North Hollywood Chapter 7 Bankruptcy Attorney

Qualifying for Chapter 7 Under the “Means Test”

Individuals or business entities who pass the “means test” may file Chapter 7. The means test determines whether the petitioner’s income is low enough for them to file by examining their disposable income, calculated from a person’s current monthly income (average income over the last 6 months prior to filing) with monthly expenses deducted. If their disposable income is less than or equal to California’s median income for a family of the petitioner’s size, they may file Chapter 7. In certain situations, if they have a higher income, it is possible to qualify for Chapter 7 if they have many expenses to pay off, such as high mortgages, car loans, and taxes, and do not have enough income left over to complete a Chapter 13 repayment plan.

Filing Under Chapter 7

A Chapter 7 case begins when the debtor files a petition with the bankruptcy court. The petition and other forms filed with the court should include: 

• schedules of assets and liabilities;
• a schedule of current income and expenditures;
• property they claim is exempt under bankruptcy law (motor vehicles, pensions, reasonably necessary clothing and furniture);
• property they owned and money spent during the previous 2 years;
• property sold or given away during the previous 2 years.

Individual debtors with primarily consumer debts should also file a certificate of credit counseling, evidence of payment from employers, if any, received 60 days before filing, a statement of monthly net income, and a record of any interest the debtor has in federal or state qualified education accounts.

Upon filing Chapter 7, an “automatic stay” will take effect that stops most creditors from trying to collect from you through wage garnishments.

Note that Chapter 7 involves the liquidation of nonexempt property to pay off the petitioner’s debts. By filing Chapter 7, they place their property and debts into the hands of the bankruptcy court, and a court-appointed trustee will handle the liquidation process and use the proceeds to pay back creditors as much as possible. The bankruptcy trustee will also run the 341 creditors meeting, where the petitioner should appear for a brief questioning. This process may seem daunting, but our experienced North Hollywood Chapter 7 lawyer can guide you assuredly through your filings, meetings, and other communications.

At the conclusion of the bankruptcy process, all your debts will be discharged (wiped out), except for:

• debts that automatically survive bankruptcy (child support, most tax debts, student loans) unless the court rules otherwise; and
• debts that the court has declared non-dischargeable because the creditor objected (debts incurred by fraud or malicious acts).