Is There a Debt Limit?
There is no need to be concerned about having too much debt to file for Chapter 7 bankruptcy, however, there are certain guidelines regarding income. In order to qualify for this chapter, filers must make less than the average California family of the same size over a period of the previous 6 months.
The means test is also used to determine the amount of disposable income someone has. If a potential filer has enough income to fund a Chapter 13 plan, they may be directed to pursue that option and be disqualified from filing under Chapter 7.
There are several types of debts that you can have discharged, or eliminated, from Chapter 7 bankruptcies. Most unsecured debts can be discharged by Chapter 7, these being the most common:
- Credit card debt
- Medical bills
- Personal loans
- Utility bills
- Past-due rent
- Some government benefit overpayments
There are also certain secured debts that can be discharged by Chapter 7, however, they do need to be handed over to your creditor in order to be fulfilled. These secured debts mainly include mortgages and car loans.
Do I Lose Everything if I File?
The common misconception about this chapter of bankruptcy is that all of your assets will be liquidated to pay off your debts, and this simply is not the case.
Chapter 7 allows you to exempt certain items of your property but there are limitations that vary depending on the property you wish to protect, the ownership interest, and the exemption statutes being applied.
These exemptions vary depending on whether you are applying state law or federal law. By using the exemptions wisely, most of the time you can protect all of the equity in your home, vehicle, retirement, and other miscellaneous personal assets, and is recommended you seek experienced legal guidance in order to find the best path forward.
Contact Our California Bankruptcy Team Today
We understand how complicated and overwhelming finances can be. No matter the circumstances, we are committed to providing personalized and compassionate services to help you gain the debt relief you deserve.
If you would like to learn more about how Chapter 7 can help you find financial freedom, contact us today through our website or give us a call at (619) 202-8976 to schedule your consultation today!