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Our Orange County Bankruptcy Attorneys are here to help you eliminate your debt by filing Bankruptcy. Whether you qualify under Chapter 7
or Chapter 13,  our Bankruptcy Lawyers will represent you every step of the way to ensure that your financial crisis is put to an end. 

See if you qualify to file Chapter 7 Bankruptcy under the 2005 Bankruptcy Reform Laws. 
> Orange County Bankruptcy Means Test <

Bankruptcy Overview

Federal bankruptcy law helps individuals get a handle on their debt by allowing them to request a complete liquidation under Chapter 7 of the Bankruptcy Code and/or a repayment plan under Chapter 13 or Chapter 11.

Chapter 7

Bankruptcy under Chapter 7 of the Bankruptcy Code is often referred to as "liquidation bankruptcy" or a "straight bankruptcy." Under Chapter 7, a Bankruptcy Court can relieve a debtor of the responsibility to pay most of his or her debts but still allow the debtor to keep much of his or her property. South Orange County Bankruptcy fights hard for you so that in most cases you retain all your assets.

A debtor begins the bankruptcy process by filing a petition with his local bankruptcy court. Once the petition is filed, an "automatic stay" goes into effect and the creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossession. Along with the petition, or shortly thereafter, the debtor files various written "schedules" and "statements" to inform the Court of his outstanding debts, his current income and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. Upon receipt of the Petition, the Court appoints a Bankruptcy Trustee to handle the debtor's case. The Trustee determines what assets, if any, it can collect from the debtor to sell to pay off the creditors. The Trustee can only collect certain assets, known as "non-exempt" assets, from the debtor. The debtor can keep his "exempt" assets if he chooses (and wants to continue to pay for as debts on those assets are not discharged). California law generally exempts a debtor's home, furniture, furnishings, motor vehicles, and additional personal property up to a certain dollar amount. Most debtors only have "exempt" property. Once the Trustee sells the debtor's "non-exempt" property, if any, and distributes the proceeds to the creditors, the Bankruptcy Court discharges the debtor's remaining debt (other than alimony and child support, student loans, most tax obligations, and debts resulting from fraudulent or malicious acts) and concludes the bankruptcy proceeding.

In California the current maximum median incomes to qualify for bankruptcy are as follows:
Houshold Size Annual Income Monthly Income
1
$47,683 $3974
2
$61,539 $5128
3
$66,050 $5504
4
$74,806 $6234

Add $7,500 for each individual in excess of 4

[NOTE - According to bankruptcy requirements the median income is determined NOT by counting the last 12 months or the last tax return but by doubling the last 6 months of income. This can often help people not otherwise able to qualify not meet the median income test.]

If you cannot pass the median income test or means test, there is a way to also qualify as a non-incorporated business bankruptcy so long as the debtor's debt related to his/her business are more than 50% of the total debts of the person exceeds 50% of the debtor's total liabilities.


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Chapter 13

Bankruptcy under Chapter 13 of the Bankruptcy Code is sometimes referred to as a “wage earner plan.” Under Chapter 13, a Bankruptcy Court can help a debtor reorganize his debts and pay them off over time.  Under Chapter 13, a debtor typically keeps all of his or her property. South Orange County Bankruptcy encourages this form of bankruptcy for those who want to retain all their valuable assets in exchange for paying a small percentage of their debt over a period of about five years. 

A debtor begins a Chapter 13 bankruptcy by filing a petition with his local bankruptcy court. Once the petition is filed, an “automatic stay” goes into effect and the creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossession. Along with the petition, or shortly thereafter, the debtor files various written “schedules” and “statements” to inform the Court of his outstanding debts, his current income and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. Within approximately 15 days of filing the petition, the debtor submits a plan to the Court detailing how he will pay off his debts. Under the plan, the debtor must completely pay off certain “priority” debts, such as the costs of administering the bankruptcy, employees’ wages and benefits, debts for undelivered services or goods, and taxes, and pay for any encumbered property he wants to keep. The debtor can plan, based on his ability, to partially pay any remaining debt and ask the Court to discharge the rest. Once the Court approves a payment plan for the debtor, a Court-appointed Trustee begins collecting the debtor’s paychecks and administering the plan. Upon the debtor’s successful completion of the repayment plan, the Bankruptcy Court discharges any remaining debt and concludes the bankruptcy.

In some situations, an individual may be able to use both Chapter 7 and Chapter 13 to handle his or her debt.

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Bankruptcy Means Test

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a means (income) test, which will be applied to Chapter 7 bankruptcy petitions, filed on or after October 17, 2005 if the debtor is an individual with primarily consumer debts. The test will determine if the debtor is eligible for Chapter 7 or must file under Chapter 13 for relief. Here's how the test works. 

  1. Your current monthly income (CMI) equals the average monthly gross income that you (in a joint filing, you and your spouse) received from all sources. This includes any amounts paid by any other entity on a regular basis for the household expenses of you, your spouse (in joint filings), and/or your dependents, over a six-month period immediately preceding the bankruptcy filing. Social Security benefits, and payments to victims of war crimes, crimes against humanity, and terrorism may be excluded.
  2. As published by the U. S. Bureau of Statistics, adjusted for family size.
  3. Generally, allowable expenses include living expenses, determined under: The IRS National Standards for Allowable Living Expenses, based on family size and gross monthly income--an additional 5 percent of the National Standards food and clothing categories is allowed if you can demonstrate that this additional amount is reasonable and necessary.

    The IRS Local Standards Housing and Utilities Allowable Living Expenses for your state and county--you may be granted an additional expense allowance for actual home energy expenses if you can document the expenses and demonstrate that they are reasonable and necessary.
    • The IRS Allowable Living Expenses for Transportation for your area
    • The actual amounts of other necessary expenses, including:
      • Charitable contributions not to exceed 15 percent of your gross income
      • Child care
      • Care for elderly, invalid, or handicapped members of your immediate family who cannot pay for these expenses themselves
      • Elementary or secondary school expenses for each dependent child under 18 years old, to a maximum of $1,500 per child per year>
      • Health insurance, disability insurance, and health savings account expenses
      • Federal, state, and local tax payments, including FICA and Medicare
      • Secured debt payments (e.g., home mortgage, car payment)>
    • Administrative expenses if you're eligible to file Chapter 13
    • Reasonably necessary expenses to keep you and your dependents safe from family violence
    • In October 2005, Congress passed the Bankruptcy Abuse Prevention, Consumer Protection Act (BAPCA) which changed Bankruptcy Law. A common mis-conception is that you may not be able to  file for Bankruptcy protection with these new laws in place. The purpose of the new Bankruptcy Laws was to prevent Bankruptcy abuse in the courts. There are numerous changes in the law that make filing for Chapter 7 somewhat more difficult. However, almost everyone who wants to file for Bankruptcy can still do so. 
    • In order for one of our Bankruptcy Lawyers to examine your situation, to see if you qualify under these new laws, please give us a brief overview of your current financial situation. This service is free of charge and all information is kept confidential by South Orange County Bankruptcy.
  4. Mandatory Credit Counseling: Prior to filing any bankruptcy case in Southern California, one must now complete a credit counseling course online or over the phone. They generally cost $0.00 to $50.00 and must be given free of charge if you don't have the ability to pay for one. The mandatory credit counseling course usually lasts 45 to 60 minutes, and can be taken usually 24/7. A certificate will be issued upon completion and must be provided to our office as a condition of filing your case. Failure to timely file the certificate of completion results in an automatic case dismissal. Most of our clients have indicated so far that they found the course very enlightening and educational. Moreover, studies thus far have indicated that 97% of all debtors taking the counseling courses have been specifically advised by the counseling organizations that they cannot help them and that they should file bankruptcy. South Orange County Bankruptcy will help arrange for you to comply with this requirement.  
  5. Tax Returns: In a Southern California Orange County Bankruptcy Chapter 7 filing, a debtor is required to submit the previous year's tax return, but only if they filed a return. If they did not file a return, a declaration is submitted instead. In a Southern California Orange County Bankruptcy Chapter 13 filing, the debtor is required to submit the last 2 years' tax returns, and possibly up to the most recent 4 years' of tax returns , depending upon the circumstances.
  6. Mandatory Debt Management: Just as with Credit Counseling, a debtor is now required to undergo a Debt Management Course after the bankruptcy case is filed. The same fees and time frames apply as with Credit Counseling. Moreover, it has been our experience that this is one of the most beneficial aspects of bankruptcy according to our clients. Debt Management is the course that everyone wanted to learn in High School and College, but nobody taught. In fact, this course very easily explains how to budget and eventually arrange your finances to become very successful!
  7. Exemptions: Exemptions are what allow a debtor to keep property in a bankruptcy proceeding. Under the new bankruptcy laws, we must use the exemptions in the state you resided in the past 2 years. If you resided in more than one state over the past 2 years, then we must use the exemptions in the state you resided in for the majority of the time for 2.5 to 2 years ago. The purpose of this law was to keep debtors from moving to favorable bankruptcy states, for instance to Texas, where they could keep their $20 million dollar house, Rolls Royce, etc. For most people, this new law has no impact on the outcome of their bankruptcy case. So far, in all of our Southern California bankruptcy cases filed, we have yet to see any debtors affected by this law. Due to poor drafting of the new laws, most states' exemptions cannot be used anyway, as they only apply to residents of that state, and we must then default to the Federal Exemptions which are almost as good as California's bankruptcy laws. In summary, this law will probably not apply to you.

    In Summary, the new bankruptcy laws have for the most part backfired. Almost every Orange County Bankruptcy Attorney, Trustee, and Judge will tell you they despise the new laws. The new laws have made bankruptcy filing more expensive and created more work, with no other effect. Bankruptcy cases in Southern California can still be filed as before, and as previously discussed, qualifying gets easier in most cases. In fact, many of the unsecured creditors and credit card issuers are now seeking to overturn the new laws, as they are now getting paid less money in Chapter 13 bankruptcy cases than than they were under the old laws. South Orange County Bankruptcy specializes in dealing with the nuiances of the new laws.

  8. If you are in danger of losing your house, your car, or other property, and/or are tired of creditors' harassment, contact us today. We can help you decide if bankruptcy is for you. The only thing you have to lose is your debt, call now: (949) 313-7263.

    South Orange County Bankruptcy

    Irvine, Orange County Bankruptcy Attorneys and Lawyers Mark Klein can help if you are facing overwhelming debt.
    15615 Alton Pkwy #230 Irvine, CA
    Phone: (949) 313-7263

  South Orange County Bankruptcy is a Debt Relief Agency under United States Bankruptcy Code.
Copyright 2010 South Orange County Bankruptcy. All rights reserved.
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