Chapter 7 bankruptcy, also called liquidation, if carefully planned and prepared, Chapter 7 bankruptcy is a way to permanently rid yourself of most debts such as credit cards, personal loans, medical bills, repossession deficiencies, auto accidents, etc.

There are numerous requirements to qualify for chapter 7 bankruptcy. You must not have received a previous chapter 7 bankruptcy discharge within the previous 8 years, and your income must meet certain guidelines.

The “means test” is an analysis of the previous six months of your income. If your income is low it’s usually not a problem, but if your income is high things can get much more complicated.

Bankruptcy exemptions in California are pretty generous compared to other states. In short, exemptions mean the things you get to keep after bankruptcy. California is unique in that it has two different “tracks” of exemptions, called the 703’s & 704’s, a reference to the code sections utilized in your particular case. The 704’s include the homestead exemption for homeowners and the 703’s include a “wildcard” that can be used for anything. Careful exemption planning is often crucial to the success of your case.

Most debts are dischargeable in a chapter 7 case, such as credit cards, personal loans, medical bills, repossession, auto accidents, business debts, etc. Careful planning is important to ensure success in the discharge of your debts.

Student loans are non-dischargeable with extremely limited exceptions. Among other debts that are non-dischargeable are child and spousal support obligations, debts obtained by fraud, auto accidents causing personal injury while intoxicated, and many (but not all) taxes are non-dischargeable.

Taxes in bankruptcy are by far the most complex of all debts. As a general rule income taxes that are old, for which you timely filed your tax returns and were assessed more than 240 days ago might be dischargeable. This area requires great care and planning before filing your chapter 7 bankruptcy.

The co-signer is still obligated for the debt.

If the bankruptcy petition is carefully prepared, most people are able to keep all of their belongings and other assets if they are within certain value ranges. Understanding what an asset is can be tricky and not obvious for most people so careful analysis is important. Even people who think they are poor can find themselves in a trap and lose very significant assets, such as an inheritance or personal injury claim.

Chapter 13 is much more complicated than chapter 7. In short, chapter 13 is a debt reorganization and repayment plan. Mostly it is for those who would like to keep assets that would be taken from them if they file a chapter 7 case, or those whose income is too high to qualify for chapter 7. The chapter 13 debtor must have a regular source of income.

A chapter 13 debtor must have a regular source of income to fund their chapter 13 plan over the course of 3 to 5 years, meet what can be complex requirements based on an analysis of the debtor’s assets and income, and get approval from the judge and the chapter 13 trustee.

All of the same debt that is dischargeable in chapter 7 plus some additional debts, such as income taxes, and back child or spousal support.

For most people debts that are not dischargeable in chapter 13 are those obtained by fraud.

Taxes are usually discharged in a chapter 13 bankruptcy. There are multiple types of taxes that fall into one of two categories – priority and non-priority. Priority taxes must be paid in full through the chapter 13 and non-priority taxes are treated the same as credit cards. In most cases all taxes are discharged through chapter 13.

Most people can keep whatever assets they would like to keep, though sometimes it is best to get rid of certain assets that are unaffordable. If there is a loan associated with the asset, such as a car, the debtor can keep it so long as he or she can make the payments.

Sometimes it’s your circumstances that dictate which is right (for example, your income is too high for chapter 7). Through careful analysis and planning and being honest with yourself about your goals you can decide which is right.

Each has its own pluses and minuses but for most people chapter 7 is easier. Only careful analysis can determine.

Not really. Though it seems counter-intuitive, for most people bankruptcy will actually improve their credit. Chapter 7 is a quicker way to improve credit than chapter 13.

If carefully planned and prepared, most chapter 7’s take about three to four months to complete. If issues arise it can take longer. Chapter 13 takes three to five years to complete.