What is Chapter 7?
Chapter 7 bankruptcy is the most widely used consumer protection law for resolution of heavy debt. Commonly known as "liquidation" or "straight bankruptcy," it certainly may be an applicable debt remedy for these challenging economic times. A Chapter 7 may stop repossession,
wage garnishment and harassment or
creditor abuse. The following are some of the main advantages that a Chapter 7
bankruptcy may provide a debtor in the San Fernando Valley:
- Once you file, all debt collection activity against you ceases, including any pending lawsuits.
- In a just a few month, 4 or less, you can have all of your unsecured debt cancelled.
- You potentially could lose no property, while still having all eligible debts discharged.
- You will be able to make a fresh start, free of all debt, once your case is completed.
Find out how an experienced legal professional can help you determine whether a Chapter 7 bankruptcy is right for you. Contact the firm for a free consultation.
How do I qualify?
To qualify for a Chapter 7, you must make less than the median income of those people living in your area. For instance, in 2009, the median household income for a San Fernando Valley household was just under $50,000. You still may be eligible for Chapter 7 protection even if your income is above the median. To make this determination, a "means test" is applied to your income. When it is found that your level of disposable income is low due to high expenses, such as a large mortgage payment, you will likely be eligible for Chapter 7 bankruptcy.
The Means Test
The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly cannot pay their debts. It is accomplished by deducting specific monthly expenses from your current monthly to arrive at your "disposable income." The lower your disposable income, the more likely you will qualify for Chapter 7, and the higher your disposable income the less likely you will qualify for this type of debt relief remedy. Most consumers experiencing extreme debt who do not qualify for a Chapter 7 liquidation, nevertheless, will qualify for a Chapter 13. Filing either type acts, in most cases, as foreclosure prevention.