What is a Chapter 7 Bankruptcy in California?

Chapter 7 bankruptcy is commonly known as Liquidation. This is the bankruptcy option most often pursued by individuals to give them a “fresh start.” Chapter 7 involves the complete liquidation of a debtor’s property to pay creditors and “wipe out” remaining unsecured debts.

How does it work?

A Chapter 7 bankruptcy filing process typically takes about four to six months. Prior to filing for Chapter 7 bankruptcy, a debtor must complete an approved credit counseling education course.

Who qualifies for a Chapter 7?

The Bankruptcy Abuse Prevention and Consumer Protection Act in 2005 have made the process for filing bankruptcy for consumers more difficult. Consumers must pass the “means test” to show that a debtor’s debt to income ratio qualifies for Chapter 7 bankruptcy, Chapter 13 bankruptcy or not at all. Also, consideration of recent or prior bankruptcy filings or discharges can affect your ability to qualify for a Chapter 7 bankruptcy.

Advantages to Chapter 7

  • No minimum amount of debt required to file; no maximum limit on the amount of debt that can be
  • discharged.
  • Unpaid balances due after assets are distributed are discharged.
  • You get to keep wages earned and property acquired (except inheritances) after bankruptcy filing date.
  • Typically your case is concluded in 3-6 months.

Disadvantages to Chapter 7

  • >Stays on a debtor’s credit report for ten years.
  • Not all debt is discharged under Chapter 7. Mortgage debt, car payments, child support, spousal support, delinquent taxes less than three years old, student loans and any judgments from a court generally survive bankruptcy.
  • Your non-exempt property is sold by the trustee. While you are permitted to keep some assets, other assets are sold by the interim trustee – the person who is appointed by United States Trustee to oversee your bankruptcy – to repay some of your creditors.
  • Only temporarily forestalls your lender’s foreclosure actions against your home.
  • Can only file Chapter 7 once every eight (8) years.
  • It is difficult to withdraw from a Chapter 7 filing.

Chapter 7 Bankruptcy Cost

Please contact Brownstone Law Group, PC. to discuss costs associated with Bankruptcy as they vary based on your particular circumstances.

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