California residents who are struggling to keep up with their debts may benefit from filing for bankruptcy. However, it should be seen as a last resort for those who don’t have any other options available. In the case of a short-term financial shortfall, it may be best to speak with a lender to work out alternate payment arrangements. This could make it possible to avoid a repossession or serious blemish on a credit report.
Those who do file for bankruptcy may have the option of filing for Chapter 7 bankruptcy. This is a liquidation bankruptcy that sees nonexempt assets sold to raise money to pay off creditors. However, Chapter 7 is only available to those who pass the means test. The means test is used to determine if an individual has the disposable income necessary to pay back some or all of an outstanding debt.
Chapter 7 is preferable to other forms of bankruptcy because a case can be resolved in a matter of months. In a Chapter 13 case, it can take up to five years to have debts discharged. As lenders aren’t keen on working with those with an ongoing case, it may be difficult to get an auto loan or other form of credit until everything is settled.
Filing for Chapter 7 bankruptcy may allow a person to pay little or nothing to creditors before having debts discharged. Once a discharge occurs, creditors can no longer require that a debtor repay a former balance owed. During the bankruptcy case itself, creditors are generally barred from having any contact with a debtor. A debtor could learn more about the benefits of Chapter 7 by talking with an attorney.