Chapter 7 Bankruptcy in Salinas

What You Need to Know About Filing Chapter 7 Bankruptcy in Salinas CA

The two most common types of consumer bankruptcy are Chapter 7 bankruptcy and Chapter 13 bankruptcy. This is a short guide on Chapter 7. You’ll find out what it is, some of its advantages and disadvantages, and how you can qualify. At the end of this guide, you’ll understand some of the basics about this form of bankruptcy filing.

Common Misconceptions Regarding This Procedure

Before I get into what Chapter 7 bankruptcy is, let me take a brief moment to explain what it is not.  People fear the worst when they are considering bankruptcy as an option.  Most of them believe that the court will sell all of their things to pay their creditors in a case.  This could not be further from the truth.  A fresh start would be impossible if the bankruptcy left you with nothing with which to start your new life.  The concept of exemptions was discussed on the What You Can Expect page, so if you should refer to that page if you have not already.  Suffice it to say that the majority of the clients I see get to keep everything they own and get rid of all or most of their debts using this process.  You will need to consult a qualified attorney to determine if you will receive similar treatment.

Also, most people fear that their credit will be ruined and they will not be able to borrow again for 10 years.  This is also not true.  Bankruptcy can be a very useful tool to help people become more credit-worthy and re-establish good credit.  Please refer to the Bankruptcy FAQ page for more information regarding credit scores.

Chapter 7 Bankruptcy – What Is It?

Chapter 7 bankruptcy is the simplest and fastest form of bankruptcy. In its most simplistic form, any property that you own that is above and beyond what you are allowed to keep under your exemptions will be sold and the proceeds from the sale will be distributed among your creditors as evenly and fairly as possible in accordance with the bankruptcy laws.

If there is no property above and beyond what you are allowed to keep, you will keep everything you own and there will be no distribution to creditors.  This kind of case is referred to as a “no-asset” case and is quite common.  In a no-asset case, the Trustee will inform the creditors that there are no assets to be distributed through the bankruptcy and all of the unpaid debts (with limited exceptions) will be discharged or forgiven.

If there are assets above and beyond what you are allowed to keep, the Trustee will usually allow you the first opportunity to purchase the property yourself.  The money received from you will be used to pay your creditors.  If you do not want to purchase the property then the Trustee will collect the property and sell it for the benefit of your creditors.  Once the proceeds from any such sales are distributed to the creditors the remaining unpaid portion of the debts (with limited exceptions) will be discharged or forgiven.

Eligibility for Filing Chapter 7 Bankruptcy

Unlike Chapter 13 bankruptcy, Chapter 7 bankruptcy is available to entities such as corporations, partnerships and LLC’s as well as to individual debtors.   If you are an individual who has debts that are primarily consumer (non-business) in nature, the main question will be whether you make too much money to qualify for treatment.  There is a test called the “means test” which will determine if you make too much money to qualify for Chapter 7 bankruptcy.  This means test is quite complicated and a thorough explanation of its requirements is beyond the scope of this brief overview.  You should certainly consult a qualified bankruptcy attorney to determine for sure if you can qualify.

If you are married, you may file with or without your spouse.  Also, legal residency is not a requirement in either a Chapter 7 bankruptcy or Chapter 13 bankruptcy, so you do not need to have a green card or social security number in order to file.  You will however need a valid ITIN number and a valid, government-issued ID (passport, matricula) for identification purposes.

Here Are Several Advantages and Disadvantages

The main advantages of Chapter 7 over Chapter 13 bankruptcy are that Chapter 7 is generally less expensive than 13, that there are no monthly payments in a Chapter 7, and that the process is much faster than 13.  Faster and cheaper …. so why would anyone choose Chapter 13 instead?

Well, there are many things that can be accomplished in this bankruptcy that are not available in Chapter 7.  Some of those advantages are discussed on the this page.

Also, as discussed briefly above, some individuals may not qualify for Chapter 7 treatment or will have assets that they need to retain that would otherwise be sold in a Chapter 7 proceeding.  Those people may decide that Chapter 13 bankruptcy is more suited to their needs.

Bankruptcy can be confusing.  It bears repeating that when dealing with a complicated legal matter like Chapter 7 bankruptcy, it is important to seek help from a qualified attorney.

The law office of Stephen H. Kim is here to help answer any questions you may have with filing consumer bankruptcy.  We provide skilled representation you can trust.  Please do not try to handle the process your own.  You could end up in an unexpectedly bad position without competent representation.  We’ve handled many cases and can make sure your interests are protected.  Please contact us today if you are considering filing.  We’re here to make the process of filing bankruptcy as easy and painless as possible.

Please contact us anytime with any questions or to schedule an appointment.
  • (831) 221-5022
  • (831) 221-5045

Map of Our Location

Map Location - Stephen H. Kim, Attorney at LawMap Location - Stephen H. Kim, Attorney at LawClick the image above to open the map in a new window/tab

Communities We Serve

Salinas, Monterey, Pacific Grove, Carmel, Carmel Valley, Marina, Seaside, Castroville, Prunedale, Watsonville, Santa Cruz, Gilroy, Hollister, King City, Greenfield, Soledad, Gonzales, Chualar, and all of Monterey County