Chapter 7 & 13

Summary of Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a debt liquidation proceeding which allows you to eliminate most of your unsecured debt. Any individual residing, domiciled, or having business property in the U.S. may file a Chapter 7 bankruptcy case. Businesses may also file Chapter 7 bankruptcy.

Chapter 7 Bankruptcy Eligibility

In addition to meeting the residency requirements, you must also pass the median income or means test in order to file a Chapter 7 bankruptcy. The median income test requires you to show that the income for your household is less than or equal to the median income for a household of the same size in the state of California. We can quickly determine if you are eligible for Chapter 7 with our free Bankruptcy consultation.  Just give our office a call to set one up today.

The means test is used to determine whether the filing of a Chapter 7 bankruptcy case amounts to an abuse of the bankruptcy process. If a debtor has at least net monthly income of $166.67 or $10,000 projected over a period of five years available for payment to general unsecured creditors, abuse is assumed. On the other hand, if a debtor has less than $100.00 or $6000 projected over a period of five years available for payment to general unsecured creditors, abuse is never presumed. If a debtor falls between these two extremes, abuse is presumed only if the debtor has projected net monthly income sufficient to pay at least 25% of general unsecured debts over a five year period. If a debtor cannot pass the means test, he must file a Chapter 13 bankruptcy.

The means test utilizes a number of complex formulas to determine whether a Chapter 7 bankruptcy filing amounts to abuse. Therefore, our experienced bankruptcy attorneys at Bankruptcy Professionals, use cutting edge technology to review and process our clients’ income and other financial information to determine whether they are eligible to file a Chapter 7 bankruptcy.

The Filing Process

Every Chapter 7 bankruptcy debtor must complete a pre-bankruptcy counseling class within the 180 day period prior to filing. The certificate of completion for the class must be filed with the bankruptcy court along with the bankruptcy petition and schedules. Additionally, Chapter 7 bankruptcy debtors must file pay stubs and payment advices for the 60 day period immediately before the bankruptcy petition is filed. Chapter 7 bankruptcy debtors must also provide the bankruptcy trustee with a copy of their most recent tax return at least 7 days before the Meeting of Creditors.

A Chapter 7 bankruptcy debtor must pay the filing fee of $335. Chapter 7 bankruptcy debtors may request permission to pay the filing fee in installments by filing an Application to Pay Filing Fee in Installments at the time that the bankruptcy petition is filed. If the application is granted, the debtor must pay the filing in full within 120 days of filing bankruptcy and in no more than four installments.

The Meeting of Creditors

The Meeting of Creditors takes place about 30 days after the bankruptcy petition. The debtor’s attendance at the Meeting of Creditors is mandatory. During the Meeting of Creditors, the debtor gives sworn testimony regarding the contents of his bankruptcy petition, including his income, assets, and debts. The Meeting of Creditors is conducted by the bankruptcy trustee; however, creditors have the option of attending and may question the debtor.

Treatment of Unsecured Debts in Chapter 7 Bankruptcy

In most Chapter 7 bankruptcy cases, after the Meeting of Creditors, the bankruptcy trustee will file a report with the bankruptcy court whereby he abandoning his interest in the bankruptcy estate. Within about 90 days of the date the petition was filed, a Chapter 7 bankruptcy debtor will receive a discharge. All unsecured debts except for domestic support obligations, certain taxes, and student loans will be discharged.

Treatment of Secured Debts in Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy case, a debtor with secured debts must specify in his bankruptcy petition his intentions with regard to the property securing those debts. A debtor may either redeem, reaffirm, or surrender such property.

How Bankruptcy Professionals Can Help You

At Bankruptcy Professionals, we are committed to helping our clients resolve their financial issues and get the fresh start they deserve. Our bankruptcy attorneys know that every case is different. Therefore, we work closely with each client, taking into consideration their special needs, circumstances, and goals. Not only will we prepare you bankruptcy petition in accordance with the Bankruptcy Code and local rules, we will represent you throughout the process to ensure that you will receive a discharge.

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