Debt Consultation

If you can't work out any other reasonable way to pay your debts, you might consider filing for Chapter 7. It allows an honest debtor to make a fresh start by having a court discharge (in other words, cancel) most debts. Chapter 7 is a way to get out of debt when you owe more money than you can be expected to pay in a reasonable amount of time.

 However, to qualify for a Chapter 7 bankruptcy, your income cannot exceed certain limits. If your income is greater than the median income in California, for example, you may not be eligible for this type of bankruptcy. You would be required to pass a "means" test to determine your eligibility. The purpose of such a test is to find out if you have enough income to participate in some sort of Chapter 13 repayment plan instead. If, after subtracting certain expenses and debt payments, you have more than $166.66 left over each month, you would not qualify for Chapter 7



The Process...

BANKRUPTCY IS -- a legal procedure for dealing with debt problems of individuals and businesses.

  • CHAPTER 7 entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a "means test" to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor's income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Our Services...

During our consultation our attorneys will access and determine whether you are eligble or not to file for bankrutpcy. This entails calculating your income and debt level using the Mean Test.

 

Mean Test.

Section 707(b)(2) of the Bankruptcy Code applies a "means test" to determine whether an individual debtor's chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor's aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $6,575. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

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Once your case is filed, you are required to attend a meeting where the trustee and creditors can ask you questions regarding your debts. Our attorneys will accompanying and preparing you for the Meeting of Creditors, which often refer to the 341 meeting.

341 Meeting

The meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called creditors' meeting.

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