California residents may want to consider filing for bankruptcy if they are struggling to repay a debt. The type of bankruptcy an individual files for depends on what types of debt they have and what kind of protection the law says that they can seek. A Chapter 7 bankruptcy is referred to as a liquidation bankruptcy and eliminates most types of unsecured debts in about three to six months. An individual must pass a means test to qualify for this type of protection.
To pass the means test, a person must have an income that is at or below the median for the state. If a person's income is above the median, it may be necessary to pay off a portion of their credit card or other unsecured debts. In some cases, an individual may not be able to pursue a Chapter 7 case at all.
Instead, a debtor may need to file for Chapter 13 protection, which involves making payments to creditors over a period of three or five years. In addition, a debtor must stay current on all of his or her current bills. It may be possible to take on new debt during a Chapter 13 case if the trustee and the bankruptcy court agree. It will also be necessary to find a lender willing to issue this new debt.
There may be benefits to filing for either Chapter 7 or Chapter 13 bankruptcy. For instance, it may be possible to have debts discharged in a timely manner or keep property such as a house or car. It may also be possible to put an end to creditor contact while a case is ongoing. An attorney might provide other benefits to filing for protection from either secured or unsecured creditors.