to pay off debtors, the remaining debt is discharged and the process is over. Here’s an overview of Chapter 7 requirements and how to tell if you qualify.

Chapter 7 eligibility and the means test

In order to file for Chapter 7, you need to qualify under the eligibility standards. This is called the “means test,” and will determine whether you’re allowed to file under this chapter or if you’ll need to fall back on Chapter 13.

The means test looks at your income and compares it to your state’s average income, as well as your expenses compared to the IRS’s local standards, to determine how yours compare. If your income is below the limit as compared to your expenses, you’ll be able to proceed.

Chapter 7 proceedings

When you file for Chapter 7 bankruptcy in Carlsbad, CA, a trustee is appointed to oversee your estate. They assume ownership of all your non-exempt assets and will sell them to raise money to pay your creditors. The money is distributed among the creditors—even if it’s not enough to pay them all back in full—and your debt is considered discharged.

Exempt property depends on state and federal laws, but can include your home, your car, property you need to earn a living (such as computers, tools and other expensive assets) and your retirement accounts. In many cases, the exemption means that there is little if anything to sell to repay your creditors—those who file for Chapter 7 often do not have a lot of assets.

Your attorney will help you collect the financial documentation you need, and file the appropriate paperwork in bankruptcy court. This includes a schedule of assets and debts, petition for relief, debtor education declarations and a statement of your financial affairs. While you can file yourself, most people choose to rely on the help of a skilled attorney.

After your paperwork is filed, you will attend mandatory credit counseling and financial management sessions to help you understand your options and give you the chance to find another solution.

Next, there will be a “meeting of the creditors” in which your creditors are entitled to show up and ask questions or submit evidence on their behalf. Generally, however, your creditors will rarely send representatives.

Finally, a discharge of your debt is filed and you will be granted a “clean slate” financially—however, the bankruptcy will appear on your credit report.

Do you need the help of a skilled attorney with knowledge of the bankruptcy code in Carlsbad, CA? Call Gregory S. Hood, Attorney at Law, P.C. today.

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