Chapter 7 bankruptcy can serve as a powerful tool for getting debt discharged and for paving the way for a healthier financial future. However, it is important to note that this type of bankruptcy might not be the right solution for everyone. While there are many benefits to Chapter 7 bankruptcy, there are also many risks that need to be considered. Due to this fact, it is vital that you seek counsel from a qualified Oakland bankruptcy attorney before you begin the process of filing for Chapter 7 bankruptcy protection.
Chapter 7 bankruptcy is limited to debtors who can show that they truly have an inability to repay their debt. This is demonstrated by their ability to pass the means test, which uses a formula that factors in the debtor's disposable income and debt level. If a debtor does not pass the means test, that individual will only have the option of filing for Chapter 13 bankruptcy, if the individual is eligible for that form of debt relief. Chapter 7 bankruptcy is commonly referred to as "liquidation bankruptcy" because the debtor gets debt discharged (or cleared) in exchange for having his or her non-exempt assets (or unprotected assets) liquidated. In this process, the bankruptcy trustee sells off those non-exempt assets and uses the profit from the sales to pay back creditors. In the majority of Chapter 7 cases, debtors have little or no nonexempt assets that become subject to liquidation. Debtors who complete Chapter 7 bankruptcy are often able to get a great portion (if not all) of their debt discharged.
Here are some of the questions you should get answered before you decide whether or not to file for Chapter 7 bankruptcy:
- Do you pass the means test?
- What are your exempt and non-exempt assets under California bankruptcy law? (Or, which of your assets could potentially be liquidated if you file for bankruptcy?)
- Are you willing to lose your non-exempt property if liquidation of these assets is required?
- Do you have any creditors who would have a strong case for getting your automatic stay lifted (or removed)?
- Even if you qualify for Chapter 7, would Chapter 13 bankruptcy be more beneficial in your particular case?
At our firm, The Bankruptcy Law Firm, we have Oakland bankruptcy attorneys who can help you make an informed decision about how to proceed with your bankruptcy filing. We can further explain how Chapter 7 bankruptcy works, help you take the means test and assist you in properly weighing the pros and cons of this type of bankruptcy. Make sure you get the legal guidance you need. Contact us so we can begin working with you to establish an action plan!