Many people struggling with debt in the San Diego California area are now considering bankruptcy as a way to eliminate those debts and obtain relief. For those who are not legal experts or experienced in the practice of bankruptcy law, the different options and path to relief can oftentimes feel overwhelming.
The complexity involved starts with the lengthy and cumbersome laws dealing with bankruptcy. The U.S. Bankruptcy Code involves page after page of legal descriptions, mandates, and rules that apply to many different situations. While some of the code applies to all bankruptcies, parts of the code only apply one or another chapter within the code.
Chapter 7 Bankruptcy and You
One of the different chapters within the U.S. Bankruptcy Code is 7. When someone files for protection under this section of the code, it is often referred to as a Chapter 7 bankruptcy. In contrast to other chapters within the code, Chapter 7 exists to help those who are suffering from too much debt, and do not have the income capacity to restructure debts or work out a plan with creditors.
Bankruptcies filed under Chapter 7 have to meet several requirements before a federal bankruptcy judge will approve the petition. For example, there are income requirements that a person must meet, and if he or she does not, then a different chapter of the code would likely be better.
In addition to income requirements, Chapter 7 bankruptcies involve the risk of losing property. In contrast to a Chapter 11 or 13 filing, Chapter 7 petitions often put up all of the debtor’s possessions for liquidation by the court. There are exceptions to what property will be sold as a result of the petition, and those exceptions will vary by state. As a result, California has its own rules for those filing for Chapter 7 bankruptcy.
Primary Purpose of Chapter 7 Bankruptcy
One of the key reasons why Chapter 7 petitions can be helpful is that it allows a debtor to list all of her debts and have most of them discharged. This allows a debtor who is in over his or her head to have a fresh start and try to reach financial independence going forward. But discharge can be complicated by the types of debt involved, facts of the case, and whether all of the rules pertaining to bankruptcy have been followed.
Another purpose of a Chapter 7 petition is to treat creditors fairly and evenly. Because Chapter 7 petitions typically end in a discharge of all debts, no one creditor is paid while another is left fighting for what is left over. In typical cases, the estate containing the assets of the debtor is accumulated and liquidated and the remains are split between creditors through a court appointed trustee.
Your San Diego Bankruptcy Legal Counsel
At the Bankruptcy Law Center we help those struggling with debt find relief through the laws found in the Bankruptcy code. If you are struggling with debts and facing the prospect of filing for bankruptcy, consider contacting us. We will help you understand what your options are, and help you with a path forward.
(image courtesy of Michael Longmire)