What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most used form of bankruptcy in the United States. According to the United States Courts, there were more than 8 million Chapter 7 filings from 2006 to 2017. Also known as “liquidation bankruptcy,” Chapter 7 allows you to wipe out debts, while offering exemptions that can protect property.
Qualifying for Chapter 7 Bankruptcy People looking to file Chapter 7 bankruptcy in California must meet specific prerequisites before the filing process can begin. Some of the requirements include, but are not limited to:
Chapter 7 Means Test
The means test is an essential prerequisite in a Chapter 7 case. For means testing, you will undergo a financial examination to determine if you have the “means” to pay back your debt. The means test will evaluate your disposable income and compare it to California’s median income to decide whether or not you are eligible for Chapter 7. The result of the means test will let you know if you can file for Chapter 7, or if you should consider another option, like a Chapter 13 bankruptcy. An experienced Chapter 7 bankruptcy lawyer can help you understand how to complete means testing and what the results could mean for your case.
Bankruptcy Credit Counseling
As part of your Chapter 7 filing, you must attend a credit counseling program that must be provided by a government-approved agency. During credit counseling, you will receive a thorough assessment of your financial situation. Though bankruptcy law makes participation mandatory, this does not mean you should disregard information the agency provides. If you still intend to file bankruptcy after credit counseling, you should talk to a Chapter 7 attorney about the right way to proceed.
To proceed with a Chapter 7 filing, you must gather and provide various documentation related to your finances. For example, you will need financial documents such as pay stubs, credit card statements, bank statements, mortgage statements, tax returns, and other records. Your bankruptcy lawyer can help you understand and fulfill your responsibilities when it comes to providing financial information about your debts, assets, and income. Be advised that failing to present accurate and truthful information can lead to severe legal consequences.
What Are the Benefits of Chapter 7? A Chapter 7 bankruptcy may be able to offer a fresh financial start if you are facing difficulties with debt. Some of the benefits you could reap from a Chapter 7 bankruptcy include:
Getting rid of debt quickly
Pausing debt collection actions
Starting over financially