Bankruptcy Help for Business and Individuals

Chapter 7 Eligibility

Chapter 7 provides for “liquidation” – the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.
A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in Chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay creditors in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property, but a trustee will liquidate the debtor’s remaining assets. Accordingly, the filing of a petition under Chapter 7 may result in the loss of property.

To qualify for Chapter 7, the debtor may be an individual, a partnership, or a corporation or other business entity. Subject to the means test for individual debtors, relief is available under Chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent. No individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

We will help you correctly fill out the paperwork for the means test. The form is six pages long and asks for a lot of financial information regarding your household income and expenses.

To learn more, contact our offices at (949) 450-8500 for your FREE consultation.

Grant and his team have always been responsive, helpful and most importantly understanding of the situations we presented to him for help. It’s been a wonderful relationship and I highly recommend Hallstrom Klein & Ward LLP.

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