In Chapter 7 bankruptcy, most or all of your debts are cancelled. The court appointments a bankruptcy trustee who presides over the case and whose primary responsibility is to ensure that your creditors are paid are much as possible. Therefore, the trustee has the right to liquidate some of your property to pay your creditors. However, in most Chapter 7 bankruptcy cases, the trustee finds nothing of value to sell. Chapter 7 bankruptcy allows you to keep what is referred to as "exempt property" and which may not be liquidated. This includes a certain amount of equity in your home. California protects up to $75,000 for single people, $100,000 for married couples, and $175,000 for people over 65 or legally disabled. Exempt property also includes your retirement funds, clothing, household furnishings, social security payments which you have not yet spent, and other necessities such as car and tools necessary to work. If you are saddled with debt, have a limited amount of equity in your home, and want to protect your retirement funds, Chapter 7 may alleviate the pressure of dealing with this debt and allow you to get a fresh start.
After the bankruptcies papers are filed, the Automatic Stay immediately goes into effect. The automatic stay prohibits most creditors from continuing with collection activities. You will no longer be hounded by creditors calling or stressed out by the bills which are piling up. There are some exceptions to the automatic stay. In those situations, a creditor may ask the court to lift the Automatic Stay. The situations which are most typically affected by lifting the automatic stay are those involving mortgage lenders and landlords.
The whole Chapter 7 bankruptcy process takes about four to six months, and it generally requires that the debtor make only one appearance in court.
Before the bankruptcy is dismissed, or approved, you must complete a credit counseling course with an agency approved by the United States Trustee. If you cannot pay your bills, please contact us to discuss filing for Chapter 7 as well as your other options.