Individuals & Chapter 7
Chapter 7 is used by individuals who seek to “wipe out” (discharge) all debts that are eligible for elimination with no repayment to creditors. The goal of Chapter 7 bankruptcy is to provide individuals with a “fresh start” by wiping out all dischargeable debts, including medical bills, credit card bills, personal loans (not guaranteed by a government agency), judgments obtained by creditors prior to the filing of a bankruptcy petition, business-related debts, and commercial and residential leases.
Businesses & Chapter 7
With respect to a business filing for Chapter 7 protection, it typically ceases to operate unless the court-appointed Trustee chooses to continue the business or the person filing receives court approval to compel the Trustee to abandon the business.
The Chapter 7 Process
If after you consult with our Bakersfield bankruptcy lawyers you conclude that a Chapter 7 bankruptcy is the best solution to resolve your debts, we will ask you to provide us with certain documents (e.g. last two years of tax returns, recent paystubs, copies of all your debt statements and correspondence) so that we can begin preparing the Chapter 7 Petition to file with the court. After we prepare the Chapter 7 Petition, we will review it with you for accuracy and completeness. Before we file an individual’s petition, the bankruptcy code requires that you attend a credit counseling education course (we will refer you to either an online or telephone course). These pre-filing courses are available in English or Spanish. Once you confirm that the petition is complete, we will file it with the Bankruptcy Court Clerk’s office.
Automatic Stay
Upon the filing of the petition, most creditors are restrained from taking any additional action to recover the debt. This restraining act is called the “automatic stay.” The automatic stay is very powerful because it prohibits collection actions unless the bankruptcy court enters an order lifting the stay to permit a creditor to proceed with collection or enforcement. The stay arises by operation of law and requires no judicial action. Provided that the stay remains in effect, your creditors generally may not initiate or continue garnishments, lawsuits, or communications demanding payment. While the stay provides significant benefits, the Bankruptcy Code limits its protections in some refiled cases.
341 Meeting of Creditors
Approximately 30 to 45 days after the filing of the petition, you will appear with one of our bankruptcy lawyers at a meeting with the Chapter 7 Trustee assigned to your case (the “341 Meeting of Creditors”). At this meeting, the Trustee will place you under oath, and both the Trustee and any present creditors will ask you questions concerning your Chapter 7 Petition, expenses, income, and debts.
Financial Management Course
To qualify for a Chapter 7 discharge, the Bankruptcy Code requires you to complete a Post-Filing Debtor Education Course (we will refer you to either an online or telephone course). If you fail to complete this course within the time required, then your case may be closed without a discharge being issued.
Discharge of Debts
Assuming that the Trustee requests no further information at the 341 Meeting and provided that no objections from your creditors are filed with the Court, you will receive a discharge of your dischargeable debts shortly after 60 days from the 341 Meeting.
Non-Dischargeable Debts
Under the Bankruptcy Code, certain debts cannot be wiped out. They are classified as non-dischargeable debts and include:
- Alimony, maintenance, and child support obligations
- Student loans (except in extreme hardship cases)
- Fines, penalties, and criminal restitution
- Debts incurred as a result of intentional injury to a person or property
- Taxes owed to governmental authorities
If your only debts are of the non-dischargeable classification, Chapter 7 is not a feasible option. However, Chapter 13 might be an alternative. Under Chapter 13, certain debts that are non-dischargeable in Chapter 7 may be discharged. Contact one of our Bakersfield bankruptcy lawyers for a Free Consultation to discuss whether your debts can be discharged in Chapter 7.
Rights of Secured Creditors in Chapter 7
A secured creditor’s rights to their collateral (security interest) generally continue even though a discharge is received on the underlying debt. For example, absent some type of arrangement to surrender or “reaffirm” a car loan, the creditor with a lien on the car may repossess the vehicle even if the debt to the creditor is discharged. Our team assists with negotiating “reaffirmation agreements” so you can keep property that secures repayment of certain debts (e.g., vehicle loans).
Who Is Eligible to File for Chapter 7 Protection?
This may include:
Businesses
A business that is unable to pay its creditors can voluntarily file—or sometimes be forced by its creditors to file—for bankruptcy under Chapter 7. When a business files for Chapter 7 bankruptcy, it stops operating, and a court-appointed Chapter 7 Trustee sells all of its assets, distributing the funds to creditors. Creditors with a security interest are paid before unsecured creditors.
Individuals
Chapter 7 relief is available only once in an eight-year period. If you previously had debts discharged in a Chapter 7 bankruptcy, you must wait at least eight years before you are eligible to have new debts discharged by another Chapter 7 filing. However, if you previously had debts discharged in a Chapter 13 bankruptcy, you must wait at least six years before you are eligible to have new debts discharged under Chapter 7 unless the plan in the prior Chapter 13 was a 100% plan as to unsecured creditors OR payments under plan totaled 70% of claims and the plan was in good faith and on your best efforts.
Additionally, an individual cannot file a Chapter 7 bankruptcy if he or she already did so in the previous 180 days and the bankruptcy petition was dismissed, or that individual failed to appear or comply with the court’s orders, or he/she dismissed the case voluntarily after their creditors with liens sought the help of the court to recover property (i.e., they sought relief from the stay).
The “Means Test”
The means test is designed to determine whether an individual filing for bankruptcy can repay a portion of the money owed to his or her creditors. The test is designed to prevent abuse of the bankruptcy process. The test compares the average of your last six months of income to the median income in your state. If your income is greater than the state median, then the test applies, and a detailed formula must be used to determine whether you are eligible to file for Chapter 7.
The formula involves subtracting certain statutory values for living expenses from your current monthly income to determine whether you, in fact, have enough money to repay creditors. If the calculation reaches certain levels, a presumption of Chapter 7 abuse applies, for which you will either have to overcome, convert the case to Chapter 13, or have the case dismissed.
How Our Chapter 7 Bankruptcy Attorney Can Assist You
Filing for Chapter 7 bankruptcy can feel overwhelming, but you don’t have to navigate it alone. Our experienced Chapter 7 bankruptcy attorney is here to provide the guidance, support, and advocacy you need at every step of the process. We help clients:
- Understand whether Chapter 7 is the right option for their financial situation
- Prepare and organize all necessary documentation accurately and efficiently
- Protect assets and ensure compliance with federal and state bankruptcy laws
- Navigate creditor communications and potential legal challenges
- Deliver clear, practical advice tailored to your specific circumstances
Our goal is to make the bankruptcy process as smooth and stress-free as possible, helping you take control of your financial future. We are committed to offering compassionate guidance, protecting your rights, and helping you achieve a fresh start.
Contact Our Chapter 7 Bankruptcy Attorney in Bakersfield Today
If you are considering seeking bankruptcy protection, the first step you should take is to consult a knowledgeable and experienced bankruptcy attorney. Our Bakersfield Chapter 7 bankruptcy lawyers are experienced in handling bankruptcy cases on behalf of individuals, families, and businesses. We will review your financial situation and help you determine whether bankruptcy is the right option for you. If it is, we help you prepare and file all of the appropriate documents and represent you at the scheduled meetings and court appearances. We are local, experienced, and affordable. We look forward to helping you!
