Chapter 7 Bankruptcy and its Requirements in California

There are situations where all other means of repaying debt fails and you are only left with the option of bankruptcy. Under the laws in California an individual, married couple or business partnerships can file for Chapter 7 bankruptcy to clear all their outstanding debt. To file for bankruptcy under Chapter 7 you will need to meet some basic requirements and we shall take a look at these requirements under the laws in California.

Residency

First and foremost bankruptcy requirements in California state that in order to file for bankruptcy and to qualify for state exemptions the person concerned must prove that he or she has been a resident of the state of California for the past two years.

Means Testing

This test is done to verify if a person is really in need of bankruptcy filing. This test is borrowed from the Federal bankruptcy. Under this test a median income for households in the state of California is compared against the person filing for bankruptcy. This median income keeps on changing from year to year. According to the latest figures the income for an individual is $57,287 while that of a family is $61,455. In case the debtor’s income is below the median state income he/she qualifies to file for Chapter 7 bankruptcy.

Credit Counseling

Apart from meeting the requirements the person must also take approved credit counseling and complete any pending state and federal tax returns. The credit counseling course should be approved by the United States Trustee's office. Under this you are educated about your options about repayment under the bankruptcy laws.

Statement of Financial Affairs

Once your eligibility for this kind of bankruptcy filing has been determined the debtor has to complete a Statement of Financial Affairs. In this statement one needs to submit details of all assets and outstanding debts. Here one must clearly mention the names and addressed of all the creditors. Any intentional or unintentional omissions from the list can result in bankruptcy fraud. Once you have completed the Statement of Financial Affair the law puts in an automatic stay on all your outstanding debts. This prevents the creditors from collecting debts and call in the individual.

Seek Exemption Based On Your Case

Under the laws in California there are two exemption plans that you can take benefit from are Chapter 704 and Chapter 703. However one cannot combine the two parts together. There are several things that are considered for exemption including your assets, homestead, wages, insurance and debts such as alimony and child support. Under Chapter 704 married couples can seek double exemption while Chapter 703 which is closer to the Federal law doesn’t offer you double exemption. Chapter 704 also allows you to keep as much as 75% of your wages earned within 30 days of filing for bankruptcy.

It is advisable that you hire the services of a professional bankruptcy attorney who will guide you through the different stages of filing bankruptcy under Chapter 7.

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