Chapter 7 Bankruptcy

ELIMINATE DEBTS

Chapter 7 Bankruptcy is a way for you to eliminate most debts and get a fresh start.  By filing for Chapter 7 Bankruptcy you can wipe out many types of debts including medical bills, credit card bills, and car payments and it forces creditors to stop any form of collection activity.  You will be able to keep exempt assets but you may need to surrender non-exempt assets to the trustee.  In practice you may be able to keep non-exempt assets when the trustee finds that selling the assets would not be worthwhile.  Thus, you may be required to surrender some types of property if you file under Chapter 7.  There are exceptions to what kinds of debts will be surrendered and you should contact a competent bankruptcy attorney to evaluate your specific needs.
Chapter 7 will not eliminate certain types of debts such as alimony and child support; student loans; and debts incurred through personal injury or death, caused by the operation of a motor vehicle.

STOP CREDITOR HARASSMENT

You can immediately stop creditor harassment when you file for Chapter 7 Bankruptcy.  When you file a bankruptcy petition with the court creditors will not be allowed to contact you, proceed with lawsuits or garnish your wages.  There are some collection actions that the stay will not apply to.
Legally this legal protection from creditors is called an “Automatic Stay” and it is one of the biggest benefits of filing for bankruptcy, because it will immediately prevent creditors from harassing you and collecting on most of your debts while the Bankruptcy application is pending.

Chapter 7 Bankruptcy Requirements

Do you qualify for Chapter 7 Bankruptcy?
To qualify for Chapter 7 Bankruptcy your average income for the last six months should be below the state’s median or you must qualify under the “means test”.

The median income for the state of California is listed below:

One earner     $48,140
Two People    $64,878
Three People $70,890
Four People   $79,477

If your income exceeds the state’s median income you may still be able to file for Chapter 7 but you will need to complete a “means test” to determine if you qualify for Chapter 7 Bankruptcy.

Chapter Seven Bankruptcy Process

Step 1: First you must participate in a credit counseling program and obtain a certificate of credit counseling.

Step 2: Next you can file a petition and supporting schedules with the bankruptcy court.  Specific bankruptcy courts serve different locations; therefore it is important that your application is served with the court that serves the location that you live in.

Step 3: After you file for your Bankruptcy Petition within 20-40 days you will be scheduled for a meeting with the trustee and creditors.  This meeting is also called a “341 meeting”. Our office will prepare you for the 341 meeting and attend the meeting with you. Before attending the U.S. Trustee meeting you must submit your most recent tax return to the U.S. Trustee.
At the meeting the U.S.  Trustee will place you under oath and the trustee or creditors may ask you questions.  The trustee will inform the court as to whether or not your filing constitutes an abuse under the “means test” within ten days after the creditors meeting.

Step 4: Within 30 days of the creditor’s meeting if you have secured debt (such as a car) and you owe money on the car, you may either surrender the property, file a reaffirmation agreement or redeem the debt.
If you prefer to keep your car you may file a reaffirmation agreement which requires you to pay the money owed to the creditor despite the discharge.  If you do decide to file a reaffirmation agreement with the court you will be responsible for making the payments despite the bankruptcy discharge.
To qualify for a reaffirmation agreement you will need to file a statement of current income and expenses. The balance of your income and expenses should demonstrate that you will have sufficient income to pay the reaffirmed debt.  Undue hardship could be presumed by the court if the balance is insufficient to make the payments on the debt.

Step 5: In addition to completing credit counseling before you filing the bankruptcy petition you are required to take a two hour financial management counseling course prior to receiving a bankruptcy discharge.

Step 6: In most cases, 60-90 days after the first meeting of the creditors the bankruptcy court will issue your discharge order.  The discharge will release you from liability of most of your debts.

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