Thursday, August 4, 2011

Chapter 7 Bankruptcy Offer Shelter To Californians Who Meet The Criteria


Only few states have been slapped as hard by the economic collapse than California. Both the people and the government are striving hard to come out of the situation and eager for a fresh beginning. In the last three years, the number of people seeking debt relief programs and bankruptcy filings in California has tripled.

These days, many Californians are opting for Chapter 7 Bankruptcy, as it is very fast to get through. After continuous struggle to regain financial stability, families that are completely exhausted and want to shed off their debts, have decided to pursue chapter 7 Bankruptcy. Another attractive feature of Chapter 7 bankruptcy is that it engages no payback of debts. However, the most challenging object for families is to qualify for it. This article deals with the necessary steps to be taken in order to qualify for a Chapter 7 Bankruptcy in California State.

  
Chapter 7 Bankruptcy in California: A Two-Part Test
There are two essential constituent to qualify for a Chapter 7 bankruptcy. Firstly, the family have to prove before the court that they do not have sufficient household income to repay their debts. There must not be any extra money leftover that could be used to pay creditors. However, with the rising living expenses in California and soaring gas and food prices, this is certainly the easiest hurdle. The second constituent is more difficult, passing the means test.

The Means Test in California
The bankruptcy court makes use of a means test to determine if a family qualifies for a Chapter 7 bankruptcy. The bankruptcy court looks at the average monthly income of a household and for the last six months and assesses that figure. If the monthly household income is less than the required and shows no disposable income, then the person most likely qualifies for filing a Chapter 7 bankruptcy.
The means test is based on calculations from the Census Bureau. This amount might vary according to state and family size. The average income for a household is amended each year. Presently, the average numbers for California are:

  • Single person household: $48,009

  • Two person household: $62,970

  • Three person household: $68,670

  • Four person household: $78,869

  • An additional $7,500 is added for each additional person beyond a family of four.


Those who do not qualify these amounts may still qualify for a Chapter 7 bankruptcy. These people have to document additional practical living costs before the court. The debtor has to fill out the extensive means test form that deducts additional living costs like health insurance, taxes, daycares, etc., to decide the monthly disposable income.
Bankruptcy is a complex arena. There are many rules and requirements to be followed and fulfilled. If you are thinking of filing bankruptcy, you should consult an experienced bankruptcy attorney to achieve the best results.

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