Ask Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA – Is Chapter 7 Bankruptcy the Right Option for You?

Even if you qualify for Chapter 7 Bankruptcy, is it the right option for you?  

Some Qualification Issues:

1.  To qualify for Chapter 7 Bankruptcy, your household income must fall below a threshold given household size and other allowable expenses.  All of this is quantified in the Means Test.

2.  Have you previously filed for bankruptcy.  If you filed a prior Chapter 7 Bankruptcy, you must wait at least 8 years from the previous filed date.  If you filed a prior Chapter 13 Bankruptcy, you must wait at least 6 years from the previous filed date.

Is Chapter 7 Bankruptcy a good idea?

1.  Do you have assets that are unprotected by the California exemptions.  The California exemptions limit the amount of assets you can keep when filing for Chapter 7 Bankruptcy.  This is an attempt to balance two interests:  for debtors to have a fresh start, they need assets and creditors' rights to recover what is owed to them.  Recently, in more cases, I see Chapter 7 Bankruptcy as a terrible option for homeowners as home values increased because the equity in their homes is more than what the California exemption will protect or the California exemption is insufficient to protect all their assets including home, cars, and other properties.  I see a lot of this problem especially in Sacramento, Stockton, Fairfield, Vacaville, Tracy, and nearby California cities.  A lot of my clients are disappointed that they could not file a Chapter 7 Bankruptcy without the risk of losing assets.  In such cases, you might want to consider filing for Chapter 13 Bankruptcy.  Chapter 13 Bankruptcy allows you to keep all of your assets including properties that is not protected under the California exemptions simply by paying a portion of your debt back in the amount that is equal to the value of unexempt assets, assuming that your income is not an issue.  Chapter 13 Bankruptcy plan payment is for a term between 3 to 5 years.  It does NOT mean you must pay 100% of your debt back.  There is a formula to determine the amount of debt you must pay back.

2.  Do you have debts that are dischargeable in a Chapter 7 Bankruptcy?  If your debt will not be discharged in a Chapter 7 Bankruptcy, then filing for Chapter 7 Bankruptcy will not do you any good.  For example, if your only debt consists of recent tax debt due within the last 3 years, then Chapter 7 Bankruptcy will not help you.  You might want to consider filing for Chapter 13 Bankruptcy.  In a Chapter 13 Bankruptcy you can stretch out your tax debt payment up to 5 years and eliminate your tax penalties (not interest).  The Internal Revenue Service, Franchise Tax Board, State Board of Equalization or other tax collectors must accept this monthly plan payment even if it is less than what you are currently paying.  This can benefit you if it turns out to be a lower monthly payment than what you are currently paying.  Moreover, if you are a business owners, this can save your license from suspension by the tax collectors when you are paying the taxes in a Chapter 13 Bankruptcy plan payment.  If you are an employee, this can prevent or stop further wage garnishments and bank levies.

Of course, it is impossible to discuss every aspects of Chapter 7 and Chapter 13 Bankruptcy on a website.  For more information if Chapter 7 or 13 Bankruptcy can help you, call Muoi Chea, experienced Bankruptcy Attorney serving Sacramento, Stockton, Fairfield, CA and surrounding California cities.