The Chapter 7 Bankruptcy Filing Process

To many people, the process of filing bankruptcy is a mystery.  However, it does not have to be that way.  In its simplest form, a bankruptcy petition consists of four parts: a petition, schedules, a statement of financial affairs, and the means test.  

Part One - The Bankruptcy Petition:


The petition is the simplest form to fill out.  It simply states the debtor's name, address, and chapter of bankruptcy that is being filed.  It also includes facts about how much total debt and assets are involved in the case, whether the case is a consumer or non-consumer bankruptcy, and the name of you attorney.  This form is only three pages and it is all that is technically required to file bankruptcy.  The filing of this form alone, will put the automatic stay into effect. 

Part Two - The Bankruptcy Schedules:

The Bankruptcy Schedules list all of the debtor's assets, debts, exemptions, income, and expenses.  This section of the bankruptcy filing will show the court and the bankruptcy trustee what your monthly budget looks like and whether you have any assets that may be seized during the bankruptcy.  The bankruptcy trustee can only seize assets that are not exempt, or protected by law.  You can see a list of the California exemptions here, California Bankruptcy Exemptions.  The idea behind exemptions is that if a debtor has excess property that could be sold to satisfy his debts, then he should be required to do so.  The fact is that most people who are filing bankruptcy do not have property in excess of the allowed exemptions.  If that is a danger, then chapter 13 may be a more appropriate option.  In short, the bankruptcy schedules disclose the debtor's financial condition and support the petition's assertion that a chapter 7 discharge is deserved. 

Part Three - Statement of Financial Affairs:

The purpose of the statement of financial affairs (SOFA) is to discover any potential fraud or dubious past financial transactions.  In this section, the debtor must disclose her income from the past few years, payments to creditors prior to the bankruptcy, any lawsuits she has been apart of recently, and any other transfers of wealth that have occurred in the year prior to the filing of the bankruptcy.  The SOFA is essentially supposed to be able to determine whether the debtor is hiding any assets somewhere.  Again, this is not an issue for most debtors.  If it is an issue, then I suggest you speak to an attorney.  

Part Four - The Means Test:

The means test is essentially a formula that determines whether a debtor qualifies for a chapter 7.  It averages a debtor's income during the six months prior to filing bankruptcy.  Then it takes that average and compares it to the median family income.  If a debtor's income is less than the median family income for his county, then he automatically qualifies for a chapter 7.  If a debtor's income is more than the median family income, then he has to "pass" the means test before he can qualify for a chapter 7 bankruptcy.  To "pass" the means test, a debtor must have less than about $200 left over each month after allowable deductions.  The allowable deductions are a hybrid of IRS standard living expenses and a debtor's actual living expenses.  Calculating the means test can be difficult and I suggest that you speak to an attorney if you are confused on how it works.   Call us at 510-556-1160 or click below to schedule your appointment online.

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