Two Big Obstacles To Chapter 7 Bankruptcy

Most folks I meet want to file a Chapter 7 Bankruptcy.  Many do not know what it means, but they have had friends file a Chapter 7 Bankruptcy and keep everything they own.  Therefore, they want to file bankruptcy the same way.  Filing a Chapter 7 bankruptcy requires navigating through a couple of obstacles. The first is a means test.  Second, is having qualified exemptions.

A Means Test You Say?

Most individual debtors filing for bankruptcy relief are required to complete  a Statement of Current Monthly Income and calculations.  Around the water cooler, we call this requirement “means testing”.

A debtor must enter income and expense information onto the appropriate form and then make calculations using the information entered. Some of the information needed to complete these forms, such as a debtor's current monthly income, comes from the debtor's own personal records. However, other information needed to complete the forms comes from the IRS.

After inputting this information we come up with a family's income.  A family qualifies for a chapter 7 bankruptcy if they make less than the following:  Single person: $48,415; couple: $63,030; three people $67,401; four people: $75,656.

If you make more than this amount, a chapter 13 bankruptcy might be the best fit, which is called the repayment bankruptcy option.

Exemptions You Say?

Chapter 7 is a liquidating bankruptcy.  This means all non exempt property is sold by the trustee and disbursed to your creditors.

The good news is that most assets are protected.  Homes, cars, tools of the trade, guns, household furnitre are protected to a certain degree.  The point is to provide a fresh start.  That means you will likely be able to exempt the Honda Accord, but have to surrender the Tesla.  There are also exemptions for cars, retirement accounts, wedding rings, household goods, etc.

Ken Jorgensen, California Attorneywww.fresnobankruptcylawgroup.com
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