Bankruptcy is a legal tool to get rid of debt. If you live in the U.S., own property in the U.S., or own a business in the U.S. you can file for bankruptcy. Most consumers file under chapter 7 or chapter 13. Chapter 7 is known as the liquidation bankruptcy because nonexempt assets are sold to pay creditors. Chapter 13 allows the petitioner to keep property and pay creditors through a repayment plan. While debt counseling services promote debt reduction plans or other solutions bankruptcy remains one of the most effective methods for achieving lasting debt relief.
Bankruptcy is achieved by filing a petition with the United States Bankruptcy Court. To file for bankruptcy you should retain a Sacramento bankruptcy attorney. While you can file pro se (without an attorney) you will have to carefully draft your petition and represent yourself at the meeting of creditors. If you fail to list a creditor your debt may not be discharged. Likewise, if you transfer assets before filing and the court determines that you did so with the intent to hinder or delay a creditor you may be denied a discharge entirely. To hire a bankruptcy attorney call Sacramento Law Group LLP at (916) 596-1018 for a free bankruptcy consultation.
California Bankruptcy Law
While bankruptcy is a creature of federal law certain California statutes and decisions from bankruptcy courts within the 9th circuit directly affect California bankruptcy cases. In particular, California chapter 7 petitioners will elect between Section 704 and Section 703 California bankruptcy exemptions. California petitioners with home equity may elect 704 California bankruptcy exemptions to protect their home equity through the 704 homestead exemption. Likewise, California petitioners with little net worth other than nonexempt assets may elect 703 California bankruptcy exemptions to protect nonexempt property through the 703 “wild card” exemption. Furthermore, decisions from federal bankruptcy courts within California and the 9th circuit affect California bankruptcy cases.
Chapter 7 Bankruptcy
Chapter 7 is known as the “liquidation” form of bankruptcy. However, contrary to the popular label most Chapter 7 cases do not involve the sale of assets. That’s because the average Chapter 7 is a “no asset” case. A Chapter 7 “no asset” case arises when there are no nonexempt assets for the Trustee to liquidate. If you are worried that you will lose property by filing for chapter 7 chances are that very little, if any, of your property will be subject to liquidation. However, individuals circumstances vary so you should seek the advice of a bankruptcy lawyer before filing.
To qualify for Chapter 7 you will have to pass what is known as the “means test.” The means test was created to (purportedly) prevent debtors from abusing bankruptcy by filing when they don’t really need to. (Coincidentally, the means test was created in a body of law heavily lobbied by the credit industry). To pass the means test you must have income for a 6 month period below the state median for a household of your size.
Chapter 13 Bankruptcy
Chapter 13 is known as the “wage earner” bankruptcy since it requires that you have sufficiently stable income to meet your future Chapter 13 payments. To qualify for Chapter 13 you must also have less than $336,900 of unsecured debt and less than $1,010,650 of secured debt. (Most consumers can easily meet these debt limits). Also, you can only file for Chapter 13 if you can pass the “best interests” test. This test is deceptively simple: your general unsecured creditors must get the present day value of your nonexempt property in your Chapter 13 repayment plan. You satisfy this requirement by paying that present day value in installments under the plan with interest. As you can see, structuring a Chapter 13 plan is best achieved by retaining an attorney. Call Sacramento Law Group LLP to speak with a chapter 13 bankruptcy attorney.