CHAPTER 7
Liquidation of Assets
Chapter 7 bankruptcies also known as ‘straight’ or ‘liquidation’ bankruptcy are the most common bankruptcies filed and is the most likely the type you have heard before.
Under a Chapter 7 filing, the person who owns the debt can sell or ‘liquidate’ their assets in order to pay off their creditors.
The Bankruptcy Court will appoint a “Trustee” who will oversee the proceedings to safeguard the creditors’ rights are protected, by ensuring the good-faith disclosure of assets owned by the debtor, and sale thereof.
With certain exceptions, if there is any amount owed after the sale or liquidation of assets, that remaining debt is discharged under Chapter 7.
To qualify for a Chapter 7, your income must be less than the median income in your states for your family size. See the median income test list below on this page.
If you don’t qualify under this rule, then you should consider a Chapter 13 instead.
Chapter 7 bankruptcies also known as ‘straight’ or ‘liquidation’ bankruptcy are the most common bankruptcies filed and is the most likely the type you have heard before.
Under a Chapter 7 filing, the person who owns the debt can sell or ‘liquidate’ their assets in order to pay off their creditors.
The Bankruptcy Court will appoint a “Trustee” who will oversee the proceedings to safeguard the creditors’ rights are protected, by ensuring the good-faith disclosure of assets owned by the debtor, and sale thereof.
With certain exceptions, if there is any amount owed after the sale or liquidation of assets, that remaining debt is discharged under Chapter 7.
To qualify for a Chapter 7, your income must be less than the median income in your states for your family size. See the median income test list below on this page.
If you don’t qualify under this rule, then you should consider a Chapter 13 instead.
THE CALIFORNIA MEDIAN INCOME TEST
1 Member Household
$62,009.00
2 Member Household
$62,009.00
3 Member Household
$47,798.00
4 Member Household
$47,798.00
5 Member Household
$47,798.00
6 Member Household
$62,009.00
7 Member Household
$62,009.00
8 Member Household
$47,798.00
9 Member Household
$47,798.00
10 Member Household
$47,798.00
DOES THE TYPE OF DEBT MATTER?
Yes, because the order in which creditors are paid in a Chapter 7 bankruptcy will effect where the money goes, and which debts, if any, get discharged. Generally, the order of payment in a Chapter 7 is as follows:
First, Unsecured priority debt are paid.
Second, Secured debt are paid.
Third, non-priority unsecured debt are paid.
WHAT ARE UNSECURED PRIORITY DEBTS?
The type of debt that has to be paid first includes categories such as tax debts, or child support, or even certain types of personal injury debts owed via a judgment or otherwise.
WHAT ARE SECURED DEBTS?
This type of debt paid second includes categories that are collateralized such a house or a mortgage, or even an automobile loan.
WHAT ARE NON-PRIORITY UNSECURED DEBTS?
This type of debt is paid last, if there are sufficient funds to cover, and would generally include your typical credit card debt, or medical bill obligations.
Choosing whether filing a Chapter 7 bankruptcy is the right choice for you must be analyzed on a case-by-case basis. Whether certain assets such as your primary residence or main vehicle is protected in a Chapter 7 depends on what how much equity you have in the property and other factors.
Once your bankruptcy papers are filed, we stop creditors from harassing you, and pursue them relentlessly if there are violations of the automatic stay.
Lastly, the effects of filing a bankruptcy include an impact on your credit history, which can last for 10 years – so be sure to contact us for a free consultation on your bankruptcy questions.