Chapter 7 bankruptcy, also called straight liquidation bankruptcy, is the most common type of bankruptcy filed by individuals and businesses in the United States. There are many benefits to filing Chapter 7 bankruptcy as opposed to other types, such as the ability to exclude certain assets from liquidation.
Chapter 7 bankruptcy is an excellent option for individuals and businesses who have low to moderate-income and can pass the “means test.” The means test is a test that accounts for your income and expenses and determines how your income compares to the state average median income. If you make less than the median income in California, then you qualify to file Chapter 7 bankruptcy.
What Happens When I File Chapter 7 Bankruptcy?
When you file Chapter 7 bankruptcy, a Bankruptcy Trustee is appointed. This Trustee examines your financial records, including income and expenses, and reviews the bankruptcy petition. The Trustee makes sure that your documents match the information sent to the court.
The process of Chapter 7 bankruptcy generally takes around four to six months. During this process, you can successfully eliminate debts, such as:
- Credit cards
- Medical bills
You cannot discharge certain debts, such as child support, alimony, or student loans. In order to discharge this debt, you will liquidate certain assets in order to pay creditors. This is done through the Trustee. But don’t worry – you won’t lose all of your possessions. California bankruptcy law protects debtors by listing assets as exempt or non-exempt. Most debtors only have exempt or secured assets, such as their home, auto loans, etc.
Why You Need a Bankruptcy Attorney
Bankruptcy is a formal legal process, and it is crucial to follow the rules. Errors – even simple ones – can lead to your case being dismissed. A bankruptcy attorney will help you through every step of the bankruptcy process to make sure that your case is destined for success. At The Law Office of Erika Luna, our bankruptcy attorney has the knowledge and resources you need to reach your debt relief goals.
To find out more about the means test and if Chapter 7 bankruptcy is right for you, contact The Law Office of Erika Luna. Let our bankruptcy attorney review your financial situation and help you determine the best way to find relief.