Chapter 7 Bankruptcy
Our Santa Clara County business law attorneys offer more than 40 years of combined experience in both estate planning and business law. We are proud to announce another area of law in which we can offer advice- Chapter 7 Bankruptcy. While we are not experts in this field, we can help you navigate the difficulties of bankruptcy confidently.
What is Bankruptcy?
Bankruptcy is a legal process in which an individual, married couple, or business can no longer pay off their creditors and seeks relief from their debts.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, or liquidation bankruptcy, involves the discharge of all unsecured debts against your valuable assets. Instead of a repayment plan, the debtor's assets as sold off, and the lump sum is used to pay off creditors.
A list of all debts is required and the debtor must decide if hey would like to discharge the said debt. A discharge is a court order that releases a debtor from all of their dischargeable debts; it also prevents the creditor from attempting to collect the debt. Unsecured debt, like medical debt or credit card debt, will be discharged. The obligation to pay a secured debt, like a mortgage or car payments, is removed and any penalties for nonpayment are discharged.
In Chapter 7, the bankruptcy trustee will look for any valuable property or assets you have and use those to repay your creditors. Most individuals who qualify under Chapter 7 do not have significant assets to liquidate and thus do not have to surrender any valuable property. Those who file under Chapter 7 are allowed to protect some of their valuable assets up to a certain amount.
Do I Qualify?
Chapter 7 bankruptcy has an income threshold. The income threshold is based on the median family income in your state of residence. This figure changes from year to year. Suffice it to say, if you make less than the state median, you can file for Chapter 7 bankruptcy.
Those who make more than the state median are required to pass a means test. The means test determines whether or not an individual with more income than the state median can file under Chapter 7. If the court determines that they have enough disposable income, they will be prevented from filing a Chapter 7 bankruptcy.
The most common type of people who file for Chapter 7 bankruptcy is those who have a large amount of credit card debt or medical expenses and they do not have the means to pay off said debt.