There are two choices for bankruptcy in general consumer cases: a Chapter 7 “straight” bankruptcy or a Chapter 13 “reorganization” payment plan. Chapter 7 is the more preferred over Chapter 13 for individuals facing financial difficulties. The two main reasons is that there is no ceiling on the amount of debt with which you can file a Chapter 7 and it wipes out debt without involving repayment.
If you find yourself having to file bankruptcy as the only option to deal with your financial stress, you will obviously have many questions. One common question that most people filing for Chapter 7 bankruptcy have is whether there is a debt limit. Although an experienced Stockton bankruptcy attorney can best answer your questions, below is an overview that may help guide you.
Chapter 7 Debt Limits
There is no maximum amount of debt for a Chapter 7 bankruptcy case. If you are considered a “low debt-owing case,” you must determine if the filing of a Chapter 7 provides enough benefit by way of discharge of the debt, for the costs of filing, and the reporting of the bankruptcy for 10 years on your credit report.
If you are considered a “high debt-owing case,” you must decide if the risk of filing a Chapter 7 discharge being challenged is also worth the costs to defend against a possible challenge.
The Chapter 7 “Means Test”
Although as mentioned above, there is no minimum debt limit, a Chapter 7 bankruptcy does require you to pass the “means test.” The means test is basically a mathematical calculation designed to determine whether you are capable of paying back the debt you owe. The calculation looks at your debts, assets and income. If you make less than a certain amount per year, you are exempt from the means test and allowed to proceed directly to filing a Chapter 7 bankruptcy.
To ensure you take all steps necessary to properly file for bankruptcy, it is important to immediately consult with an experienced bankruptcy attorney in the Central Valley.
Call an Experienced Central Valley Bankruptcy Attorney
If you are considering Chapter 7 bankruptcy, it is in your best interest to consult with an experienced bankruptcy attorney to help you learn your legal rights and options, especially with respect to Chapter 7 bankruptcy.