A recent job loss or significant medical issue can cause our everyday living expenses to suddenly become overwhelmingly burdensome. No one in California wants to have to choose which bills to pay each month or worry about how they are going to feed their family or pay their rent. When financial times are tough with no real end in sight, one option that may be for the best is filing for bankruptcy.
Filing for bankruptcy is a legal process, so it is important to seek assistance with it rather than trying to do it alone, which could lead to costly mistakes. However, this post will provide a general overview of the Chapter 7 bankruptcy process that readers may find helpful.
How Does Chapter 7 Work?
First, it is important to understand what Chapter 7 bankruptcy is. Also known as “liquidation” bankruptcy, a Chapter 7 bankruptcy is the legal process in which your non-exempt assets will be sold off, and the proceeds used to pay some (but not all) of your debts. After the Chapter 7 bankruptcy process is complete, many (but not all) of your debts will be extinguished.
Am I Eligible for Chapter 7?
To be eligible for Chapter 7 bankruptcy, you must meet the requirements of the “means test.” Basically, this is a mathematical formula that is used to determine if you earn too much or have too many assets to qualify for Chapter 7 bankruptcy, and thus should file for a Chapter 13 bankruptcy instead.
Will I Lose All My Assets?
State and federal law dictate what assets are exempt from being sold in a Chapter 7 bankruptcy and which are non-exempt. It is not true that you will lose everything just by filing for Chapter 7 bankruptcy.
What Are the Benefits of Chapter 7?
Filing for Chapter 7 offers a variety of benefits that can help debtors, including:
- Automatic stay protection, which stops repossession, foreclosure, wage garnishment, and creditor calls.
- Quick and easy discharge - your qualifying debts can be discharged in 4-6 months.
- You can discharge all unsecured debts such as credit cards debts, medical bills, etc.
- You do not have to repay or owe any money after your Chapter 7 case is complete.
For many debtors, filing for bankruptcy is an effective way to get rid of debt so they can start rebuilding their credit.
Things to Avoid Before Filing for Bankruptcy
- Avoid excessive spending: You should not go on a spending spree prior to filing for bankruptcy in order to lower your income or try to gift or sell assets to protect them from liquidation. Creditors in such situations can claim this is bankruptcy fraud, and therefore it could be decided that your debt to them should not be discharged.
- Don't gift or transfer assets to others: In addition, the bankruptcy trustee assigned to your case has the ability to set aside transfers of assets made within 90 days of the bankruptcy filing. Gifting during this time period could be seen as a fraudulent conveyance that the bankruptcy trustee has the power to undo.
Call to Learn More About Filing for Chapter 7
Ultimately, many Californians who find themselves in tough financial times find relief through the Chapter 7 bankruptcy process. While they may lose some assets, being freed from many of their debts can start them on the road to a more secure financial future.
Schedule a free consultation today with our team.