Understanding Chapter 7 Bankruptcy

Before the recent bankruptcy laws were enacted, individuals had a choice whether to file Chapter 7 or Chapter 13 bankruptcy without regard to income, assets, or other considerations. Under the new laws, only certain individuals can qualify for a Chapter 7 discharge, and if your income is above the limits, you may not be able to qualify for a discharge of debt. Specifically, if you make more than the median income for the state of California, and are able to pay at least 25% of what is known as "non-priority, unsecured debt" then you will not be able to qualify for a Chapter 7 bankruptcy, and will instead have to file for Chapter 13 if you want bankruptcy relief.

It is important to note that non-priority, unsecured debt refers to your ability to pay not only those debts, but any priority debt claims and secured claims as well, as they would have to be repaid first. Additionally, your income is evaluated after necessary expenses such as food and your mortgage payment or rent. Therefore, even if you have a job and are working steadily, you may still qualify for a Chapter 7 bankruptcy. Also, if you recently lost your job and no longer have income, you may be able to get a Chapter 7 even if an assessment of your past income would cause you to be ineligible.

If you have a lot of unsecured debt, such as from personal loans or credit cards, a Chapter 7 bankruptcy may be just what you need in order to get a fresh start. However, if your debts are largely comprised of student loans, past-due taxes, alimony or child support, Chapter 7 will not help you to resolve your debt issues. This is because these types of debt, along with some others, cannot be discharged by a Chapter 7 bankruptcy filing. You can, however, set up a repayment plan through Chapter 13 that will let you catch up on these types of payments while you take reasonable steps to lighten your debt load.

Bankruptcy is a complicated subject and one that should not be navigated alone. If you are considering filing for Chapter 7 bankruptcy but you are not certain if you qualify, or if there are unusual circumstances surrounding your case, we can help. Contact our team of professional, reputable Orange County Bankruptcy Attorneys as soon as possible to discuss your case. We may be able to offer options that you had not considered, and we will address any concerns you may have promptly and professionally. We even offer a free, no obligation case evaluation to help you better understand your position and how bankruptcy can help you reach the financial security you need. So contact us today and let our premier Orange County Bankruptcy Law Firm help you to get peace of mind and a fresh start.