Chapter 7 bankruptcy (also a "straight bankruptcy" or “liquidation") is the simplest way to a fresh start, and it is the most popular.

After the recent changes in the bankruptcy law, many people think that they no longer qualify to file under Chapter 7 bankruptcy. This is not true. Although after October of 2005, the new law has changed the qualifying factors, you can still get the debt relief you need if you qualify. As soon as you file for bankruptcy, your creditors must stop contacting you. If you are approved for Chapter 7 bankruptcy, you could have a complete forgiveness of your debt within months.

Based on the new law, people who want to file for Chapter 7 bankruptcy have to pass what is known as the "Chapter 7 Means Test". The Chapter 7 means test is a formula used to see if the consumer can have enough money available to make very minimal payments to creditors, like in a Chapter 13 bankruptcy plan. The purpose of the changes of 2005 was to ensure that anyone who can make some payments to creditors makes those payments. As a result those who qualify for Chapter 7 generally have such low income levels that they cannot make payments on their debts. This is why one’s household income has direct relationship to qualifying for Chapter 7. If your annual household income is below your state's median family income, or you pass the “means test,” and you do not have any assets that exceed the allowed exemptions, Chapter 7 will probably be the option for you. Call our Orange County, Irvine, and Laguna bankruptcy attorneys today for a free consultation.

Currently median income in the state of California is $44,499 for one earner, $59,086 for 2 people, $64,118 for 3 people, and $72,996 for 4 people in a family. Currently (January 2009) Homestead exemption for a single person is $50,000 and $75,000 for a married couple. It increases to $150,000 for persons over 65, the disabled, and persons over 55 with low income.

As the means test can be a bit complicated, the Rachelle Shakoori our Orange County and Los Angeles bankruptcy attorney, will help you determine whether bankruptcy is even the right choice for you, and if so, whether you can pass the “means test” necessary to qualify for Chapter 7 Bankruptcy. Rachelle Shakoori will also help you understand the process and all its potential consequences. Keep in mind that although Chapter 7 bankruptcy is referred to as “liquidation” bankruptcy, in most cases people who file Chapter 7 may retain their personal effects, home, vehicle, and retirement funds while eliminating their debts. Currently (January 2009) Homestead exemption for a single person is $50,000 and $75,000 for a married couple. It increases to $150,000 for persons over 65, the disabled, and persons over 55 with low income.

Chapter 7 can help debtors discharge most of their unsecured debts, including credit card debts, medical debts, etc. However, certain debts cannot be discharged in Chapter 7. Debts that are not dischargeable in Chapter 7 include, but are not limited to:

• Student Loans which are guaranteed federally,
• Child and/or spousal support debts
• Certain federal and/or state tax debts
• Debts incurred to pay taxes that are themselves not dischargeable
• Debts for money, property or services obtained by means of fraud, false representation or wrongful conduct including embezzlement or larceny
• Debts stemming from intentional or malicious injury to person or property or from driving while intoxicated
• Criminal and/or civil fines or penalties owed to governmental entities
• Certain debts incurred shortly before filing bankruptcy

Chapter 7 process generally takes from 4 to 6 months to complete and the debtor will generally only has to be in court one time and that is the creditors’ meeting.