Chapter 7 is one of the primary forms of bankruptcy for consumers and businesses alike who cannot meet their financial obligations. Bankruptcy attorney Sina Maghsoudi counsels people across Torrance, San Pedro and throughout Los Angeles County who are in financial stress, and assists them through the Chapter 7 bankruptcy process when it is in their best interests.
What Is Chapter 7? Get Rid of the Debt Keep Almost Everything Else.
A Chapter 7 proceeding is known as a liquidation because it involves the gathering together and selling off (liquidation) of the debtor’s non-exempt assets. Fortunately, most consumers have all of their assets exempt because California has generous exemptions. The remaining debts are then discharged by the bankruptcy court, meaning that the debtor is no longer responsible for paying them off.
By discharging most debt, a Chapter 7 is seen as a way to provide debtors with a fresh start. Chapter 7 is usually appropriate for people with large amounts of unsecured debt, such as credit card debt or unpaid medical bills. In order to qualify for a Chapter 7, the debtor must pass a means test to determine whether he or she is truly unable to meet his or her financial obligations. A debtor who is not eligible to file Chapter 7 may still be able to seek relief through a Chapter 13.
Exempt and Non-Exempt Assets
A Chapter 7 liquidation is not always as drastic as it sounds. The law allows you to keep certain assets from being sold. For instance, you can exempt a certain amount of equity in your home. Although this exemption may prevent your home from being sold to pay your debts, Chapter 7 will not be able to permanently stop a foreclosure. If you in danger of losing your home to foreclosure and wish to keep it, you may want to consider filing a Chapter 13 instead.
Other available exemptions include a certain amount of money in your bank account, equity in your car, tools of the trade, household goods and furnishings, and retirement funds such as pensions, IRAs, and 401(k) plans.
Not every debt is dischargeable. Examples of non-dischargeable debts include most student loans, child support payments, and spousal support payments. Debts that are secured by property or other collateral are also not dischargeable. Certain tax debt and civil judgments may or may not be dischargeable, depending upon the type of debt and whether a lien has been levied to secure the debt.
Find Out if Chapter 7 is Right for You
For professional legal advice regarding your eligibility for Chapter 7 and the options available to help you find a fresh start, contact Sina Maghsoudi for a free consultation.