The estate of a debtor is """"no asset"""" if the scheduled or recoverable assets, minus encumbrances (balance of loan(s), judgment lien(s), etc.) and exemptions, equals zero funds for creditors.
Such a debtor will be discharged from dischargeable debts after the trustee files a """"no asset"""" report and the Bankruptcy Court issues a discharge order. The issue is subsequently closed by ministerial decree.
Qualification to File a Chapter 7 Petition:
In contrast to Chapter 13 petitions, which limit the quantities of unsecured and secured claims eligible for discharge, Chapter 7 petitions have no such restrictions. 11 USC 109(a) requires a Chapter 7 individual debtor to have a domicile (residence), a place of business, or property in the United States.
In addition, neither U.S. citizenship nor financial hardship are prerequisites for Chapter 7 eligibility. 11 USC 727(a)(8) prohibits a Chapter 7 debtor from receiving a second discharge in a Chapter 7 bankruptcy case within eight years of the filing date of the prior Chapter 7 petition.
During the 180-day period preceding the filing of a Chapter 7 petition, an individual debtor is required to receive credit counseling from an approved credit counseling agency. The briefing may be delayed for 30 days (or 45 days if approved by the Bankruptcy Court) after the Chapter 7 filing date if """"exigent circumstances"""" exist and the debtor was unable to acquire a briefing within 5 days of request.
It has been determined that filing an emergency motion to halt a foreclosure sale does not constitute a """"exigent circumstance"""" that excuses compliance with the credit counseling requirement. The debtor is required to attend a financial management course after the section 341(a) meeting of creditors, following the filing of a Chapter 7 petition.
The Chapter 7 petition filing fee is $299.00, payable to the U.S. Bankruptcy Court.
Means Test To Determine Abuse:
In 11 USC 707(b)(2), the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) established the """"means test"""" for Chapter 7 debtors to determine dismissal for abuse. It is also used to determine ""disposable income"" in Chapter 13 petitions for repayment to creditors and the plan's duration.
The basic """"means test"""" formula triggers the presumption of abuse in a Chapter 7 individual debtor whose debts are primarily consumer debts, if the debtor's current monthly income, reduced by allowable monthly expenses (IRS' National and Standards: http://www.irs.gov) and multiplied by 60, is not less than the lesser of: (a) the greater of (1) 25 percent of the debtor's nonpriority unsecured claims in the case; or (2) $6,000.00; or (b) $10,000.00.
If the means test is applicable and there is a presumption of abuse, the Bankruptcy Court may dismiss or convert the Chapter 13 unless the debtor can rebut the presumption by demonstrating special circumstances, such as a call to active duty in the Armed Forces or serious medical conditions, justifying additional expenses or adjustments to current monthly income.
The means test does not apply if the debtor and spouse's current monthly income multiplied by 12 as of the Chapter 7 filing date is equal to or less than the state median family income ($46,814.00 for 1 earner, $61, 742.00 for 2 people, $66,611.00 for 3 people, $78,931.00 for 4 or more people in California). Under 11 U.S.C. 707(b)(2), there is no standing to file a motion to dismiss/convert.
California's Exemption Statute:
Individual debtors residing in California may choose between the so-called """"703-series"""" and """"704-series"""" exemptions, the amounts of which are adjusted by the Judicial Council on April 1 every three years.
Real or personal property homestead - $20,725.00, motor vehicle - $3,300.00, clothing/household goods/appliances - $525.00 per item, jewelry - $1,350.00, personal injury recovery - $20,725.00, tools/books of trade - $2,075.00, and unmatured life insurance - $11,075.00 are some exemption amounts under the """"703-series"""".
And some exemption quantities under the """"704-series"""" are as follows:
Real or personal property domicile - $50,000, if single; $75,000, if family; $150,000, if 65 or older; motor vehicle - $2,500; jewelry - $6,750.00; personal injury recovery - amount needed for support; tools/materials - $6,750.00; and matured life insurance - $10,775.00.
In the Chapter 7 petition, the series most advantageous to the debtor based on his or her circumstances should be used.
Automatic Restraining Order And Release:
The filing of a Chapter 7 petition halts all collection efforts, harassment, and repossession and foreclosure actions by creditors against the debtor and the debtor's property until: (1) the stay is lifted by a Bankruptcy Court order, (2) the stay expires or is rendered ineffective, and (3) the case is closed or dismissed.
Creditors may request relief from the automatic stay in order to: (1) proceed with a foreclosure or real estate collateral/security interest, (2) repossess personal property as security for delinquent loan(s), or (3) continue litigation in another case halted by the filing of the Chapter 7 petition.
Common grounds for lifting the automatic stay include insufficient protection of a property interest, the debtor's lack of equity in the property, or the property's non-necessity for a successful reorganization.
As stated in the recorded deed of trust, a Chapter 7 petition cannot prevent the foreclosure of the debtor's primary residence, which is the collateral/security interest for a purchase money loan.
Discharged And Undischarged Debts:
A discharge order issued by the Bankruptcy Court under Chapter 7 eliminates a debtor's legal obligation to pay discharged debts.
Certain debts, however, are not discharged in a Chapter 7 bankruptcy case, namely: most taxes, domestic support obligations, most student loans, most fines, penalties, or criminal restitution obligations, debts for personal injuries, death caused by driving under the influence, debts not properly listed in the schedules, debts decided as not discharged by the Bankruptcy Court, debts that are properly reaffirmed, and debts owed to certain pension, profit sharing, and other retirment plans.
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