LAW OFFICE OF BRIAN R. MASON, APC
Chapter 7 Bankruptcy
What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is what many call a “complete bankruptcy.” If you are eligible for a Chapter 7 Bankruptcy, then the filing will basically “wipe out” all of your unsecured debt. However, if you have non-exempt assets, then the Trustee assigned to your case will be required to sell all of you non-exempt assets and pay your creditors.
Frequently Asked Questions About Chapter 7
CAN CHAPTER 7 BANKRUPTCY STOP A FORECLOSURE?
The automatic stay in Chapter 7 Bankruptcy immediately stops any collection action as soon as the case is filed. This includes stopping of any pending foreclosure, repossession, collection lawsuit, or wage garnishment.
However, Chapter 7 is only a temporary stopping of the foreclosure. The automatic stay only last as long as the case is open, typcially 90 days. Additionally, the mortgage company could seek relief from that stay before the 90 days is up.
So, Chapter 7 bankruptcy can temporarily stop a foreclosure, but it is only temporarily. To permenantly stop the foreclosure the homeowner would have to do something else to catch up the mortgage payments, including the filing of a Chapter 13 Bankruptcy.
WHAT ASSETS ARE EXEMPT?
The California Code of Civil Procedure §703 & §704 and the Federal Exemptions available allow many individual debtors to protect their assets. The majority of cases do not involve any
liquiditation, as most people's assets are protecterd.
For example, 401(k)'s are normally 100% protected. Clothing and household goods are 100% protected. Additionally, in California, there is a "wildcard" exemption available for approximately $23,000.00 that can protect any asset chosen by the Debtor.
It is important to note that exemptions are only available to individual debtors. Therefore a corporation filing for Chapter 7 is not entitled to any exemptions and all assets may be
liquidated.
WHO IS ELIGIBLE FOR CHAPTER 7?
To be eligible for a Chapter 7 Bankruptcy, your household income must be below your State’s median income level for your household size. If your household income is above the median income
level, then there are other ways to become eligible for a Chapter 7. However, if after all tests, your household income is simply too high, then you will have to file a Chapter 13 and pay back some of the creditors.
The only way to really determine eligibility for Chapter 7 Bankruptcy is to sit down with an experienced bankruptcy attorney and review your income and expenses using your previous 6 month average income, as well as your current income figures.
CAN I DISCHARGE MEDICAL BILLS IN CHAPTER 7?
Yes, medical bills are unsecured debts that can be discharged in a Chapter 7 Bankrutpcy.
CAN I DISCHARGE STUDENT LOANS IN CHAPTER 7?
The answer to this is maybe, but most likely no. Technically, student loans can be discharged in Chapter 7 bankruptcy if the debtor can show extreme hardship. However, the burden of proving extreme hardship is so high that most debtors will not be able to make that showing. If you cannot make the showing, then student loans are non-dischargeable.
CAN I DISCHARGE CREDIT CARDS AND PAYDAY LOANS IN CHAPTER 7?
Yes, credit cards and payday loans are unsecured debts that can be discharged in a Chapter 7 Bankrutpcy. In fact, these are probably the most common reason most poeople are forced to file
for Chapter 7.
Examples of Chapter 7 Bankruptcy
INDIVIDUAL OR FAMILY
Husband and wife have a combined household income of $60,000. They have two children. They have one house that has no equity, two cars with no equity, and $90,000 credit card debt incurred over the last five years. They have not used their credit cards in over 8 months. This couple should be eligible for a Chapter 7 Bankruptcy, which would wipe out the $90,000 debt and allow them to keep their house and cars.
BUSINESS OR CORPORATION
Corporation "A" is winding down and closing its doors. When Corporation files for Chapter 7 Bankruptcy, all of the corporate assets, including but not limited to furniture, bank accounts, storage units, and accounts receivables become part of the bankruptcy estate. The Chapter 7 Trustee will liquidate any assets to pay creditors. The remaining debts owed to creditors after the liquidation will be discharged.
Recent Case Results in Bankruptcy
Click here for our recent case results in Bankruptcy law.
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