If you are overwhelmed by debt and without any feasible resolution for the foreseeable future, you may be considering bankruptcy. Although bankruptcy should be the last resort, after all other options have failed, there is no shame in obtaining this form of debt relief. Life can be difficult, and a person’s economic situation can change almost overnight. That’s been particularly true over the past year.
If a failed business, extensive medical bills, pandemic-related issues, job loss, or poorly-managed finances has resulted in financial distress, it may be in your best interest to speak with an experienced chapter 7 bankruptcy lawyer.
At The Sands Law Group APLC, our team of compassionate and highly-skilled Los Angeles chapter 7 bankruptcy lawyers is here to help you navigate this confusing, stressful process in the quickest, most cost-effective manner possible. We have helped countless individuals and families get out of debt and rebuild their financial futures after difficult times. At The Sands Law Group APLC, we offer exceptional legal services, affordable fees, and a multilingual staff who can communicate with clients in five different languages: Spanish, Hebrew, Arabic, French, and English. Contact us today for a confidential consultation about your case.
What is Chapter 7 Bankruptcy in California?
Chapter 7 is the most commonly filed type of bankruptcy for individual debtors. As a form of liquidation bankruptcy, chapter 7 requires the court to sell your assets and use the resulting funds to pay your creditors. There are some exceptions, however, which are referred to as bankruptcy exemptions. You can retain ownership of any asset that is exempt under federal and/or state law. Once your non-exempt assets have been liquidated and debts paid with those funds, most of your remaining debts will be wiped out, leaving you with a clean slate and the ability to start fresh and rebuild your financial future.
Not everyone qualifies for chapter 7 bankruptcy, however. To determine eligibility, you must first pass something called a “means test.” Essentially, if you make too much money, you can’t file chapter 7. This is to prevent wealthy individuals from racking up debt and then wiping it out every few years. Chapter 7 is reserved for individuals of modest means who find themselves overwhelmed by debt with no practical way out.
Furthermore, to prevent serial filings, chapter 7 bankruptcy can only be discharged once every eight years. There are other forms of bankruptcy for individuals who make too much to qualify for chapter 7, or who have received a previous chapter 7 discharge less than eight years ago.
Whether you should file chapter 7 or another type of bankruptcy also depends on your reason for filing bankruptcy and the desired outcome. For example, if you are a business owner who wishes to remain in business and avoid liquidating your assets, you may prefer to file chapter 11 or chapter 13 bankruptcy, both of which function as a reorganization of debts, rather than a way to completely wipe them out.
Will I Lose My Car, House, or Personal Property?
As chapter 7 bankruptcy is a form of liquidation, most assets will be liquidated (sold) to pay unsecured debts, such as personal loans and credit card balances. Certain assets may be exempt, however.
In some states, you can choose between state and federal exemptions, but not in California. In California, you must use state exemptions, but there are two sets of state exemptions. Working with a Los Angeles Chapter 7 Bankruptcy lawyer is highly recommended to assist in choosing the set that best aligns with your needs.
Generally speaking, you can exempt property that you require to maintain your job and household, such as furniture, clothing, and some equity in your vehicle.
In California other exemptions may include:
- Deposit accounts, when a family is living paycheck to paycheck;
- FEMA benefits;
- Some equity in your primary residence—up to $75,000 for an individual, and up to $175,000 if the individual is 65 or older, or disabled;
- Up to $3,325 in vehicle equity;
- Household items;
- Tax-exempt retirement accounts;
- IRAs and Roth IRAs, up to a certain amount; and
- Cemetery plots.
The list of exemptions above is far from exhaustive, but you can view more details online from the California government. One of our experienced Los Angeles chapter 7 bankruptcy lawyers can assess your situation and help you determine how to maximize your exemptions.
To determine whether you are allowed to keep your home or vehicle, you must first determine if its equity exceeds the allowed exemption. If it does, that property will need to be liquidated to pay off creditors. However, you will be entitled to the cash value of the exemption, once the property has been liquidated. This is one situation in which you may wish for less equity in your home.
Frequently Asked Questions
What Happens To Your Bank Account When You File Chapter 7?
Although bank accounts are considered to be an asset under the Bankruptcy Code, what happens to the funds in those bank accounts depends largely on the amount in each account. For the purpose of a chapter 7 filing, you will need to list each bank account and its value separately. In both California and Hawaii, bank account balances are exempted up to a certain limit. If you are someone who is living paycheck to paycheck, chances are good that your bank account balance will be exempt from chapter 7 liquidation.
Can You Be Denied a Chapter 7?
Yes. A debtor can be denied a chapter 7 bankruptcy if they:
- Do not pass the means test;
- Fail to attend required credit counseling;
- Attempt to commit bankruptcy fraud;
- Received a previous chapter 7 discharge less than eight years ago; or
- Received a previous chapter 13 discharge less than six years ago.
How Often Can You File Chapter 7?
You can file for bankruptcy as often as you like, but if you’ve previously received a chapter 7 bankruptcy discharge, you can only receive a second or subsequent chapter 7 discharge after the passing of a certain number of years. A previous chapter 7 must have been discharged more than eight years ago, and a previous chapter 13 must have been discharged more than six years ago.
Contact The LA Chapter 7 Bankruptcy Attorneys at Sands Law Group, APLC Today
If you have questions about filing Chapter 7 bankruptcy, the legal team at The Sands Law Group APLC can help. Our highly-skilled Los Angeles Chapter 7 bankruptcy lawyers have helped countless families protect their rights and get out of debt. We will thoroughly review the details of your case to determine the best strategy for moving forward, and remain by your side from start to finish. Contact us office today for a confidential consultation about your case.