Lake Forest Bankruptcy

YOU ARE ALWAYS ELIGIBLE TO FILE FOR BANKRUPTCY PROTECTION!  However, you may not be able eligible for every type of Bankruptcy relief available.  Your eligibility will depend upon many factors such as:
1. Have you previously filed for Bankruptcy?
2.  What is your current income?
3.  What is the value of your assets?

 The choice of relief can be a complicated process, and our law firm can assist you with that process.

An Overview of Chapter 7 Bankruptcy
Chapter 7 bankruptcy is sometimes called "liquidation" bankruptcy -- it cancels your debts, but you might have to let the bankruptcy court liquidate (sell) some of your property for the benefit of your creditors. ("Chapter 7" refers to the chapter of the federal Bankruptcy Code that contains the bankruptcy law.)

Bankruptcy Costs in Time and Money
The whole Chapter 7 bankruptcy process takes about four to six months.  Legal fees will vary based upon the complexity of the case.  The court charges $299 in filing fees, the credit counseling course costs $55, and commonly requires only one trip to the courthouse.

You must also complete a credit counseling and debtor's course in personal financial managment with an agency approved by the United States Trustee. (For a list of approved agencies in each state, go to the Trustee's website, www.usdoj.gov/ust, and click "Credit Counseling and Debtor Education.")

Bankruptcy Forms
To file for bankruptcy, you fill out a petition and a number of other forms and file them with the bankruptcy court in your area. Basically, the forms ask you to describe:

• your property
• your current income and monthly living expenses
• your debts
• property you claim the law allows you to keep through the bankruptcy process (called "exempt property") -- most states let you keep some equity in your home, clothing, household furnishings, Social Security payments you haven't spent, and other necessities such as a car and the tools of your trade.
• property you owned and money you spent during the previous two years, and
• property you sold or gave away during the previous two years.

WHO IS ELIGIBLE FOR CHAPTER 7 BANKRUPTCY?
Filing for Chapter 7 bankruptcy can be a powerful tool for dealing with overwhelming debt. But it isn't available to everyone. Here are some situations in which you will not be allowed to file for Chapter 7:Who Can File for Bankruptcy Protection?

You won't be able to use Chapter 7 if you already received a bankruptcy discharge in the last eight years (depending which type of bankruptcy you filed) or if, based on your income, expenses, and debt burden, you could feasibly complete a Chapter 13 repayment plan.

You Have Enough Income to Repay Your Debts
Under the old bankruptcy rules, the bankruptcy judge had the power to dismiss a Chapter 7 case if he or she thought the debtor had sufficient disposable income to fund a Chapter 13 repayment plan. There were no hard and fast rules dictating when a judge should dismiss a case on these grounds -- it depended on the facts of the case and the attitude of the judge.

Now that the new bankruptcy law has gone into effect, however, there are clear criteria that dictate who will be allowed to stay in Chapter 7 bankruptcy -- and who will be forced to use Chapter 13 bankruptcy if they want to file. Disabled veterans whose debts were incurred during active duty and people whose debts come primarily from the operation of a business get a fast pass to Chapter 7. All others must meet the requirements set out below.

How High is Your Income?
Under the new rules, the first step in figuring out whether you can file for Chapter 7 is to measure your "current monthly income" against the median income for a family of your size in your state. Your "current monthly income" is your average income over the last six months before you file. If your income is less than or equal to the median, you can file for Chapter 7.

If your income is more than the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for Chapter 7.

Do You Have Enough Disposable Income to Repay Some Debts?
The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to repay at least a portion of your unsecured debts over a five-year repayment period.

When Chapter 7 Isn't the Right Choice
If you can't wipe out enough debt, or if you have to sacrifice too much property, Chapter 7 may not be worthwhile.

If you are inclined to file for Chapter 7 bankruptcy, take a moment to decide whether it makes economic sense. You need to consider three questions:

Are you judgment proof -- that is, are creditors legally barred from taking your property or income even if you don't file for bankruptcy?

Will bankruptcy discharge enough of your debts to make it worth your while?

Will you have to give up property you really want to keep?

Are you Judgment Proof?  Most unsecured creditors are required to obtain a court judgment before they can start collection procedures, such as a wage garnishment or seizure of personal property. (Collections for taxes, child support, and student loans are exceptions to this general rule.)

If your debts are mainly of the type that require a judgment, the next question is whether you have any income or property that your creditors can seize if they go to the trouble of obtaining a judgment. For instance, if all of your income comes from Social Security (which can’t be taken by creditors), and all of your property is exempt, there is nothing your creditors can take from you to satisfy their judgment. That makes you "judgment proof."

When Chapter 7 Bankruptcy Is Better than Chapter 13
Most people choose Chapter 7, if they have a choice. Here are some reasons why:

Advantages of Chapter 7 Bankruptcy
A typical Chapter 7 bankruptcy case is opened and closed within three to six months, and the person filing emerges debt-free except for a mortgage, car payments, and certain types of debts that survive bankruptcy, such as student loans, recent taxes, and unpaid child support.

Although you can lose property in Chapter 7 bankruptcy, most filers don't. Bankruptcy lets you keep most necessities -- if you have little to begin with, chances are good you'll be able to keep all or most of your property (unless you pledged the item as collateral for a loan).

However, not everyone is eligible to use Chapter 7 bankruptcy. If your income is sufficient to fund a Chapter 13 repayment plan, after subtracting what you'll spend on certain allowed expenses and monthly payments for child support, tax debts, secured debts (such as a mortgage or car loan), and a few other types of debts, you won't be allowed to file for Chapter 7 bankruptcy.

Drawbacks of Chapter 13 Bankruptcy
Probably the main reason most people prefer Chapter 7 bankruptcy is that it doesn't require you to repay any portion of your debts, as Chapter 13 bankruptcy does. And if you use Chapter 13 bankruptcy, you must complete the entire three- to five-year repayment plan in order to have your remaining debts discharged (unless the court lets you off the hook early, for hardship reasons). The majority of those who file for Chapter 13 bankruptcy don't complete their plans, so filers run a very real risk that their debts won't ultimately be discharged.

Despite this major potential drawback, there are some good reasons why people who are eligible for both types of bankruptcy choose to use Chapter 13.

The Means Test: Is Your Income Low Enough for Chapter 7 Bankruptcy?
When the new bankruptcy law passed in 2005, it included a new "means test" -- a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. (These filers may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 to wipe out their debts altogether.)

Because of this new requirement, some people mistakenly believe that they must be completely penniless in order to use Chapter 7. Not true. You can earn significant monthly income and still qualify for Chapter 7 bankruptcy, even under the new law. In fact, most people who would have qualified for bankruptcy under the old law still qualify under the new law. This article shows you simple ways to determine whether you could pass the means test -- and, therefore, use Chapter 7 -- if you were to file for bankruptcy.

How Does the Means Test Work?
The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly can't pay their debts. It does this by deducting specific monthly expenses from your "current monthly income" (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly "disposable income." The higher your disposable income, the more likely you won’t be allowed to use Chapter 7.

To take the means test, you must first determine whether your income is more or less than the median income in your state. If you earn more than the median, you must figure out whether you would have enough left over, after subtracting certain expenses, to repay some of your debt.

Is Your Income More Than the Median?
The first step is simple: If your current monthly income is less than the median income for a household of your size in for your state, you pass. Period. You're done. You do not need to complete the rest of the means test. You can file for Chapter 7.