Filing for Chapter 7 can be a daunting and complex task, for the most part, because there are numerous factors influencing the eligibility, and criteria set by California bankruptcy laws are very strict when it comes to passing the means test.
Although there are a lot of nuances to the process, the two key aspects that are absolutely pivotal to its resolution are home equity and income. For this reason, it is imperative to understand how each of these contributors influences the outcome.
It is important to note that, while this guide will give you a good foundation, the circumstances of each case regarding Chapter 7 bankruptcy in San Diego are unique. As such, consulting with a qualified attorney is the best course of action to take in order to ensure your future financial well-being.
How much equity can you have in your house and file Chapter 7 in California?
By far the most common question anyone contemplating Chapter 7 asks is “Will I be able to keep my house after I file for bankruptcy?” This is where understanding equity can prove essential. In simple terms, home equity represents the value of your home beyond what you owe on your mortgage.
In California, rules governing this factor in Chapter 7 and Chapter 13 bankruptcy cases are defined by the state’s homestead exemption. What homestead exemption essentially does is, it allows you to “shield” a certain amount of equity in your primary residence from creditors during bankruptcy proceedings.
The excellent news here is that the latest legislation (AB 1885, effective January 1, 2021) dramatically increased the exemption values throughout California. Today, these values stand at a minimum of $300,000 to around $680,000 (value adjusted for 2023) for debtors in San Diego, Los Angeles, and Orange Counties.
What is the income cutoff for Chapter 7 in California?
By definition, “income cutoff” refers to a specific limit on how much money you can earn if you wish to qualify for a specific financial benefit or program.
In the context of Chapter 7, this pertains to the maximum amount of income you can have and still be eligible to file for bankruptcy.
This factor comes into play when calculating the means test (applicable to Ch13), which compares your average monthly income over the past six months to the median income for a household of your size in California.
As per information published by the US Census Bureau, the median household income for bankruptcy cases filed on or after May 15, 2023 is:
- 1 earner: $75,235;
- 2 people: $93,175;
- 3 people: $104,785;
- 4 people: $122,707.
- If your household size is greater than 4, you would add $9,900 for each additional family member.
If your income falls below this threshold, you generally qualify for Chapter 7 and may file for bankruptcy under this model immediately. However, if your income exceeds the median, further calculations are necessary to determine your disposable income and the ability to repay your debtors.
Which law firm offers comprehensive help with Chapter 7 bankruptcy in San Diego near me?
If you’re in need of professional assistance with Chapter 7, there’s no one better to turn to from Palm City to Montelena than the Bankruptcy Law Offices of Mark L. Miller. Our adept team has been on San Diego’s legal scene for over two decades, guiding individuals toward a fresh start and financial independence.
Today, we’re ready to put all our experience and expertise to good use – helping you reach the same goal. Contact us today to schedule an appointment and to ensure you have a legal team that’s ready to tirelessly advocate for your rights!