By: chris skinner July 29, 2024

Am I Eligible to File for Chapter 7 Bankruptcy Protection in Orange County?

What is Chapter 7 Bankruptcy?

As explained by the United States Courts, Chapter 7 bankruptcy is a form of liquidation bankruptcy that allows for “the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.” In other words, it is a type of bankruptcy that sets the table for a fresh start. Do you lose everything when you file for Chapter 7 bankruptcy in Orange County? The short answer is “no”—there are a number of different assets that can be “exempt” from a Chapter 7 bankruptcy. You may be able to keep most (or all) of your existing money, property, assets when you file for Chapter 7 bankruptcy. Though, how much, will always depend on your specific financial circumstances/

Chapter 7 Bankruptcy is Restricted (Means Test)

There was a major federal bankruptcy law reform package signed in the early 2000’s. Among other things, that law limited who can file for Chapter 7 personal bankruptcy protection. The option is not currently available for all people and families. Instead, there is a “means test”.” A petition for Chapter 7 bankruptcy must first satisfy the means-test. If that test is met, then he or she has the right to file for Chapter 7 bankruptcy protection.The test determines eligibility by comparing the applicant’s income to the median income of a similar household in their state. If the income exceeds the median—further analysis of disposable income and allowable expenses is required.

An Overview of the Chapter 7 Bankruptcy Financial Requirements in California

If you are considering filing for Chapter 7 bankruptcy protection in Orange County, here is a key thing to understand about the means test: It is applied at the state level. In other words, you must satisfy California’s Chapter 7 bankruptcy means test in order to be eligible to get this type of personal bankruptcy protection in Orange County. Here is an overview of key points:

Median Income Standard: The first part of the means test compares your average household income over the past six months to the median income for a similar-sized household in California. If your income is below the median, you qualify for Chapter 7. As of 2024, the median annual incomes are set at $74,819 for a single person in California. If you are a single person with an income below $74,819, you can file for Chapter 7 in 2024.
Household Size: The Chapter 7 bankruptcy means the test is applied on a household-size adjusted basis. Determining your household size can affect the outcome of the means test. It typically includes those you support financially, such as dependents. Special circumstances might affect this count—such as non-custodial children. An attorney can help.
Excluded Income: Certain types of income are not included in the means test—such as certain disability benefits and Social Security income. It is essential to understand what income is considered to ensure accurate calculations. With that being said, wages are generally “included” income for determining the baseline.
Allowable Deductions: Finally, allowable deductions can include things like mandatory employment deductions, health insurance premiums, and various living expenses. These can significantly impact the calculation of disposable income. You may actually qualify for Chapter 7 bankruptcy after deductions are applied.

Do Not Assume Ineligibility: An Orange County Bankruptcy Lawyer Should Evaluate

If your income exceeds the median, you must complete a more detailed analysis involving Form 22A-2—which deducts allowable expenses from your income to determine your disposable income. If this calculated disposable income is below certain thresholds, you might still qualify for Chapter 7 bankruptcy. In other words, do not assume that you do not qualify to file simply because your income is somewhat above the median threshold on a household-size adjusted basis. You may qualify under a more comprehensive income/expenses analysis. Before you make any final decisions, be sure to consult with a top-tier Orange County bankruptcy attorney.

Know the Alternative if You Do Not Qualify: Chapter 13 Bankruptcy

What happens if you cannot qualify to file for Chapter 7 bankruptcy protection based on your income level? The short answer is that bankruptcy protection may still be the best available option to fix your finances. The primary alternative to Chapter 7 is Chapter 13 bankruptcy. Through Chapter 13 bankruptcy, you can get an (affordable) monthly repayment plan that allows you to resolve your delinquent debts over a three to five year period.

Resolve Law Firm Helps People With Bankruptcy in Orange County

Considering filing for Chapter 7 bankruptcy in Orange County? It is normal to have a ton of questions. Meeting the eligibility requirement is merely one (key) step in the process. Le’Roy Roberson is a bankruptcy attorney with extensive experience helping people and families solve financial problems and secure a better, more stable future. Bankruptcy is merely a tool to help. It is our goal to make sure that clients are able to navigate the process in the most effective manner possible. More specifically, our Orange County bankruptcy lawyer is prepared to:

Listen to your story and answer your questions about Chapter 7 bankruptcy law;
Gather supporting documentation and ensure that meet the eligibility requirements; and
Handle the legal paperwork, including your Chapter 7 bankruptcy petition.

Get Help From Our Orange County Personal Bankruptcy Attorney Today

At Resolve Law Firm, APC, our Orange County personal bankruptcy lawyer has extensive experience handling Chapter 7 petitions. If you have any questions about your eligibility to file for Chapter 7, we can help. Contact us today to set up your free 30-minute initial consultation. Our firm provides personal bankruptcy representation throughout Orange County, including in Anaheim, Santa Ana, Irvine, Huntington Beach, Fullerton, Costa Mesa, Mission Viejo, and Newport Beach.