In 2005, the federal government enacted new bankruptcy laws making it more difficult for individuals to qualify for a Chapter 7 liquidation proceeding. The petitioner must be able to pass the Chapter 7 “means test” before they can be eligible. Their income over the past six months must be below the average median income for their family size in the state where they file. If they are approved for Chapter 7, all of their unsecured debts can be discharged, including medical bills, credit card debt and personal bank loans.
If the individual or couple is unable to qualify for Chapter 7, they can file for Chapter 13. This requires them to submit a repayment plan to the court outlining how they intend to pay back their creditors over a 3 to 5-year period. Once the bankruptcy court approves the plan, a Trustee will be appointed to collect a monthly payment from the debtor. The Trustee will use these monies to pay each creditor a portion of what is currently owed on the debt. Once the repayment plan is concluded, any remaining unsecured debt will be discharged.
The bankruptcy laws in California are some of the most generous in the nation when it comes to protecting their home, cars, pension plan, and tools of their trade. When you are facing bankruptcy due to mounting debts that are unsecured by collateral, it may be beneficial to discharge your debts and start with a clean slate.
Contact the Hedtke Law Firm today for a FREE initial consultation to find out how we can help get you back on your feet.
To schedule a free consultation, please call Hedtke Law Firm today at our Upland office at: 909 579-2233 or Chino office: 909 457 0183 or Moreno Valley office at: 951 746 1722.