Chapter 7 Restrictions and Limits
While Chapter 7 is a very flexible form of consumer bankruptcy in terms of income limits and restrictions, there are rules that must be followed when California residents choose to file this type of bankruptcy. If you want to know if you qualify for a Chapter 7 bankruptcy, or “liquidation” as they are often termed, be sure to discuss your case with a qualified bankruptcy attorney.
California bankruptcy rules for Chapter 7 include a mixture of federal rules and specific state regulations, including:
- The Means Test. The Means Test is a name given to a test that will determine if your income exceeds your debts by enough to warrant you filing a Chapter 13 repayment plan. Because Chapter 13 offers more theoretical protection to creditors, a judge may be allowed to order you to file a Chapter 13 rather than a 7 if your income is too great. If your current income when compared to the size of your family is greater than the media, you may be subjected to the means test to more closely examine how much disposable income you have.
- Exceptions to the means test. If you are a veteran or have a business, you may find that you meet one of the exceptions to the means test. It is best to discuss these circumstances with an attorney if you want to file Chapter 7; you may find that you are able to do so even if your income is higher than the normal limit.
- Disposable income to repay debts. One of the strictest requirements of Chapter 7 is the surrender of your assets or disposable income to pay your creditors as much as possible. If you have a good bit of disposable income, even if you pass the means test, you may have to turn some of your assets over to the court for distribution to your creditors.
- Former discharges. If you have filed Chapter 7 within a certain time period and received a discharge in the past, you may be barred from filing another bankruptcy until a certain amount of time has gone by.
Essentially, your debt-to-income ratio must fall within acceptable parameters to allow you to file a Chapter 7 bankruptcy and you must not have received a recent bankruptcy discharge.
For more information on Chapter 7 and other forms of bankruptcy, contact Amerio Law Firm in Sacramento.