Different Bankruptcies Available for Unique Needs of Californians

No two families are alike, nor are the situations which bring them into financial turmoil. The beleaguered economy has left many Californians without work and wiped out equity in their homes. Whatever the reason behind your struggles, there is a bankruptcy available to help you obtain a fresh start.While this article will provide an overview of the various forms of bankruptcy, it is important that anyone considering bankruptcy speak with an experienced Los Angeles personal bankruptcy attorney who can advise them on the different ways a bankruptcy may impact them.While there are six different types of bankruptcy, Chapter 7 and Chapter 13 bankruptcy are two chapters that are used most frequently by the consumer seeking debt relief. Although each chapter has different advantages, there are also benefits that apply to both forms.

Chapter 7 Bankruptcy – Liquidation

Chapter 7 bankruptcy is the most common form of bankruptcy for individuals. Although it is commonly referred to as “liquidation”, the name is something of a misnomer. A common bankruptcy myth is that the individual filing bankruptcy will lose all of their assets. While this form of bankruptcy calls for the sale of non-exempt property, the reality for most debtors is that there are ample exemptions available to protect the assets. Exemptions are legal entitlements to personal property, equity in real property or household goods and furnishings.

This form of bankruptcy is attractive to many because it does not involve any repayment to debtors. The debtor’s unsecured debt, such as medical bills, credit cards and unsecured loans are discharged through this bankruptcy leaving the debtor with no further obligations to pay.

Income is scrutinized in a Chapter 7 bankruptcy. People who wish to use this form of relief must pass what Congress has termed a “means test.” In order to pass the “means test”, an individual’s gross income must be under the state median income as determined by the United States Census Bureau. These income limits depend on family size and change periodically throughout the year. Beginning November 1, 2011, the income limits for California households are as follows:

Individual $47,683
2 People $61,539
3 People $66,050
4 People $74,806

These limits are a preliminary threshold only. It does not mean that individuals whose income exceeds this number will not be able to file a Chapter 7 bankruptcy. The Bankruptcy Code was designed to accommodate individuals with different circumstances. Because of this, individuals may still qualify if they pass the means test. Bankruptcy qualification will depend on the individual’s aggregate monthly income over five years. Not every bankruptcy attorney is well skilled in analyzing the means test. Oftentimes, this can result in the wrong information being relayed to the Client. This why a seasoned bankruptcy attorney with means test experience is crucial where the income is close to the eligibility limits.