Category: Chapter 7

California bankruptcy exemptions can save your house.

California Homestead Exemption

California Homestead Exemption

Chapter 7 bankruptcy is liquidation; the bankruptcy trustee can take your stuff. They don’t take the shirt off your back, but at some point they draw the line regarding what you can keep. These are the bankruptcy exemptions, and each state has its own. The California exemptions include a way to protect some home equity. This is the California homestead exemption.

There are two sets of California bankruptcy exemptions. Bankruptcy attorneys call these the 703s and 704s. The California homestead exemption is found in the 704s, at California Code of Civil Procedure 704.730. There isn’t just one homestead exemption in California, but three.

The Three Homestead Exemptions in California

The California homestead exemption can save your house.
Don’t risk losing your house in Chapter 7. Talk to a experienced bankruptcy attorney about the bankruptcy exemptions and homestead exemption in California.

Firstly, there’s the bankruptcy exemption that a single homeowner gets. This is in subsection (a)(1). In 2018, a single person who lives in a house gets to protect $75,000 of home equity under the California exemptions.

Secondly, there’s a higher California homestead exemption for a married person’s residence. This is in (a)(2). The California homestead exemption for a married person is $100,000.

Finally, if you can tick one of three boxes, you get the superduper $175,000 homestead exemption in California’s bankruptcy exemptions. To level-up and qualify for this, you have to either be:

  • 65 years old;
  • have a disability that prevents gainful employment; or,
  • 55 years old, and make below a certain income level that changes from time to time

This may seem simple, but what is “disabled?” What is “as a result of?” What is the income level, and which time period is measured? You’ll want to speak to a qualified bankruptcy attorney in your area. But in the right circumstances, someone filing consumer bankruptcy can protect a lot more house equity under this third option.

Spouses Sometimes Count

A final note: a good thing about, in particular, the $175,000 California homestead exemption is that it extends to the spouse of the person filing Chapter 7. So if the debtor is, say, 63 years old, but their husband is 67 but really doesn’t want to file bankruptcy, the 63 year old who does file Chapter 7 bankruptcy gets the $175,000 homestead exemption in California anyway.

Be careful in Chapter 7 bankruptcy.  It’s not always the best type of bankruptcies.

Learn the differences between Chapter 7 bankruptcy vs 11 vs 13.

 

 

You really should talk to a qualified Los Angeles bankruptcy lawyer, as you get what you pay for, and it’s not worth risking your home.

2018 median income limits bankruptcy means test

2018 Median Income Limits Changed for Bankruptcy Means Test

2018 Median Income Limits Change for Bankruptcy Means Test

The means test decides eligibility for Chapter 7 bankruptcy. The Chapter 7 means test lets people file bankruptcy without having to repay their debts if they earn less than the California median income limits, or those in their own state. So, 2018 median income changes impact who qualifies, since it sets the bar for who can get into Chapter 7 bankruptcy.

Means Test: 2018 Median Income Adjustments

As the economy changes, from time to time, the government updates the median income limits used. As a result, on April 1, 2018, the DOJ started utilizing new 2018 median income numbers for the Chapter 7 means test.

The California median income numbers have increased for bankruptcy means-test takers. Consequently, many Californians should now have an easier time qualifying to file Chapter 7 bankruptcy.

California household size and California median income for Bankruptcy

  • 1 – $54,787
  • 2 – $73,162
  • 3 – $79,061
  • 4 – $91,349
  • add $8,400 each add’l person

Read Our Means Test Guide.


Just because a household earns more than the median income, it’s still not barred from Chapter 7 bankruptcy. The bankruptcy means test would just need to be filled out completely. It’s still possible to qualify. However, even if someone isn’t eligible, there is still a way out in Chapter 13.

Finally, we don’t know the next time changes to the median income limits will happen again. So, be sure to check before relying on this 2018 median income limits in the future.

 

bankruptcy debt limits

Is There a Debt Limit to Chapter 7

Is there a debt limit to Chapter 7?

One question people ask is, “How much do you have to be in debt to file Chapter 7.” Unlike Chapter 13 bankruptcy, there is no debt limit to Chapter 7. It just becomes a matter of practicality. There are financial benefits to file Chapter 7 bankruptcy, but these must be weighed against the costs, monetary and otherwise..

Too little debt for Chapter 7

The Bankruptcy Code has no lower limit to file bankruptcy under Chapter 7. The only limit is common sense. One the one hand, if you owed someone a dollar, and the Chapter 7 filing fee is $335, most people would just pay the dollar. No brainer. Another example: if you owed someone $1000, the debt is greater than the filing fee, but now there are other costs you’d weigh, like the hit on your credit. Is it worth it to discharge $1,000 of debt but have a bankruptcy on your credit report? Most would say no. Each individual weighs their own personal limit line differently. Many people would agree that $20,000 or $30,000 of debt is a lot to ditch in a bankruptcy discharge. A debt amount that high may outweigh the cost of the bankruptcy filing fee, paying a bankruptcy attorney, and the credit report ding. While there’s no debt limit to Chapter 7, we bankruptcy lawyers do see a typical range of debt.

Too much debt for Chapter 7?

On the other hand, there’s nothing written in the law that has a specific dollar amount that becomes too much debt to file a Chapter 7 bankruptcy (note: this is in contrast to Chapter 13 bankruptcy, which has a maximum debt limit set by law in 11 USC 109(e), which periodically adjusts, so check current limits).

There are other factors though that can stop a bankruptcy with too much debt. Firstly, the government looks at whether the debt was obtained in good faith. If someone unemployed for years has $250,000 of credit card debt, were they really intending to pay it back? Secondly, they look at the nature of the debts: were they luxuries like travel? Another factor is if the debts or discharge was obtained by fraud. Too much debt is situation specific. It may make sense for a business owner to have a lot of debt, but maybe not so much for a retired grandma.

Summing up the Debt Limit for Chapter 7

In short, there is no debt limit to file Chapter 7. Common sense factors would make it not worthwhile to file Chapter 7 bankruptcy for some. There is an upper limit that will get you on the trustee’s radar, though it’s not sure exactly what that number is. Like most things, if it’s reasonable it should work, though your mileage may vary.