Filing for Chapter 7 bankruptcy can be beneficial if you are experiencing financial difficulties or are behind on debt payments to lenders. The objective of filing Chapter 7 bankruptcy is to offer you a clean slate by addressing and paying off some of your pending obligations. To pay off your creditors, any assets and non-exempt properties will be liquidated. Chapter 7 bankruptcy is designed to simplify the process of filing for bankruptcy relief, even though it may result in the loss of some assets.
At Sacramento Bankruptcy Lawyer, our skilled lawyers will strive to protect all of your assets to prevent liquidation. Reach out to our Roseville bankruptcy attorneys to find out more about declaring Chapter 7 and if it's the best option for you.
Eligibility For Chapter 7 Relief
Joint spouses or individuals seeking relief from the court can choose to declare bankruptcy under Chapter 7. To declare Chapter 7, it is important to note that you shouldn’t have gotten relief from a previous declaration within the last eight years. Additionally, the court requires borrowers to complete a credit counseling program at least 180 days before filing.
The main objective of this program is to assess your eligibility for bankruptcy relief. In certain cases, you may be able to set up a repayment plan directly with your creditors. After reviewing all of your alternatives, the credit counselor will guide you toward the most suitable solution for your situation. You are not required to select the choice that is offered to you. You have fifteen days from the date of filing to turn in your completion certificate to the court as part of the initial bankruptcy case. A knowledgeable bankruptcy lawyer will ensure that this is submitted on the same day as your case.
In addition, passing the bankruptcy Means test is also required. The purpose of this test is to ensure that individuals with higher incomes do not take advantage of Chapter 7 relief. It computes your disposable earnings by subtracting the monthly expenditures from your income and comparing it to the disposable income of people in your region.
If the income earned monthly falls short of the state median for households similar to your size, you could be eligible to automatically file for bankruptcy relief under Chapter 7. Your disposable income is taken into consideration by the test if your income exceeds the median. The bankruptcy court would review Schedules I and J forms, respectively, before proceeding with the proceedings if your disposable earnings make you eligible for relief under Chapter 7.
Schedule I represents your projected income, while Schedule J represents your projected expenses. If the borrower’s disposable earnings exceed the level set for your region and the household’s size, it is unlikely that you would be eligible for Chapter 7 relief. However, there are alternatives accessible to you, if Chapter 7 bankruptcy does not provide the relief you seek. Alternatively, you could be eligible to file under Chapter 13 bankruptcy, which enables you to retain your assets while paying some lenders over three to five years. The criteria used to determine eligibility for a Chapter 7 bankruptcy relief isn’t income. Each bankruptcy filer is unique, and their expenses also vary.
Let's take into account the following situation:
A married couple has two children together, and the wife has a third child from her previous relationship who lives separately. Each spouse earns $52,000 per year working full-time. The monthly expenses consist of the following:
- Mortgage worth $3,400.
- Two $600 monthly car payments.
- $1,800 for childcare expenses.
- A home equity credit line, worth $300 and secured by the property.
- Child support of $800.
Based on this information, even though the couple's income is higher than the median, they may still be eligible for Chapter 7 relief. On the other hand, consider this scenario:
A married couple has one child. One spouse works full-time and makes $48, 000 per year, while the other partner works part-time and makes $30, 000. The couple's only additional monthly expense is $750 for apartment rent.
In contrast to the first couple, the second couple might not be eligible for Chapter 7 relief. Despite earning less money than the first couple, this does not automatically qualify them to file for Chapter 7. To determine if Chapter 7 bankruptcy is the ideal course of action for you, it is crucial to thoroughly evaluate your financial situation.
A competent bankruptcy lawyer is aware of the complex requirements for filing under Chapter 7. They will dedicate the necessary time to thoroughly examine the specifics of the case. Bankruptcy attorneys are well-versed in the intricate details of the bankruptcy Means Test. They will make sure that all factors are thoroughly considered before reaching a decision.
The Process Of Chapter 7 Bankruptcy
To initiate bankruptcy under Chapter 7, you should file several documents with the court. If you’re married, both partners have the option to declare jointly, but it is not mandatory. Opting to file jointly makes the administrative process much simpler and more cost-effective. Instead of dealing with multiple sets of documents and paying separate fees, you only need to provide a set of documents and pay a single filing fee to the court.
Once the Voluntary Petition, the first form, is filed, the case will officially begin, as an Automatic Stay promptly comes into effect. This streamlined approach ensures efficiency and convenience throughout the bankruptcy proceedings. By following this process, you can block lenders from taking legal action against you and continue your rehabilitation smoothly. The remaining documents include an overview of your financial affairs, which encompass contracts with third parties, current income, assets, and liabilities.
Appointment of a Bankruptcy Trustee
The bankruptcy court will designate a Chapter 7 trustee to supervise your case. He or she will receive a copy of all the necessary documentation. The trustee's role will be to manage the case. According to Section 521 of the U.S. Bankruptcy Code, you are mandated to furnish the bankruptcy trustee with more documents after filing the initial petition. An experienced bankruptcy lawyer will expedite the procedure on behalf of the client, as they possess an in-depth understanding of the required documents.
Meeting of Creditors
The bankruptcy trustee will conduct a Meeting of Creditors between twenty-one and forty days following the original declaration. 341 Hearing is a term commonly used to refer to the Meeting of Creditors. Despite its name implying the presence of lenders, creditors rarely attend the meeting.
The objectives of the meeting are to verify the accuracy of every detail you submit to the bankruptcy court and to check if any assets have to be sold off. Furthermore, you will have the chance to respond to questions under oath regarding your financial situation. These questions will be posed by the bankruptcy trustee and, if applicable, your lenders
This process aims to support the documentation and statements that you have provided. The meeting will proceed, as well as the filing, until you’ve been granted a discharge after fulfilling all conditions if the trustee determines that no additional material is required.
Liquidation of Property
If your claim is considered an asset matter, the liquidation procedure would begin once the bankruptcy trustee concludes the Meeting of Creditors. By doing this, the designated trustee will try to settle any unpaid debts by selling any non-exempt assets that the debtor has. Clients are more frequently seen as non-asset cases, nevertheless. In certain situations, the bankruptcy trustee will not liquidate anything and will let the debtor retain all of their assets.
The bankruptcy court is likely to grant a discharge, which is the second-to-last stage in a Chapter 7 proceeding, within three to five months of your initial petition. Certain unsecured debts, like medical bills, credit card debts, deficiency sums, personal loans, and outdated lease agreements, will be removed. Creditors can be apprised of your release, and they won’t pursue collection actions against you.
Debt Discharge
Non-dischargeable obligations, such as student loans, child support, the majority of taxes, or fines resulting from a conviction for a crime, will remain your responsibility. Moreover, if you were able to have your debts cleared, any cosigner who did not request relief is still responsible for their financial obligations. The court may refuse to approve your release if it learns that you provided misleading details or didn’t disclose some information.
It is expected that you will be discharged within 60 to 90 days following the Meeting of Creditors, provided that you comply with the court's requirements. If any act of fraud is discovered after the proceedings, the court has the authority to revoke the dismissal at any time.
After the discharge has been entered into a Chapter 7 process, the final stage typically occurs quickly. At this stage, the bankruptcy court will issue a final ruling to officially close your case. This includes properly concluding everything and making all necessary legal decisions, ensuring that there’s nothing left in your case. By doing so, you can get peace of mind and seize the opportunity for a new beginning.
Exempt Property
When filing for Chapter 7, it’s important to understand that all your assets and property will be sold through liquidation. This is done to settle any outstanding obligations that you may have. However, there are certain exemptions where certain properties and assets can be protected from being sold. You can list certain properties as exempt under Schedule C, which can protect them from being sold.
The types of property that are exempt vary at the federal and state levels. Under California law, a debtor has the option to pick between either the 704 or 703 exemptions. Additionally, to be eligible for these exemptions, you should have resided in the state for the last two years.
When it comes to protecting your assets from creditors, it’s important to have a clear understanding of the limitations of 703 exemptions. While these exemptions can be beneficial in bankruptcy cases, it is crucial to note that their applicability is limited to the realm of bankruptcy law. It doesn’t apply in situations where there is a risk of losing property to lenders.
Here are some examples of 703 exemptions:
- Motor vehicle exemption—you can list $5,850 or less of auto coverage.
- Household necessities, clothing, pets, crops, and personal items (703.140b3)—each listed item can be protected for up to $725.
- Jewelry—Jewelry worth $1,750 or less can be exempted.
- Materials needed for business—if the business needs any special materials or tools, you could claim not more than $8,725 as exempt.
- Health aids required for survival.
- Insurance.
- Personal injury and wrongful death recovery.
- Wildcard exemption—Contrary to the 704 exemption, 703 allows for no more than $28,350 to be utilized to exempt any asset of your choice. 704 exemptions don’t offer this exemption.
- Public benefits—This incorporates all government-issued perks, like Social Security or unemployment, as well as child support and alimony, if applicable.
- Pensions.
Some examples of the 704 exemption comprise the following:
- Clothing, food, and home necessities.
- Auto Exemption—In California, you can protect your motor vehicle and get car insurance coverage of no more than $3,325. It doesn't matter if you're married or a single bankruptcy filer.
- Home improvement—you can claim an exemption for tools not more than $3,500 for home repairs or renovations.
- Jewelry, artwork, and family heirlooms—protect no more than $8,725 worth of jewelry, artwork, and family heirlooms from being liquidated.
- Health aids required for survival.
- Homestead exemption—this tool offers protection for both single-family homes and mobile homes, with a level of coverage tailored to your specific needs. For example, if you're a single filer, living alone without any disabilities, up to $75,000 of your equity can be protected. However, if you have a family and you're the sole property owner, up to $100,000 worth of equity can be protected. If you're 65 or older, or have a physical or mental disability, you can safeguard up to $175,000 of equity.
- Materials necessary for occupation—if you need special materials or tools for your job, you can potentially exempt no more than $8,725 of expenses.
- Wages—If you earn wages within thirty days of filing for bankruptcy, you can exempt up to seventy-five percent of the total amount earned.
- Social Security and government benefits—if you're filing as an individual, you might not have to pay taxes exceeding $1,750 for other benefits and $3,500 for Social Security payments. For married individuals, these exemption amounts can go up to $2,600 for other benefits and $5,250 for Social Security. Some examples of these benefits are unemployment, financial aid, and workers' compensation.
- Wrongful death and personal injury recovery (704.150 and 140).
- Pensions—a tax-exempt account like a 401(k) account, as well as pensions and retirement benefits from county or public employment—are all included in this section.
Exemption codes are designed to assist you in retaining some assets during bankruptcy. However, certain properties cannot be protected and can be sold by the bankruptcy trustee. The properties would be used to settle the outstanding debts. The role of the bankruptcy attorney is to ensure the protection of all the person's belongings.
How Much Does It Cost To Declare Chapter 7 Bankruptcy?
Declaring bankruptcy comes with costs. There are attorney fees and various court charges involved. You will be required to pay a filing fee worth $245, along with an administrative fee worth $75 and a trustee fee of $15. These fees should be deposited to the clerk upon declaring or under a repayment arrangement after filing. If payment is made after filing, all 4 installments should be settled within a 120-day window period of the initial application.
If you don’t comply with and settle the fees, your bankruptcy case could be dismissed. However, in certain cases, the courts can waive the charges. If your earnings are significantly below the deprivation level (such as 150% lower), the court can exempt you from making payments. Before filing, there's a credit counseling program that will cost you between $10 and $25. After filing, you'll have to take financial management coursework. It usually costs around $10 to $25.
What Happens When the Chapter 7 Filing Process is Completed?
After declaring bankruptcy, you can typically expect to receive your discharge within 3 to 6 months. Once your debt discharge is approved, your bankruptcy case will be closed. Once you reach this point, you won't have to worry about any debts you owe. It's a fresh start towards a debt-free life. Using this has the potential to boost your credit score and allow you to fully enjoy a debt-free life.
Find A Roseville Bankruptcy Attorney Near Me
If you're feeling overwhelmed by the mountain of debt on your desk, there are solutions available to help you tackle your financial stress and give you a fresh start. The licensed bankruptcy experts at Sacramento Bankruptcy Lawyer in Roseville, California, have the knowledge and commitment to help you secure the relief you need. Our experienced lawyers will utilize their expertise in filing Chapter 7 bankruptcy to achieve the best possible result for you. Call us today at 916-800-7690 to speak with one of our lawyers and receive prompt assistance for your needs.
