eligible to file bankruptcy

How to Know if You’re Eligible to File Bankruptcy


For many debtors, filing bankruptcy can be an appealing option to rid themselves of formidable debt. Yet, before filing, it is essential to know the difference between bankruptcy options (7, 11, 13) and whether you are even eligible to file bankruptcy in the first place.

Chapter 7 and the “Means Test”

The means test determines eligibility to file for Chapter 7 bankruptcy. It was developed to differentiate between those individuals or entities who are truly incapable of repaying debts and others who may simply be looking to cut corners with creditors. By calculating disposable income over the past six months and comparing it with your state’s median income, it helps determine your ability (or lack thereof), even with a reduction in monthly expenses, to repay your debt.

Many websites offer bankruptcy means test calculators to help you determine this in minutes. If your income falls below the median you become immediately eligible to file bankruptcy. However, if it exceeds the state’s median income you must move onto the next step.

Partial Debt Repayment

If you reach this stage, your income falls above the median for your state. However, that does not necessarily mean you have excess funds. This is why you will need to complete the remainder of the means test to determine your final disposable income.

This will conclude whether it is feasible to at least repay some of your unsecured debt. However, if you’re disposable income is too high you will probably be disqualified from filing for Chapter 7 bankruptcy. Luckily There are other options available.

More Options

Those who do not qualify to file for Chapter 7 bankruptcy will probably be eligible to file for Chapter 13.  

This is called “individual debt readjustment” and it requires you pay all of your “net disposable income” after household expenses to the chapter 13 trustee toward satisfying unsecured creditors. However, this option is worth considering if you would like to keep all of your assets (like your home, regardless of its equity). Payment timelines range from 3 – 5 years and you must pay an additional 11 percent of your disposable income to cover the trustee’s operating expenses.

Before considering any bankruptcy option it is highly advised that you speak with a reputable and knowledgeable attorney. While bankruptcy can definitely be an attractive option to cure your debt woes, only someone well-versed in the field will be able to effectively guide you through the process and help to ensure a favorable outcome.

Do you think filing bankruptcy may be your best option? Would you like more details about our expertise and what we can do to address your specific needs? Contact us today for more information and a free consultation.

Filing Bankruptcy

Busting Bankruptcy Myths


Just saying the word feels taboo – “Bankruptcy” [shivers] – but filing bankruptcy isn’t a topic that should avoid discussion. Years of bad publicity have framed it as a way out, or the mark of fiscal irresponsibility. However, in certain situations it may be the most responsible thing you can do!

But first you must know more about it. We’ve already broken down the difference between Chapters 7, 11 and 13 bankruptcy, now let’s bust some myths that have become all too common about filing bankruptcy.

Myth: Filing bankruptcy will eliminate all my of my debt.

Fact: Certain debts can be completely eliminated, but others may remain, depending on the type of bankruptcy you’ve filed for. Generally speaking, filing for bankruptcy is ideal for freeing you of unsecured debts (medical bills, student loans, credit cards, etc.). However, you may still be on the hook for any secured debt that you owe.

Myth: Filing bankruptcy will ruin my credit.

Fact: Yes, filing for bankruptcy will be a knock on your credit score, but you can’t live in an alternate reality forever. Think of it as officially acknowledging which steps you will need to take in order to rebuild that glorious number. Filing is step one and should be viewed as vital to regaining your former glory. In essence, it will begin rebuilding your credit, not ruining it; depending on which chapter you file for the extent of the damage may even vary.

Myth: Bankruptcy can only be filed once.

Fact: We’re not advocating that you become the king of bankruptcy, but sometimes life happens. Just because you have previously filed for bankruptcy does not mean that you are ineligible to file again. Depending on which chapter you filed for, and how long ago, you may be able to do so.

Myth: Filing bankruptcy is expensive.

Fact: The cost is dependent on the type of bankruptcy filed and, without an attorney, can range anywhere from $300 – $500. However, this may ultimately cost you more if you have no knowledge of how bankruptcy procedures actually work. We always recommend seeking out a knowledgeable and seasoned attorney. This raises the average cost to somewhere between $1,500 – $4,000. But remember, paying the attorney fees up front may save you much more money in debt cleared, and procedural fees for what you messed up down the road. Contact our favorite attorney, Peter Wittlin, and receive a consultation today.

Myth: Filing bankruptcy is for scam artists and frauds.

Fact: Filing bankruptcy is actually quite a responsible thing to do if you can’t pay the bills and are finally out of options. It is the first step on the road to financial recovery and can salvage relationships with family and friends. Although the system is capable of being manipulated by ill-intentioned individuals, the majority of people who file bankruptcy are hard-working, honest individuals who have run into some bad luck.

We hope you found this useful. Don’t let the taboo of bankruptcy caution you from learning more about it.

Do you think filing bankruptcy may be your best option? Would you like more details about our expertise and what we can do to address your specific needs? Contact us today!

Bankruptcy options

Bankruptcy Options: Chapters 7, 13, and 11

As a bankruptcy attorney, I’ve represented many clients in obtaining relief from debt. Here are your options in Bankruptcy Court:

Defining Bankruptcy

Bankruptcy is a federal court procedure (done in Santa Ana, LA, or Riverside), which enables consumers and/or businesses to rid themselves of all, or substantially reduce, their unsecured debt, and extend the time to pay past due secured debt. Unsecured debt is generally consumer credit card debt and medical bills, whereas secured debt is mortgage debt on your home or other realty, and against your car(s).

Chapter 7:

This is called “liquidation,” i.e., whatever assets you have which are not exempt from creditors (most assets are exempt so you keep them), are given to the chapter 7 trustee to sell and distribute any net sale proceeds to your creditors pro rata. Chapter 7 is good for you to extinguish your unsecured debt, and is recommended if you (husband & wife) have less than $100,000 equity in your home (less than $75,000 equity for individuals, and less than $175,000 for debtors 65 years or older) so you keep your home. Chapter 7 is available to you every 8 years.

In a Chapter 7 case, if you have mortgage (secured) debt on your home or cars, you’ll generally have to pay it as it becomes due. You may be able to extinguish certain back income taxes owing to the IRS or to the FTB if they are for taxable years for which the last day to pay them is at least 3 years before you file your Chapter 7 bankruptcy petition.

The attorney’s fees you pay for a Chapter 7 range from about $1,800 to $2,500, but may be more depending on how much work special work your attorney may be required to do, e.g., to reaffirm debt, dealing with tax claims or student loans, opposing adversary actions by creditors (rare).

Chapter 13:

This is called “individual debt readjustment, i.e., you keep all of your assets, including your home regardless of its equity, provided you pay over 36 to 60 months all of your “net disposable income” after household expenses to the chapter 13 trustee toward satisfying unsecured creditors and to cure the arrears owing to your lenders on your home and cars. Whatever your monthly payment is to the Chapter 13 trustee, you add 11% to cover his operating expenses.

Chapter 13 can save your home from foreclosure, and hence is generally the reason to select it over Chapter 7. Filing a Chapter 13 will automatically stop any threatened foreclosure sale of your home. (A Chapter 7 filing would do that, but a threatened foreclosure sale can be renoticed, but not in a pending chapter 13 case.)

Chapter 13 is available only to individuals (husband and wife, included), whose combined unsecured debt does not exceed $394,725, nor secured debt exceed $1,184,200 (as of Year 2017). (These figures tend to increase some every year.)

The attorney’s fees you pay for a Chapter 13 are generally $4,000 to $5,000, depending upon the number of unsecured and secured creditors, and also how much work the attorney may have to do to have your Plan approved by the Court. Such fees may be payable over time to the attorney, rather than all “upfront.”

Chapter 11:

This is called “reorganization.” It is available to individuals whose assets


exceed the Chapter 13 ceiling, and to partnerships, LLCs, and corporations, who want to stay in business and preserve their assets, but need time to pay off unsecured and secured debt. Unsecured creditors must receive what they would receive in a chapter 7 liquidation.

The attorney’s fees for Chapter 11 generally run in the five figures, i.e., $20,000 or more, depending upon the amount of work needed to have a Chapter 11 Reorganization Plan approved by the Court. Chapter 11’s are “paper-intensive,” requiring periodic written accountings and disclosures of business operations, but if done correctly can save your business from a forced chapter 7 liquidation.

Which Bankruptcy Option is Best for you?

While this article serves as a helpful overview of your bankruptcy options, tailoring my legal advice to your specific financial situation is best done in person.

Disclaimer: The information in this article by Attorney, Pete Wittlin, is for promotional purposes only, and should not be relied upon without your firstly consulting with learned bankruptcy counsel familiar with your particular financial situation.

Whether you are a debtor or creditor, it is most advisable that you not represent yourself in Bankruptcy Court, but hire an experienced bankruptcy attorney so to do. It has been said that, “Anyone who represents himself in court has a fool for a client, and a jackass for an attorney.” So with that chuckle, be so aware.

For more information, concerns or clarification, please contact Attorney, Peter C. Wittlin, at pwittlin@gmail.com or (949) 430-6529.