Filing for bankruptcy could help you get a fresh financial start and a new lease on life. Most commonly, individuals either find themselves filing for chapter 7 or 13 bankruptcy. Understanding the differences between the two, and the requirements of filing for each, can help you determine the best path forward in your bankruptcy case.
Our attorneys are here to help with your bankruptcy dispute whether you file for chapter 7 or 13. To schedule a consultation with our team, contact us online or via phone at (559) 900-1263.
How a Chapter 7 Bankruptcy Works
Chapter 7 bankruptcies are generally reserved for individuals who are in significant debt, and cannot feasibly repay their creditors.
As part of filing for Chapter 7 bankruptcy, you must attend a credit counseling course. These courses are intended to help individuals avoid filing for bankruptcy (if possible), or gain the necessary financial education to avoid filing for bankruptcy in the future.
To qualify for a Chapter 7 bankruptcy, the individual who wishes to file must pass a means test. If an individual's income falls under the limit set by the means test, they can file for Chapter 7 - otherwise, they may need to file for Chapter 13.
In California, if your total monthly income over the next 60 months will amount to less than $7,475, you should be able to file for a Chapter 7 bankruptcy. If your income falls below $12,475, you may still be able to file depending on the circumstances of your case, but if it exceeds that number, you may need to file for Chapter 13 instead.
In a Chapter 7 bankruptcy, you'll work with a bankruptcy trustee. Trustees are appointed by the United States Trustee and Department of Justice to handle bankruptcy cases, and act as liaisons between debtors and creditors.
You will attend a creditors meeting. The Trustee will verify your debts at the creditors meeting, and your creditors may ask questions to verify your financial status under oath. Creditors typically decide whether they are going to forgive a debt or pursue another path forward after the creditors meeting.
In Chapter 7 bankruptcies, an individual's property can be liquidated or seized to repay debts. However, vital assets - such as your living space or car - are often exempt from seizure or liquidation, although you may need to take certain steps to retain them. Many creditors will consider debtor assets effectively worthless and forgive debts instead of liquidating assets, but some creditors may choose to pursue liquidation instead.
While most debts are forgiven at the end of a bankruptcy case, this is not the case for all debts. Certain debts, such as student loans or child support payments, cannot be erased by filing for bankruptcy.
Your bankruptcy attorney can help you understand what assets are at risk throughout your bankruptcy case, and help you improve your financial standing when all is said and done.
Understanding Chapter 13 Bankruptcy
Generally, when individuals fail to meet the requirements for Chapter 7 bankruptcy, typically because they make too much money to pass the means test, they must instead file for a Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, instead of liquidating the debtor's assets to repay creditors, the trustee and bankruptcy court, as well as the creditors, work with the debtor to develop a repayment plan. Repayment plans can have variable timelines, and are generally meant to create a reasonable path towards paying off debts for the debtor. As part of these repayment plans, creditors often choose to forgive or reduce outstanding debts.
Certain debts, such as student loans or child support payments, may remain non-negotiable. Ideally, at the end of the repayment plan, the debtor will have paid off all their debts. Any outstanding debts that can be forgiven at this point will be.
Having a skilled bankruptcy attorney by your side is vital if you want to pursue the best possible outcome in your bankruptcy case. To schedule a consultation with our team, contact us online or via phone at (559) 900-1263.