There are two main types of bankruptcy:
Chapter 7
Sometimes called straight bankruptcy. Chapter 7 is a liquidation of non-exempt property. You get to keep your exempt property. In more than 95% of the Chapter 7 cases filed there is no property liquidated by the trustee.
In order to file a Chapter 7, you must pass the Means Test.
- Means Test
As a result of the one hundred million dollars in lobbying by the financial services industry, if you want to file a Chapter 7, you have to go through the Means Test. This is not a test for which you have to study. It is a form that needs to be filled out.
If you are below median income (“median income” is the amount that half of the people in the state are above and half of the people are below) then you only have to complete a short form Means Test
- Initial Conference
I suggest you start by setting an appointment with me to go over the facts of your case and discuss the legal issues involved and what your options are.
While no specific documents are required for the initial meeting, you should bring a rough list of debts, copies of any lawsuits with which you have been served, any foreclosure documents (notice of default, notice of sale), and if you have refinanced in the last 3 years, a copy of the documents from the refinancing. Also, it is helpful if you can bring some paystubs. I will need your most recent six months of paystubs to file.
If you are self-employed, at the initial meeting please bring in a rough estimate of your business gross and business net income. If you live in Inyo County, I would be happy to do the initial consultation by telephone.
- Filing Bankruptcy in Inyo County
If you file bankruptcy in Inyo County, you will have to come to Bakersfield for your meeting of creditors.
Chapter 13
Chapter 13 is a type of bankruptcy that requires you to make payments to your creditors for 3 to 5 years.
You pay the creditors through a Chapter 13 Plan.
Chapter 13 is frequently used to stop a foreclosure and catch up on the payments.
In a Chapter 13, it is possible to remove a second (or third) deed of trust if it is completely unsecured (e.g., the house is worth $150,000; 1st deed of trust is $160,000).
If you make too much money for a Chapter 7, you can file a Chapter 13. If your “disposable income” is $500 per month, then you have to pay $500 per month to a Chapter 13 trustee who would pay it to your creditors pro rata. At the end of 5 years, any debt that is not paid would be discharged.