A LOT of debtors prefer to file Chapter 7 bankruptcy, otherwise called liquidation bankruptcy, because most debtors can get a discharge of all or most of their debts under this type. In addition, you usually get your discharge a few months after the 341 meeting is held, unless an opposition is filed. However, debtors contemplating filing bankruptcy are concerned if any or all of their assets will be surrendered to, or confiscated by, the bankruptcy court once they file.
In a Chapter 7 liquidation bankruptcy, the Chapter 7 trustee is appointed by the bankruptcy court principally to examine your real and personal properties as listed in the bankruptcy petition schedules and determine which property can be sold for the benefit of the creditors. (The Chapter 7 bankruptcy trustee gets a small percentage from the sale of property.) Your properties in the bankruptcy estate are almost anything and everything you own, such as real property (e.g., house, land) or personal property (e.g., cash, cars, household furnishings, etc.) On the other hand, properties excluded from the bankruptcy estate include property in your possession that belongs to someone else, tax-deferred educational funds, and property bought or receive after filing (with certain exemptions), among others.
As earlier stated, the debtor’s property may be sold by the trustee to pay off the debts unless they are exempt properties. Exempt properties are those owned by the debtors that are exempt from execution of the judgment creditors. However, most Chapter 7 filings are considered “no asset” cases, which means that the debtor does not have non-exempt properties that trustee can sell.
There are two (2) systems of exemptions in California which the debtors can choose from, depending which is most advantageous for them. These two (2) systems are called the “703-series exemptions” and the “704-series exemptions”. The usual exemptions are household furnishings and clothing.
Included in the “703-series exemptions” system are a $25,575.00 exemption in equity in real or personal property if used by the debtor or dependent of the debtor as a residence, an exemption equal to $1,350 plus and unused portion of the $25,575.00 exemption (called the “wild card” because it applies to any kind of property) and a $5,100.00 motor vehicle equity exemption for one motor vehicle.
On the other hand, a notable exemption under the “704-Series exemption” system is the homestead exemption of $75,000 for a single person, $100,000 if debtor or spouse is a member of a family unit and at least one there is at least one member of the family unit who owns no interest in the homestead or whose only interest in the homestead is a community property interest with the judgment debtor, $175,000 for a person 65 years or a disabled person, among others.
If you are contemplating of filing bankruptcy or other alternatives, it is advisable to seek the counsel of a bankruptcy lawyer to guide you on the intricacies of filing for such a petition.
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Atty. Gwendolyn Malaya-Santos is a member of the State Bar of California and the Integrated Bar of the Philippines. To schedule for a free initial in-person consultation, please call Tel. Nos. (213) 284-5984 or (626) 329-8215. Atty. Santos’ office is located at 3450 Wilshire Blvd., Suite 1200-105, Los Angeles, CA 90010.
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Information contained in this article does not, nor is it intended to, constitutes legal advice for any specific situation and does not create a lawyer-client relationship. It likewise does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.
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