Chapter 7 Bankruptcy Orange County
Practice Areas
Do You Need a Chapter 7 Lawyer in Orange County?
Chapter 7 bankruptcy is commonly referred to as a “liquidation bankruptcy.” Both individual debtors and businesses may file Chapter 7 in Orange County. It is an option under bankruptcy law to allow those who are struggling with debts to find financial relief. Whether someone is solvent or insolvent, Chapter 7 is available. If you’re in need of a Chapter 7 bankruptcy Orange County attorney, Marshack Hays Wood is here for you.
At Marshack Hays Wood, we see the big picture when it comes to each bankruptcy case that we handle. Our business and bankruptcy litigation firm is highly skilled in representing debtors, creditors, bankruptcy trustees, and businesses. Because of this versatile legal experience, we are prepared to help you file your bankruptcy petition and achieve the relief you need. To schedule a consultation with one of our Orange County bankruptcy attorneys, please call our office at (949) 333-7777 today.
What is Chapter 7 Bankruptcy in Orange County?
Chapter 7 bankruptcy, or liquidation bankruptcy, is a form of debt relief available to petitioners under the United States Bankruptcy Code. It aims to give filers a fresh financial start and allows them to discharge certain debts. When a debt is discharged, this means it is wiped out. You will no longer be responsible for a debt once it is discharged.
Another benefit of Chapter 7 is the automatic stay. This is one of the most significant forms of bankruptcy protection. It allows you to live your life free of wage garnishments, telephone calls from creditors, foreclosure, car repossession, and other stressors. Once your Chapter 7 bankruptcy case concludes, you’ll have a clean slate financially.
What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7 and Chapter 13 bankruptcy are the two most common forms of bankruptcy in the Bankruptcy Code. The most significant difference lies in the purpose of each chapter. While Chapter 7 focuses on discharging your unsecured debts, Chapter 13 focuses on giving you room to catch up on your secured debts. Chapter 13 also discharges unsecured debts.
When you file your Chapter 7 bankruptcy petition, the bankruptcy trustee will look at all the assets you have at the time of filing. You can protect all of your exempt assets, and any non-exempt assets may be used to pay off your creditors. Once your case concludes, the rest of your debts will be discharged, and you’ll have a fresh financial start.
When you file your Chapter 13 bankruptcy petition, the bankruptcy trustee will develop a plan for you to repay your secured creditors. In other words, you’ll be able to catch up on certain payments, such as your car note or your mortgage. You’ll also be able to discharge all or most of your unsecured debts.
How Does Chapter 7 Bankruptcy Work?
As soon as you file your petition with the bankruptcy court, the automatic stay goes into effect. The automatic stay prevents your creditors from attempting to collect payments, foreclosing on your house, garnishing your wages, or evicting you. This is one of the most significant advantages of filing bankruptcy over pursuing other options, such as debt consolidation. Bankruptcy relief is the only form of relief that offers you legal protection against your creditors.
After you file your petition, the court will take possession of your assets and assign a bankruptcy trustee to oversee your case. The trustee will review your financial situation and your assets, then oversee your case to its conclusion. If you have any assets that do not qualify as exempt property, the trustee might sell these assets to repay your creditors. They will also conduct a 341 creditors meeting where they will ask questions about your case.
Each state has its own laws on what qualifies as exempt property. However, some states allow you to choose between state and federal bankruptcy exemptions. California requires filers to use state exemptions when they file bankruptcy.
When your case concludes, your remaining debts will be discharged by the bankruptcy court. The discharge occurs around four to six months after you file your petition. Keep in mind that not all debts can be discharged through bankruptcy. Some examples of debts that cannot be discharged include certain tax debts, child support, court fees, and alimony.
What Can You Keep and What Can You Lose in Chapter 7?
In Chapter 7, you will be able to keep all of your exempt property. You might lose your nonexempt property, any property that you offered as collateral, or property that has a lien on it.
You may use the California bankruptcy exemptions for your case once you have lived in the state for at least 730 days prior to filing. If you do not meet this requirement, you will use the exemptions of the state you previously lived in. Below, we outline the current California bankruptcy exemptions.
California Bankruptcy Exemptions System 1
- Homestead exemption: Equity up to $600,000
- Motor vehicle exemption: Equity up to $3,625
- Personal property exemption:
- Personal and household items
- Health aids
- Personal injury and wrongful death awards
- Burial and cemetery plots
- Building materials up to $3,825
- Jewelry, art, and heirlooms up to $9,525
- Bank deposits up to $1,826
- Social security bank deposits up to $3,825 for single payees and $5,725 for spouse payees
- Wage exemption: Up to 75% of wages paid in the 30 days before filing for bankruptcy, as well as any vacation credits for public employees
- Pension and retirement exemption:
- Public retirement benefits
- IRAs and Roth IRAs, according to federal bankruptcy exemptions
- Private retirement benefits and plans
- Tax-exempt retirement accounts
- Retirement and pensions for all public employees, county peace officers, county firefighters, and other county employees
- Public benefits exemption:
- Public assistance
- Disability, unemployment, and union benefits
- Worker’s compensation benefits
- Student financial aid
- FEMA benefits
- Relocation benefits
- Tools of the trade exemption: Up to $9,700 for one person, or up to $19,050 if used by both spouses in the same job
- Insurance exemption:
- Health insurance or disability benefits
- Fidelity bonds
- Matured life insurance benefits
- Life insurance payouts, only if the policy prevents using it to pay creditors
- Homeowners’ insurance payouts up to the homestead exemption amount
- Unmatured life insurance policies up to $15,250
- Other exemptions:
- Professional and business licenses
- Property of a business partnership
- Inmate trust funds up to $325
California Bankruptcy Exemptions System 2
- Homestead exemption: Up to $31,950 for personal or real property
- Motor vehicle exemption: Equity up to $6,375
- Personal property exemption:
- Health aids
- Wrongful death payouts
- Personal injury payouts up to $31,950
- Burial plot up to $31,950
- Certain personal items and household goods up to $800 per item
- Jewelry up to $1,900
- Pension and retirement exemption:
- ERISA-qualified benefits, annuities, and pension
- IRAs and Roth IRAs
- Tax-exempt retirement accounts
- Public benefits exemption:
- Unemployment benefits
- Veterans benefits
- Social Security payments
- Public assistance benefits
- Crime victims benefits
- Tools of the trade exemption: Up to $9,525
- Insurance exemption:
- Disability benefits
- Unmatured life insurance policy
- Loss of future earnings
- Unmatured life insurance accrued interest, cash, loan, dividence, or surrender value up to $17,075
- Child support and alimony exemption: Up to what is necessary for support
- Wildcard exemption: Up to $1,700, along with any unused homestead exemption
How Do I Qualify for Chapter 7 in California?
In order to qualify for Chapter 7 anywhere in the country, you will need to pass what is called the means test. The means test basically measures whether or not you have an income that is below the state’s median income. If you do make less than the California state median, you qualify for Chapter 7. Some individuals who make more than the median may still qualify for Chapter 7, although this is rare.
What is the California Median Income for Chapter 7?
Each state has its own median income level. The median income also depends on the number of people in a particular household. Below, we outline the income eligibility requirements based on household size.
| Household Size | Monthly Median Income | Annual Median Income |
| 1 person | $5,030 | $60,360 |
| 2 people | $6,606 | $79,271 |
| 3 people | $7,353 | $88,235 |
| 4 people | $8,443 | $101,315 |
| 5 people | $9,193 | $110,315 |
If more than five people live in a household, the monthly and annual median income levels will continue to increase with each additional person.
What is the Debt Limit for Chapter 7?
Fortunately, Chapter 7 bankruptcy does not have a debt ceiling. This means that you cannot have too much debt to file Chapter 7. The more debt you have, however, the more likely your trustee will need to sell certain assets to pay off your creditors. Regardless of how much debt you begin the bankruptcy process with, you will still be able to achieve a discharge.
What Debts are Discharged in Chapter 7?
A Chapter 7 bankruptcy discharge specifically eliminates a debtor’s unsecured debts. These are the debts that are not backed by collateral or assets. Examples of unsecured debts that can be discharged in Chapter 7 include the following.
- Medical bills
- Credit card debts
- Collection accounts
- Personal loans
- Utility balances
- Auto accident claims
- Business debts
- Repossession balances
- Unpaid taxes
- Tax penalties
- Attorney fees
- Overdue rent payments
- Civil court judgments
- Overpayments from government programs
While the above list can help you get a feel for what will be discharged in your case, we still recommend speaking with one of our bankruptcy attorneys. We will look at the specifics involved in your case and give you a better idea of how your case might play out.
How to File Chapter 7 Bankruptcy in California
Once you have decided to file for bankruptcy, get in touch with an Orange County bankruptcy lawyer. Law offices that handle bankruptcy are always preferable over debt consolidation companies and other “debt relief” businesses. Bankruptcy is the only way in which you can receive legal protections from your creditors in the form of the automatic stay.
Below, we outline the basic steps of how to file bankruptcy in California.
- Gather all the required documentation you will need for your case. This includes certain financial documents, as well as official bankruptcy forms.
- Take the credit counseling course. This must be completed at least 180 days before you submit your bankruptcy petition to the court.
- Work with your attorney to fill out all of your bankruptcy forms. If you work with an attorney, you can be assured that you won’t forget or miss any of the required local forms.
- Pay your filing fee. If you have an income that is under 150% of the federal poverty guidelines, you will qualify for a fee waiver.
- File all of your forms and documents with the district court that is handling your case. Your attorney will know which court to submit everything to.
- Once your trustee is assigned to your case, you will need to send them bank statements, tax returns, and other documents that will show your financial situation. This must be done at least a week before your creditor meeting.
- Take your debtor education course. This course will teach you about how to manage your personal finances. This course must be completed within 60 days of your creditor meeting.
- Attend the 341 meeting of creditors. Although your creditors are not required to attend (and most don’t), you must be there. At this time, you will likely have a remote 341 meeting. This meeting serves to answer any questions your trustee or creditors have for you.
- Get your bankruptcy discharge and complete your case.
How Long Does Chapter 7 Bankruptcy Take?
In general, Chapter 7 bankruptcy can take anywhere from 4 months to 6 months to complete. Many factors can affect the length of your case, so we recommend speaking with an attorney about how long yours may take. The estimated time period spans from the moment you file your petition to the moment you get your discharge.
Contact a Chapter 7 Bankruptcy Orange County Lawyer at Marshack Hays Wood Today
If you are a business or individual in need of representation in bankruptcy court, the attorneys at Marshack Hays Wood are here for you. We excel in both business and bankruptcy litigation, and we have extensive experience representing clients on both sides of the equation. Whether you are in need of an attorney for a reorganization bankruptcy, to stop wage garnishment, or for other parts of the bankruptcy process, Marshack Hays Wood can help. To schedule a consultation with us, please call our Orange County lawyers at (949) 333-7777 or reach out online today.
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