Chapter 7 Bankruptcy
Chapter 7 bankruptcy in San Diego will discharge your debts and put you in control of your financial future with a fresh start.
By far the most common type of bankruptcy case filed, a Chapter 7 case can eliminate virtually all of your debts. If your case is handled by an expert San Diego bankruptcy attorney, it is likely to be a fast and easy process from the perspective of most people who file. But without expert advice and help, Chapter 7 cases can quickly go off track and lead to many problems, delays and even lost property or the failure to get the relief you seek. Our attorneys have filed and handled literally thousands of bankruptcy cases and we are experts at guiding people through the process and getting you the relief you deserve.
WHAT IS A CHAPTER 7 BANKRUTCY CASE?
Sometimes called a “fresh start” bankruptcy, a “clean slate” bankruptcy or a “liquidation,” Chapter 7 bankruptcy is the best way to take control of your financial situation and start over by eliminating your debts. In Chapter 7 you will wipe out your credit card debts, medical bills, pay day loans, lawsuits, judgments, unpaid balances on repossessions or foreclosures, personal loans, guarantees and more. Your Chapter 7 case will be finished in just 3 to 4 months. A Bankruptcy Trustee reviews your paperwork at a “meeting of creditors” that you attend with your San Diego bankruptcy lawyer. Most people complete their cases quickly and the get to keep all of their property.
WHO FILES CHAPTER 7 BANKRUPTCY?
People with overwhelming debts file Chapter 7 because they want to eliminate debts they can’t pay and they want a new start at rebuilding credit and getting back into the financial mainstream. But there are some limitations on who can file Chapter 7. And if you received a discharge in a prior Chapter 13 case (which means that you likely completed all the payments over time in your prior Chapter 13 case), you’ll have to wait 6 years after the Chapter 13 was first filed in order to file a later Chapter 7 case. But the rules are complicated and much will depend on the handling and disposition of your prior Chapter 13 case, so it’s important to review these issues with a San Diego bankruptcy lawyer expert even if you think you may not qualify for Chapter 7 relief. Another “qualifying” issue for Chapter 7 may kick in if you are a high income earner. The Means Test may prevent you from using Chapter 7 (see below). But don’t worry. Even if Chapter 7 is not available to you, there is still relief to be had in Chapter 13 depending on your income, expenses and debt burden. It’s possible that you could feasibly complete a Chapter 13 repayment plan and use the advantages of Chapter 13 to restructure your debts and your debt payments—thus taking back control of your financial life.
THE AUTOMATIC STAY IMMEDIATELY STOPS CREDITORS
Your Chapter 7 bankruptcy petition will invoke an “automatic stay” that immediately and efficiently stops most creditor collection activity, foreclosures, repossessions, wage garnishments, bank levies, lawsuits and other lien enforcement actions—it even stops the cut off of utility services or welfare benefits. You don’t have to do anything to get this automatic stay. It acts like an injunction and creditors must respect it or suffer consequences once they are advised that you have filed bankruptcy. There are some very limited exceptions to the automatic stay and your attorney will explain whether any of these exceptions may apply to your Chapter 7 case (for example, child custody and support hearings along with most other divorce and parenting issues will proceed in state court despite your bankruptcy). And with regard to your property that has liens or mortgages against it (like you home or your cars), creditors may ask the San Diego Bankruptcy Court to remove or “lift” the automatic stay. But in Chapter 7, the relief from the automatic stay will allow you an opportunity to regroup, delay foreclosure or repossessions and decide how to handle these assets with liens on them (try to keep them or let them go).
WILL MY DEBTS BE DISCHARGED IN CHAPTER 7?
Most or perhaps all of your debts will be discharged in Chapter 7. As noted above, you will eliminate your credit card debts, gasoline card debt, medical bills, pay day loans, lawsuits, judgments, unpaid balances on repossessions or foreclosures, personal loans, guarantees and more. Of course, there are some limited exceptions to the Chapter 7 discharge of debts. These debts which don’t get discharged are called “nondischargeable debts.” They fall into just a few categories: Child and spousal support; most student loans (but not all), recent debts run up for buying luxury items; and tax debts that first came due in the last 3 years. Older tax debts may be discharged in your Chapter 7 case, so talk to us about the specific rules that apply to taxes. Besides these categories of “nondischargeable debts,” Chapter 7 also may not discharge debts that arise from fraud (like actual fraud, lying on a credit application or writing a bad check). But in these situations, the creditor is required to ask the Bankruptcy Court to “except” their debt from your discharge. If they don’t ask with for this kind of an “exception to discharge” within the allowed time limits, then their debts will also be discharged in your Chapter 7 bankruptcy.
CHAPTER 7 IS MORE COMPLICATED AFTER CHANGES TO THE LAW IN 2005
Despite its popularity with consumers suffering from too much debt, Chapter 7 relief has an eligibility requirement called the “Means Test” that makes bankruptcy more complicated for higher income earners. The Means Test was added to the Bankruptcy Code in the 2005 amendments to the law called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). The Means Test will only apply to you if your income (measured over the 6 month period before you file) is higher than established averages in your region. And if it’s necessary to apply this Means Test to your income, you’ll find that the Test uses a complicated combination of your actual income, some of your actual expenses, and some “hypothetical living expenses” in order to see how much “net income” you have available to pay your creditors over time. If the Means Test shows that you have significant net available income to pay creditors, you may not be able to file Chapter 7 and instead you’ll have to consider other options, like Chapter 13. Of course, there are threshold minimum amounts of “net available income,” and below these threshold amounts, you will still qualify for Chapter 7. And the Means Test is time sensitive because it looks backwards at your income for 6 months. So even if you just got a big raise or a fabulous new job, you may be able to qualify for Chapter 7 bankruptcy and beat the Means Test if you move fast. Call us if you face this situation and we’ll drop everything to get you relief!
PROTECTING MY PROPERTY IN CHAPTER 7
Every Chapter 7 bankruptcy case has a Trustee who is appointed to represent creditors. The Trustee’s duty is to liquidate or sell assets where possible to pay a dividend to the creditors. Our job as your San Diego bankruptcy lawyers is to protect you and your assets to the fullest extent of the law and to plan your bankruptcy case so that you will get to keep all of your assets. Federal Bankruptcy law and California law combine in your bankruptcy case to allow protection for your assets in the form of “exemptions.” These exemptions represent categories (types and amounts) of property you get to keep. But the laws are complex and it is common for inexperienced lawyers to make mistakes, miss exemptions, claim the wrong exemptions or to fail to protect enough of your property with proper planning before you file your case. When you file Chapter 7 bankruptcy in San Diego, you just choose from 1 of 2 “lists” of exemptions (these lists are set out in California Code of Civil Procedure Sec. 703 and 704. You can learn more about these exemptions and how they apply here. Proper exemption planning requires a thorough knowledge of the law and ways to use the law to protect your property—and this is similar to the kind of tax planning that lawyers and accounts do to protect their clients from paying too much income tax. For example, it may be possible to legally exchange property that is not exempt for property that is exempt. In addition, it is also possible to use more than one exemption to protect a single item of property (sometimes called “cross-claiming”) or to split an exemption between 2 or more items of property. Don’t trust anyone other than a highly experienced bankruptcy expert to make these determinations and to guide your through the pre-bankruptcy planning process.
CHOOSE THE RIGHT SAN DIEGO BANKRUPTCY LAWYER
When handled by highly experienced bankruptcy lawyers, your Chapter 7 bankruptcy will seem fast and easy. You will certainly wonder why you had any anxiety at all about the process. But bankruptcy law is extremely complex. So don’t kid yourself. The law requires your lawyers to make a series of critical determinations and judgments and to guide you through any tricky issues so that you receive your discharge quickly and efficiently. In addition, you’ll want to get your discharge and keep all of your property if possible. And if there is risk to any of your assets, you’ll want the best lawyers available to assess and explain the risk, to plan your case to address the risk, and to explain other options if Chapter 7 is not the best option for you. We represent our clients with passion and zeal and we aggressively work to get you the relief you deserve. Choose the best San Diego bankruptcy lawyers. Find out if Chapter 7 bankruptcy will work for you or if there are other options that will radically change your financial situation and put you back in control. Call the the Bankruptcy Law Center today to set up a FREE consultation at 1-(800)-551-7922. Don’t live the rest of your life buried in debt. Call today to set up a FREE consultation with one of our lawyers at (800) 551-7922.