Chapter 7 Or 13: I Can't Decide, Some Questions To Ask, Part 1

Federal law, specifically chapters 7, 11, and 13 of Title 11, detail the most common types of bankruptcy relief. Today’s blog, the first of a series, addresses some questions that you should ask if you are unsure which type of bankruptcy is best for you.

Chapter 7 of the Bankruptcy Code regulates the procedure for liquidation under federal bankruptcy law. Chapter 13 of the Bankruptcy Code provides for the adjustment of debts of an individual with regular income permitting a debtor to retain property and pay debts over a time period defined by federal law.

*How much income do you have?

The “means test” calculates whether a debtor has adequate income to repay a certain threshold amount of debt to creditors. If a debtor’s income is above the threshold amount of median income for the size of the debtor’s household in California, a debtor must further calculate his or her income to determine if a chapter 13 bankruptcy case, which requires a plan of repayment, must be filed instead of a chapter 7 bankruptcy case, which does not require such a plan.

*How much property do you own?

A Chapter 7 bankruptcy case theoretically requires liquidation of a debtor’s real and personal property nonexempt assets to pay general, unsecured creditors. Debtors take exemptions allowed by state or federal law in certain eligible property, which protects it from liquidation and the reach of creditors.

Federal law permits each state to adopt its own exemption laws, which a debtor may choose instead of the exemptions provided by federal law. Since this may be a complicated analysis and chapter 7 debtors may lose some property when filing a petition under chapter 7, it is important to consult with an experienced bankruptcy attorney.

Alberto Montefalcon has the legal knowledge to assist anyone who must consider filing a chapter 7 or 13 bankruptcy case. The experienced Sacramento metropolitan area/Northern California attorneys at the Montefalcon Law Offices are here to help you if your financial position necessitates the consideration of a bankruptcy case filing under Chapter 7, 11, or 13. Contact us online or schedule a consultation at any of our three conveniently located offices. Telephone our downtown Sacramento office at (916) 444-0440, our South Sacramento office at (916) 399-9944, or our Concord office at (925) 222-5929.