Steps of a Chapter 7 Bankruptcy Case
1. Meet with a Bankruptcy Attorney
Your bankruptcy attorney can help you decide whether bankruptcy is right for you and, if so, under which chapter you should file. Your attorney will evaluate your individual financial situation and answer any questions you may have. Your attorney will also arrange for the mandatory credit counseling you must complete befor you can file for bankruptcy.
2. File a Bankruptcy Petition with the Court
Your attorney will complete all paperwork required for the petition, including obtaining your tax returns and credit reports. Once the petition is filed with the court, an "automatic stay" begins. This means that creditors can no longer contact you and try to collect payments for your debts.
3. Chapter 7 Bankruptcy “Means Test”
Before you can proceed with a Chapter 7 bankruptcy case, you must pass a “means test.” The "means test" is used by the court to decide if a person has the “means," or ability, to repay some part of their debt. If the answer is yes, the court will not allow the person to file Chapter 7. Because of this, people who earn a high income may not pass the "means test."
As part of the means test, the court will compare your income to the median income for a household of your size in California. If you earn less than the median income, you are permitted to file Chapter 7. If you earn more than the median income, the means test is more complicated. The court will analyze your income and legally-allowable expenses (such as rent and food) to decide how much of your income is available to repay your debt. The type of expense allowed and the maximum permitted for each will depend not on what you actually spend, but on schedules published by the Internal Revenue Service.
After legally allowable expenses are subtracted, if you are left with little or no income available to repay some part of your debt, you will pass the "means test" and be able to continue your Chapter 7 case. If your remaining income is more than the maximum allowed, you will not pass the means test and your only bankruptcy option will be to file for Chapter 13 bankruptcy. Chapter 13 requires you to make monthly payments to your creditors over a 5-year period in the amounts set under a court-approved plan.
4. Bankruptcy Court Appoints a Trustee
The Bankruptcy Court will appoint a trustee who will take over your finances. The trustee will review your bankruptcy petition. The court will set a date for an in-court meeting of creditors, which is called the “341 Meeting” (named after the bankruptcy law section that describes the meeting).
5. In-Court Meeting with Creditors
You and your attorney will attend the first meeting of creditors about 30 to 90 days after your petition is filed. The trustee may ask you questions about your property, income, and debt under oath. Usually, this meeting is very short. Creditors may attend the meeting, but sometimes no creditors will show up. After this meeting, you probably will not have to attend court again. Your attorney will make all other court appearances for you.
6. Non-Exempt Property is Sold, and Secured Property is Handled
You will be allowed to keep your property, and some types of income, that is "exempt" up to the legally-allowed maximum for each item. See the list on this website at What Property You Can Keep in a Chapter 7 Bankruptcy for more information about exempt property. If you have any property that is not "exempt", the trustee will sell the property and use the money to repay unsecured creditors. The money is distributed according to the priority of the creditors’ claims. You may be required to give up property if it was used as collateral to secure a debt. You may be able to keep property used to secure debts if you choose to reaffirm the debt, meaning it will not be eliminated in bankruptcy. Your attorney will advise you, item-by-item, on whether it would be better to turn over that item or to reaffirm the debt on that item.
7. Financial Management Course
You will be have to attend a financial management course before your debts are eliminated in bankruptcy.
8. Discharge
Within 3-6 months, the court will hold a hearing where your final discharge is granted and your debt is wiped out.
9. Case Closed
Your case will be complete within 3 to 6 months. After your discharge, you will no longer be liable to your creditors for most of your debt. You may keep all of the money you earn from working after your bankruptcy.
Call San Diego Law Firm for Bankruptcy Help
Bankruptcy in California is a complicated area of law involving many deadlines and regulations that must be followed exactly. Our attorneys are knowledgeable in bankruptcy law and know how to protect your property. Call our office to schedule a consultation with an attorney and take the first step in getting your fresh financial start.
- We’ll provide personalized service tailored to fit your needs.
- We’ll evaluate your individual situation and develop a strategy to deal with it in the most effective way possible.
- We’ll provide honest advice and work to protect your best interests.
Chapter 7 bankruptcy can provide you with a new life in which you aren’t constantly worried about making ends meet. By eliminating your dischargeable debts, you can get back on the road to financial wellbeing. Contact our office to find out how we can put your mind at ease and help you become debt free.
- We’ll assess your financial situation and develop a plan of action
- We’ll prepare all of your paperwork
- We’ll arrange your court-required credit counseling
- We’ll represent you at all court hearings
How to Contact San Diego Law Firm
We handle matters throughout California, and new clients are always welcome. For more information or to make an appointment, please contact us either by:
Telephone: (619) 794-0243
E-mail: contactus@SanDiegoLawFirm.com
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