Chapter 7 Bankruptcy in Los Angeles: A Detailed Analysis
Chapter 7 bankruptcy is a legal process that has the sole purpose of helping consumers or businesses settle their debts so they can have a fresh financial start. In the city of Los Angeles, California, Chapter 7 bankruptcy has particular implications.
You will find detailed information about this legal tool, including its process, requirements, consequences, what it means to file for bankruptcy Chapter 7, and much more.
What is Chapter 7 Bankruptcy Law?
This chapter is the most common bankruptcy provision with consumers. It is the complete liquidation of the debtor’s assets to pay the creditors the outstanding debts so that the consumer can start a new life financially. It is essential to keep in mind that any person who resides in the United States or who has a business in the country can declare Chapter 7 bankruptcy.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is a legal process in which a debtor seeks to settle their debts by selling their non-exempt assets. Through it, it is possible to find a solution to the problems since it offers the possibility of eliminating the following debts: medical expense insurance, loans for the purchase of automobiles, including car repossession, credit card debts, tax debts, utility bills, and even personal loans.
However, not all debts can be eliminated after declaring Chapter 7 bankruptcy; alimony, child support expenses, student loans, tax, and government debts are not eligible for this tool, which is why they are known as non-dischargeable debts.
Requirements for Chapter 7 Bankruptcy in Los Angeles
Debtors must meet certain requirements to qualify for a Chapter 7 bankruptcy in Los Angeles. Some of these Chapter 7 bankruptcy requirements include:
- Having a residency in Los Angeles.
- Having met the income limits established by the income test, which evaluates the debtor’s ability to pay their debts.
It is important to note that the requirements may vary depending on each debtor’s financial situation and individual circumstances. Consulting with bankruptcy attorneys is essential to understand the specific requirements in Los Angeles.
Chapter 7 Bankruptcy Process
The process of how to file for Chapter 7 bankruptcy in Los Angeles follows a series of steps that are described below:
- Filing a bankruptcy petition with the appropriate bankruptcy court: Initially, you must fill out a series of forms to establish your income, expenses, capital, and the amount of debts.
- Evaluation of assets and debts: after completing the forms, they will be sent to the Bankruptcy Court for review. If you are employed, the agency will request the presentation of tax returns and proof of payment. A bankruptcy supervisor will review all documents, and you will also be called for a 341 Meeting of Creditors, in which you will be asked questions about your financial situation. Remember that you should not worry about this procedure because your bankruptcy lawyer will always provide you with the necessary assistance. In the following months, if everything goes well, the court will contact you via email to inform you that your Chapter 7 bankruptcy petition has been granted. The key to achieving success in this procedure is to answer all the forms as truthfully as possible.
- Once the petition is granted, the court appoints a trustee who will manage the process and liquidate the non-exempt assets to make the respective payment to the creditors.
Benefits of filing for Chapter 7 bankruptcy
Immediate and imminent relief: once the Chapter 7 bankruptcy measure is obtained, you will feel immediate relief and automatic cancellation of all collection notices (phone calls, letters, garnishments, and other pressure measures).
Improvement of your relationship with the banking sector: by filing for Chapter 7 bankruptcy, the bank can grant you more credit cards, which will help you increase your credit score and credibility in the banking field.
Possibility of keeping some of your assets: In Chapter 7 bankruptcy cases in the United States, debtors can keep several belongings because the law protects certain objects that are known as exempt assets, including cars, monthly social security checks, and televisions, among others.
Who can file for Chapter 7 bankruptcy?
Most consumers whose income is less than the state’s median income can file a petition with the help of their attorney Chapter 7 to file for this bankruptcy. To request this measure, it is necessary to take the income test, an exam in which the average monthly income obtained in the last six months must be recorded. In addition, the home’s size will also be important.
For example, a person with a salary below the minimum wage or unemployed may qualify for Chapter 7 bankruptcy. If they do not pass the aforementioned test, they may apply for Chapter 13 bankruptcy.
What is the difference between Chapter 7 and Chapter 13 bankruptcy?
These are different types of bankruptcy. Chapter 7 bankruptcy consists of liquidating assets to pay debts, while Chapter 13 bankruptcy is based on a payment plan with your respective creditors to cancel your debts. Chapter 13 is a type of bankruptcy that only applies to regular people, while regular people and businesses can request Chapter 7 bankruptcy.
How do you know if you should file Chapter 7 bankruptcy right now?
There are various signs that indicate if you should file for Chapter 7 bankruptcy; some of them are the following:
- Having a debt greater than $10,000.
- Your credit score is less than 600.
- Not being able to meet your debt payments in the next five years.
- Paying your debts prevents you from covering basic needs such as rent, food, clothing, and services.
What assets do you lose in Chapter 7?
In a Chapter 7 bankruptcy, certain assets may be sold by a court-appointed trustee to pay off creditors. However, many assets are typically protected through exemptions. Assets that might be sold include non-exempt property such as second homes, luxury items, collections of value, cash, bank accounts exceeding exemption limits, and investments like stocks and bonds.
On the other hand, many Chapter 7 cases allow debtors to keep exempt property. This often includes a primary residence up to a certain value (thanks to the homestead exemption), necessary clothing and household goods, a motor vehicle up to a specific amount, retirement accounts like 401(k)s and IRAs, tools needed for your job, and public benefits like Social Security. Some states offer a wildcard exemption that can be applied to any property within a specific limit.
If you are facing financial difficulties and considering this option to get ahead, do not hesitate to hire a Chapter 7 attorney. You can turn to the S&B Legal firm; we have extensive experience in Chapter 7 bankruptcy issues. Are you looking for the “best Chapter 7 lawyers near me”? Contact us today to provide you with the advice you need!
