Qualifying for Chapter 7 relief is the first point of analysis in determining your debt relief options. Filing under this Chapter allows both individuals and businesses to obtain debt relief fast, assuming that you can qualify to file based on your income and other factors. Other Chapters utilize debt restructuring whereby debtors pay off their debts, but in a Chapter 7 case, a debtor’s non-exempt assets, if any, are sold with the sale proceeds used to discharge the debts, meaning the legal process is completed much sooner, typically in 90 days. Exempt assets are retained. Exempt assets are determined according to your available exemptions, which your lawyer can discuss with you.
Debtors interested in Chapter 7 must meet certain criteria. Debtors can be individuals or business entities, such as partnerships or corporations. If you are considering filing for Chapter 7 in San Diego, consulting an expert San Diego bankruptcy lawyer can save you time and money. It is also necessary in order to ensure that you can keep all of your assets and are not jeopardizing having your assets sold and liquidated to pay your creditors.
If you are filing as an individual or with your spouse, you must meet certain income requirements in order to qualify for bankruptcy under Chapter 7. Under federal law, a debtor’s income should be under the median income of the state he lives in; otherwise, a means test will be done. Your average monthly income cannot exceed a threshold limit. Your total income, minus your total expenses allowable under applicable legal standards, should not exceed approximately $100 per month. Otherwise, your case may be presumed to be abusive under the U.S. Bankruptcy Code and you will be forced to file a Chapter 13 repayment proceeding in which you must make monthly payments to a trustee for 3-5 years.
In 2005, the bankruptcy laws were amended to provide that an individual may only obtain Chapter 7 relief once every eight years. More specifically, if you have previously filed a Chapter 7 case, you must wait another 8 years before you can obtain a discharge in another Chapter 7 case. Also, if you had filed a prior case that was dismissed with a bar against refiling, you must wait until the bar against refiling expires. A bar against refiling can occur if you did not appear in court, failed to follow court orders, or you voluntarily dismissed your bankruptcy petition after creditors sought relief from the court to recover property.
An individual filing for bankruptcy relief must also provide proof that he sought credit counseling for help managing his debts in the six months prior to filing. This requirement may be waived in certain instances, such as a credit counseling agency not being conveniently available.
Certain property, such as homes and cars, may be exempt from being liquidated to settle debts. The federal and state governments may have different criteria on property exemption so filers should first consult a bankruptcy lawyer for assistance in deciding which exemption to use.