Why Chapter 7 Bankruptcy?
Filing for bankruptcy gives a fresh start to financially burdened individuals. In a Chapter 7 personal bankruptcy, all credit card debts and “unsecured” debts are eliminated and it gives you fresh financial start at an improved life.
It’s very possible, and highly recommended that after bankruptcy, you can recover good credit in generally two to five years. 12 years to restore good credit is a myth. Credit card companies will usually offer you new credit cards right after the bankruptcy is over. Be careful, as these can be the same entities and put you in bankruptcy. Qualifying for a mortgage will generally take three years after bankruptcy.
The most often asked question is how does one qualify for Chapter 7 bankruptcy? Really, one need’s three things: (1) moderate to low income, (2) significant amount of debt and (3) no substantial property.
1) Moderate to Low Income
In order to qualify for Chapter 7 personal bankruptcy, moderate to low income is required. Your income level is determined by your household’s expenses and circumstances. This includes factors such as your cost of living relative to your area, where you actually live, and what deductions are taken from your paychecks.
Every case is unique, and needs to be addresssed as a case-by-case basis. Below are a few examples where Chapter 7 bankruptcy laws can help individuals:
- A single parent cares for one child however has no child support, living in downtown Pittsburg, may be earning $50,000 a year and qualify for Chapter 7 bankruptcy.
- A married couple living in Concord with two small children where one spouse earns $65,000 a year and the other spouse earns $42,000 a year could potentially qualify for Chapter 7 bankruptcy with a total household income of $107,000.
- A single individual living in Lafayette (with no dependents) can earn $45,000 a year and qualify for Chapter 7 bankruptcy.
Income levels required to qualify for a Chapter 7 bankruptcy filing are based on the Census Bureau’s median income figures. However, these figures are not “set in stone”, guidelines and may be able to qualify for Chapter 7 bankruptcy despite if you’re earning more income than the median income. It really all depends on your particular situation. Those with income too high to qualify for Chapter 7 bankruptcy, may seek filing for a Chapter 13 bankruptcy.
2) Significant Debt
Individuals are able to file Chapter 7 bankruptcy to waive debt to $4,000 on the low side, and and as high as $100,000 or more on the high side. In most Chapter 7 cases, we see debt totals generally settling between $20,000 and $60,000. The total amount of debt that may be considered “substantial” varies widely from one individual to another. For example, a $5,000 credit card debt to a single mother with three children, no child support, earning $35,000 a year can be just as overwhelming as a $30,000 credit card debt for an man or woman earning $100,000 a year.
3) No Substantial Property
Contrary to myths, filing Chapter 7 bankruptcy doesn’t end up in you losing all of your property or assests. The California and United States bankruptcy law is designed to protect your cars, homes, bank accounts among other assets up to a maximum amount. In the vast majority of bankruptcy cases, consumers are able to keep their cars, homes, bank accounts and other personal items. The amount of protection varies for each state. If your assets are above the value allocated, the Bankruptcy Court could potentially sell them to pay creditors.
Depending which state you live in, you may have the choice to choose between State exemptions and Federal exemptions. These laws differ in that they protect different assets in different ways. The safest way to ensure that all of your assets are protected is to consult with our lawyers for bankruptcy evaluation.
If you are interested in learning more from an attorney in bankruptcy practice, call us today at (925) 297-5606 for a free phone consultation.