Chapter 7 bankruptcy allows the debtor to discharge the vast majority of unsecured debt. Unsecured debt is not backed by collateral such as a house or a car. Credit cards, medical bills, utility bills, certain taxes (more than three years old), and personal loans are examples of unsecured debt that can be discharged in Chapter 7.
In Chapter 7 bankruptcy, not all debts are dischargeable. Child support, spousal support or alimony, court-ordered penalties, recent taxes, student loans, and victim restitution cannot be discharged under Chapter 7.
In order to petition for Chapter 7 bankruptcy, an individual must first pass the """"means test for bankruptcy."""" This test compares the median income for your household size to the state's median income. If your income is less than the state's median income, you are automatically eligible for Chapter 7 and can proceed with the filing.
If your income exceeds the state's median income, your bankruptcy attorney will calculate certain allowable deductions. If you still have too much income, you will be directed to file for Chapter 13 bankruptcy (debt reorganization).
Once you have been given the go-ahead to file for Chapter 7, your attorney will file a petition with the local bankruptcy court. You are required to submit a schedule of assets and liabilities, a schedule of current income and expenses, a statement of financial affairs, and a schedule of any executory contracts or expired leases. In addition, you will be required to provide a copy of your most recent tax returns to the trustee.
You will be required to submit a certificate of credit counseling to the court; however, this course is relatively inexpensive and can be completed in person or online in a few hours. The California courts will assess a $245 filing fee, a $39 administrative fee for miscellaneous services, and a $15 trustee surcharge. The majority of filers pay these fees at the time of filing, but if you cannot pay them, the court may work out a payment plan with you.
Once you file for Chapter 7 bankruptcy, the ""automatic stay"" will halt the majority of collection activities against you and your property. For the duration of the stay, or until your bankruptcy is discharged, creditors will not be permitted to continue with litigation, wage garnishments, or collection calls. The bankruptcy registrar will notify all of the creditors that you have provided of the bankruptcy filing. A fiduciary appointed by the court will assist you in liquidating any non-exempt assets. In the majority of cases, the debtor has no non-exempt assets, so they get to retain everything they own. Exempt property in California includes a portion of your primary residence's equity, your vehicles up to a certain value, jewelry, pensions, clothing, furniture, work-related equipment, social security or unemployment income, and money from a personal injury settlement.
You will be required to attend one meeting, known as the creditors' meeting. Typically, this meeting is conducted one month after the filing. The creditors will be permitted to ask you any queries under oath. The meeting is typically very brief and serves as a forum for the trustee to affirm that all the information in the papers is correct.
If there are no objections to the bankruptcy, the court will mail you a notice of discharge stating that your debts have been discharged. You can then rid yourself of the majority of your unsecured debt and start fresh. From this point forward, you should prioritize developing and adhering to a sensible budget, as well as rebuilding your credit after bankruptcy.""
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