Chapter 7 Bankruptcy Attorneys in San Mateo, California

For many people, the thought of filing for bankruptcy is equivalent to admitting failure—and, in the process, losing everything you’ve worked for your entire life. Your employer and friends will find out and you’ll be disgraced forever. However, these fears couldn’t be further from the truth.  

The reality is that bankruptcy under federal and state statutes is designed to offer a fresh start in life. The entire process is designed to provide a fresh start for you and your family after a rollercoaster ride of trying to make ends meet. 

The federal bankruptcy codes offer different protections called chapters. Chapter 7 is the swiftest route to ending your unsecured debt obligations and moving forward. It is often called the liquidation option, which indeed does sound like losing everything. California, however, offers generous exemptions, so that you can even keep a personal residence with up to $600,000 in equity depending on home values where you live. 

If you’re overburdened with debt and the bill collectors are hounding you in or around San Mateo, California, contact EH Law Group. We have more than three decades of combined experience in helping individuals and families move forward in life with a fresh financial start through bankruptcy. As bankruptcy attorneys, will help you navigate the system and represent you and your interests throughout. 

In addition to San Mateo, we have an office in San Francisco, and we proudly serve clients throughout the area, including South San Francisco, Oakland, Daly City, and Santa Clara County. 

What Is a Chapter 7 Bankruptcy? 

The U.S. bankruptcy code has different chapters for individuals, families, businesses, and government entities to seek relief from debt. The two most often used chapters for individuals and families are Chapter 13 and Chapter 7. Chapter 13 is known as the wage-earner’s plan, while Chapter 7 is known as the liquidation plan. 

In a Chapter 13 filing, filers must use their disposable income to repay at least part of their unsecured debt obligations while still honoring their full obligations toward secured debts such as homes or vehicles unless they are able to renegotiate those debt terms. They must submit a reorganization plan to creditors for approval and then make monthly payments for three to five years. 

Under Chapter 7, there is no repayment plan—but the downside is that nonexempt assets are subject to being sold off to satisfy outstanding debts, at least partially. Homes and cars fall under California’s generous exemption status in terms of how much equity you can have before they are subject to being sold to satisfy creditors. Once again, however, if you want to keep your home or car, you will have to honor your debt agreement even if they are exempt. 

Qualifying for a Chapter 7 Filing 

Chapter 7 generally can be concluded in a matter of months, after which you will be discharged from unsecured debt obligations, but it is not open to everyone. There is an income “means test.” In other words, there are income thresholds to qualify for a Chapter 7 filing. For an individual, the income limit currently stands at $69,660. For a household of four, the limit is $133,615. These figures are routinely updated, sometimes every six months.  

Some types of income are not included in the calculation. For instance, Social Security and disability payments are not included in the calculation. In addition, you can also deduct certain expenses from the income total, including income taxes, alimony, child support payments, mandatory employment expenses such as union dues and retirement plans, and even childcare expenses. 

Exemptions Allowed: What You Can Keep 

When filing for Chapter 7, California allows two types of exemptions named after the sections of the applicable California civil code: 704 and 703. Using section 704, you can, for instance, exempt up to $600,000 of equity in your home from being subject to liquidation. This depends on the general value of the homes where you live. In other words, if you have $500,000 of equity in your personal residence and homes in the neighborhood average $600,000 in value, your home might be exempt from being subject to sale or seizure to satisfy creditors.  

Of course, if you are behind in your mortgage payments, you could be subject to foreclosure anyway. If you are behind, you would have to use the automatic stay provision of a bankruptcy filing to work out a new payment arrangement with your mortgage holder. 

Section 704 also has exemptions for vehicles, tools of the trade, personal property, and more. Retirement and pension funds are also protected, as are workers’ compensation, unemployment, disability, and other public benefits. 

Section 703 exemptions are for those who are non-homeowners or otherwise have less than $31,950 in equity in their home. Essentially, it ups the equity and personal property amounts that are protected. This "wildcard" exemption can be used for almost any asset and split between assets as well. For instance, you can exempt up to $6,375 in vehicle equity as opposed to $3,625 under Section 704.  

When Is Chapter 7 a Good Option? 

A Chapter 7 filing is quick, and it is likely over and done within a matter of months. However, it does depend on whether you can satisfy the income means test. Chapter 7 bankruptcy is a good option if your debts are largely unsecured as opposed to secured such as your home. Perhaps you have huge medical expenses that you ran up during a period of health challenges, but you have kept up with your mortgage or other payments. You may be able to wipe out your medical debt while retaining your home.