Filing for bankruptcy is not an easy decision. Many people will try to find ways to avoid filing, often moving debt from one credit card to another or borrowing more money to pay for existing obligations. One of the reasons people choose to avoid bankruptcy is they do not understand the process and are intimidated by the thought of standing before a judge. However, bankruptcy is an administrative process and, in nearly every Chapter 7 case, a debtor will not appear before a judge. Below, our Sacramento chapter 7 bankruptcy attorney discusses the steps to file bankruptcy in California.
Making the Decision to File For Chapter 7 in California
While it might go without saying, before filing for Chapter 7 bankruptcy, you must decide whether bankruptcy is necessary. Meeting with our experienced California Chapter 7 bankruptcy attorney is one of the best ways to help determine if filing for bankruptcy will benefit you. We will thoroughly review your financial information, including your secured and unsecured debt, your assets, and your income. Not all debt is dischargeable and certain assets, such as a home, could make filing for Chapter 7 difficult. By sitting down with our attorney, you will better understand the pros and cons associated with Chapter 7. More importantly, you will know if filing for bankruptcy will help you achieve a fresh start.
Preparing Your Chapter 7 Bankruptcy for Filing in California
Next, our California Chapter 7 bankruptcy attorney will prepare your case for filing. A Chapter 7 bankruptcy filing consists of numerous documents that must be prepared and filed with the court. To complete these documents, our office will need many statements and documents from you, including pay stubs, bank statements, tax returns, mortgage statements, and documentation regarding any other loans or debt you have.
The Means Test
If you plan to file for Chapter 7, our attorney will first have to see if you are eligible. The Means Test is the calculation that determines whether you qualify for Chapter 7 in California. After gathering your financial information, the first thing our office will do is take your income and run the numbers through the Means Test calculation. Basically, this test looks at your income for the previous six months while deducting some actual and IRS allowed expenses to determine if your income is below the state’s median family income. If your income falls below the median, you are eligible to file for Chapter 7.
The Bankruptcy Schedules
After you have passed the Means Test, the first document to prepare is the Voluntary Petition. The petition includes your personal information, including your name, address, your attorney, and the type of bankruptcy.
Following the petition are several documents known as “schedules.” Each schedule concerns a specific financial aspect of your case. For example, in Schedule A, a debtor will list their real estate while Schedule B will include all your personal property. The property that can be protected under California law will be included in Schedule C.
Debt in bankruptcy is broken down into three separate categories. Secured debt includes mortgages, car notes, and any debt attached to collateral, including some municipal debts. Unsecured debt includes most of your other liabilities, such as credit card debt, personal loans, medical bills, and a variety of other financial obligations. Finally, there is priority debt, which includes taxes and other specific debts. Everything you owe is listed in detail in Schedules D, E, and F.
The other two important schedules in a Chapter 7 bankruptcy are Schedules I and J. These two documents list your income and monthly expenses. If you have too much money left over at the end of the month, you might be required to file for Chapter 13.
Credit Counseling Course
While our office will prepare the bulk of your filing, you have an essential job. Before filing for bankruptcy in California, every debtor must complete a credit counseling course within 180 days of the filing date. If a certificate of completion is not filed with your case, it will be dismissed.
The Meeting of Creditors in California Chapter 7 Cases
Once you have reviewed and signed the petition and all required schedules, our Sacramento bankruptcy attorney will file your Chapter 7 case. The court will schedule a “meeting of creditors” or “341 hearing” between 21 and 40 days from the date of filing.
You, along with our attorney, will meet with the court-appointed Trustee at the meeting. It is possible, though unlikely, that one or more of your creditors will also attend the hearing. Usually, a creditor will only attend a 341 hearing if they are objecting to discharge.
You will need to bring your social security card and a photo ID to the meeting. While our office would have supplied the Trustee many required documents, the Trustee may request specific items such as a recent pay stub or bank statement.
At the meeting, the Trustee will swear you in and then ask a series of questions. We will have reviewed many of these questions beforehand, but the Trustee is liable to ask specific questions based on your schedules. Some of the inquiries could include why you are filing for bankruptcy, do the schedules reflect accurate information, and questions regarding recent financial transactions. If there are any creditors present, they will also be allowed to ask you their questions. The Trustee will then conclude the hearing or schedule another one if additional documents were requested.
Mortgages and Car Loans in a Chapter 7 Bankruptcy in California
Most people file for Chapter 7 to eliminate the bulk of their financial liabilities, usually all their unsecured debt. However, if you have secured debt, you will have some other decisions to make. For example, if your home was in foreclosure and you decided you were not able to keep it, you would allow the foreclosure to proceed not challenging a mortgage holder’s motion to release your property from the protection of the bankruptcy. However, if you intended to keep your property, you would reaffirm your mortgage. If you have a car loan, you will have to make a similar choice.
Surrendering Property to Trustees Under Chapter 7 in CA
If you have assets that you were not able to protect under California law, the Trustee will take control of the property, sell it, and distribute the proceeds to your creditors. However, in most Chapter 7 cases, a debtor can protect all their property. In those cases where it might be a problem, our California bankruptcy attorney will usually suggest filing for Chapter 13.
Discharging Bankruptcy in California Chapter 7 Bankruptcy Cases
Once your unprotected property is sold and you have made decisions on your secured debt, your remaining unsecured debt and loans will be discharged by the court. Once a debt is discharged, it is permanently eliminated. This means that a creditor is not permitted to try to collect the debt at a later date.
However, it is important to note that not all debt is dischargeable, including some taxes, alimony, and child support. Additionally, except under very rare circumstances, student loans cannot be eliminated. As part of your initial consultation with our experienced California Chapter 7 bankruptcy attorney, we will carefully review the debt so you know what can be discharged.
Call Our California Chapter 7 Bankruptcy Attorney for a Free Consultation
When you are suffering from the strain of substantial debt, it impacts all aspects of your life. In many cases, bankruptcy provides a solution. At The Bankruptcy Group, our attorneys and staff understand the fear bankruptcy inspires. However, if you meet with one of our sympathetic Roseville bankruptcy attorneys, you will have a much better understanding of the process and benefits of Chapter 7. Call us at 1-800-920-5351 to schedule a free consultation.