Helping Californians Get Immediate Debt Relief
If you are unable to pay your bills and have been threatened by debt collectors with lawsuits and wage garnishments, you owe it to yourself to explore whether Chapter 7 bankruptcy is the right solution for you.
At the Law Office of Jeff D. Hoffman in Oakland, we help people get relief from debts they can no longer afford to pay. California attorney Jeff D. Hoffman will explain how Chapter 7 works and will represent you if you choose to file. Contact us to schedule a free consultation with a knowledgeable bankruptcy lawyer.
Determining Your Chapter 7 Benefits and Eligibility
Chapter 7 bankruptcy allows people to discharge (eliminate) certain types of unsecured debt — debt that is not backed by a house, car or other specific asset. The most common types of debt people discharge in Chapter 7 are credit card debt and medical debt.
Some people are worried about whether they are eligible for Chapter 7 bankruptcy, especially since the laws were changed in 2005. As a practical matter, most people who need the protections of Chapter 7 are eligible for them.
First, you may not file a Chapter 7 bankruptcy within eight years of filing a previous Chapter 7 where your debts were discharged, or within six years of filing a previous Chapter 13 where your debts were discharged unless you paid at least 70% of what you owed to your unsecured creditors.
Second, if your household income is below the median for California households of your size, you qualify for Chapter 7 so long as you are within the time limits described above. If your household income is above the California median, a "means test" that determines your disposable income (based on your income and your reasonable monthly expenses) will determine whether you are eligible to file a Chapter 7 bankruptcy.
Finally, if you own a business with employees and wish to continue operating it, Chapter 7 is probably not the right solution for you. In this case, Chapter 13 bankruptcy would allow you to continue operating your business while discharging all or most of your credit card, doctor, medical, and personal loan debts.
If you do not qualify for Chapter 7, if you wish to continue operating your business, or if you wish to retain your home and/or auto but you are having trouble paying for them, Chapter 13 bankruptcy may be a good alternative option for you.
Protecting Your Property From Liquidation
You may have heard that the Chapter 7 bankruptcy trustee can liquidate (sell off) your property to repay your unsecured creditors. However, many types of property are exempt from liquidation in California.
If you are a family (more than one person) and have less than $100,000 of equity in your home, are a single individual and have less than $75,000 equity, or are either disabled, a senior (65 or older), or very low income, and have less than $175,000 equity, your home is exempt and will not be taken to pay your debts. If you have more than the allowed equity for your category, choose to file Chapter 7, and the trustee takes your house to pay your unsecured creditors, the trustee must pay you the applicable exemption amount in full ($75,000, $100,000, or $175,000).
These are the legally allowed exemptions. However, in reality you have to have significantly more equity than your exemption in order for a trustee to take your house, because it will cost the trustee $10-50,000 to list and sell it, and (s)he must sill pay you the full exemption to which you are entitled.
There are also specific exemptions for vehicles, jewelry and other personal possessions, as well as a substantial "wildcard" exemption — for those who do not have any equity in a home — that can be used to exempt any property. Again, if the trustee takes any property in which you have equity above the allowed exempt amount, (s)he must pay you the full exemption to which you are entitled.
You can also protect your property and soften the blow of paying the trustee the amount of the equity that is above the exemption limit. By filing a Chapter 13 bankruptcy, bankruptcy law gives you three to five years to pay the trustee the amount of equity that is not exempt if you do not wish to surrender that property.
Jeff will go over your assets with you carefully to determine whether you would have to give anything up in Chapter 7. If so, he will help you weigh your options. Contact us today to schedule your free consultation.
