How to File a Chapter 7 with No Money

Sometimes, unexpected life circumstances happen and you come to ask yourself, am I at this point where I need to file….Bankruptcy? It’s always been a taboo subject and at this point in your life, all you really know and heard was, filing for Bankruptcy is bad. But upon further reflection, you did have that Uncle who filed a Chapter 7 and they seem to still have their car and seem to be living an ordinary life. It’s almost like you wouldn’t be able to tell, just by looking at his face. You may wonder what bankruptcy filing was like for others, so you search reddit, yelp and do some google searches and find that the process can be quite simple with the right attorney. It is possible to file a Chapter 7 with no money down.

Bankruptcy Near Me, LLC is a bankruptcy law firm that serves the state of California and offers free bankruptcy consultation for individuals that have debt matters needing resolution. Iris Kwon is a distinguished bankruptcy attorney with over 10 years of experience representing both everyday people, high income indivduals, low income individuals, and corporations and banks. Iris Kwon earned her Juris Doctorate at Nova Southeastern University and her Bachelors from University of Florida, with honors. She has practiced bankruptcy law in Florida, Maryland and California; passing each bar exam on her first attempt.

At Bankruptcy Near Me, LLC, we empathize with the ongoing stresses and the unknown; we are here to support and provide clear guidance to our clients with professionalism and compassion.

To give you more information, our bankruptcy attorney in California is sharing how you can file for Chapter 7 with no money.

Quick Steps to File Chapter 7 for Free

If someone can’t afford to hire an attorney to file a Chapter 7 bankruptcy, that person may try to do it themselves. But it is absolutely important to be aware that saving money upfront may lead to losing more money or your belongings, later on.

1. Assess whether you are eligible for a Chapter 7. To even be eligible, you will need to pass the Means Test. If you exceed the median income, the Bankruptcy law (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) requires that your Chapter 7 is labeled as presumptively abusive.

2. Complete a credit counseling court. If you are looking to file, you must receive credit counseling from an approved credit counseling agency and it must be done within 180 days prior to the date of filing. 11 U.S.C. § 109.

3. Collect all required documents before you file your bankruptcy case. During this step, you will need to acquire a lot of items including bank statements, filed copies of your tax returns, paystubs and credit card statements. You will need to provide a clear picture of your financial situation at the time of filing. You will also need to provide all of your creditors a summary of your financial history, transactions and operations for a period of time before you file for bankruptcy.

4. File your case and pay the Court filing fee. After you finish your credit counseling course and you have all of your documents, you will need to file your Bankruptcy Petition, Schedules, and forms related to California (Fed. R. Bankr. P. 1007(b)). You can download the required forms from the US Courts website. There is a $338.00 Bankruptcy Court filing fee and it can be paid in installments. If your household income is below 150% of the federal annual income amount, you may be eligible to not have to pay this fee (28 U.S.C. § 1930(f)).

5. Understand the exemption laws specific to your jurisdiction. Knowing your state exemptions helps you understand what property you can protect in bankruptcy. Since Chapter 7 involves liquidating or selling your non-exempt assets, you must become familiar with your state’s available exemptions and how to apply them before filing your case. Our guide to Understanding California Bankruptcy Exemptions is a free resource currently in the works for your review.

6. Know what debts can be wiped out or eliminated. It is crucial to comprehend which debts can be eliminated through bankruptcy. A discharge relieves the debtor of their obligation to pay most debts and prevents creditors from taking legal action against them. However, there are some exceptions to the discharge when filing for Chapter 7. Therefore, debtors must seek advice from competent legal counsel to understand the discharge’s terms and limitations.

7. Comply with the Trustee’s requirements. Debtors are also required to furnish the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year, as well as tax returns filed during the case (including tax returns for prior years that were not filed when the case commenced) (11 U.S.C. § 521).

8. Attend your meeting of creditors hearing. It is mandatory for you to attend the 341 Meeting of Creditors. This meeting is usually scheduled within 45 days of filing for bankruptcy and is conducted by the Trustee assigned to your case. Creditors may attend this meeting and ask questions regarding your bankruptcy case. Although it is rare for creditors to show up, if the meeting is delayed or disputed, it can negatively impact the outcome of your Chapter 7 bankruptcy.

9. Complete your financial management course. To be eligible for a bankruptcy discharge, you must complete an approved financial management course. You will need your bankruptcy case number to complete the course, and you must file evidence of completion before your case closes.

If you don’t have an attorney representing you, you may face complex legal issues that can cause you to take time off from work and your family. This can also result in the loss of your property. So, seeking legal advice and representation is essential to help guide you through the process.

As we said above, legally, you can file for bankruptcy without legal representation. Still, you are more likely to lose property or have your case dismissed, or the process can take significantly longer and cause more stress than necessary. Having an attorney on your side to ensure you keep your property when possible, have your paperwork in order, and push back against creditors can help you achieve a more favorable outcome.

Key Exemptions in Chapter 7 Bankruptcy

Not all assets are vulnerable to liquidation in Chapter 7 bankruptcy. Specific exemptions allow debtors to retain essential assets for a fresh start. Commonly protected items include a primary residence, up to a certain equity limit, essential household goods, clothing, and tools necessary for the debtor’s profession.

Although you can file for bankruptcy in California after living there for over the greater portion of 180 days before filing, you have to be a California resident for much longer to be able to use California’s bankruptcy exemptions. Specifically, you must live in California for 730 days before filing the bankruptcy petition. If that is not the case, you will have to use the previous state’s exemptions. Our firm has previously written an article, in detail, about the exemptions you can use as a California resident.

California has two sets of exemptions that can be used and they cannot be mixed. They come from the California Code of Civil Procedure (“C.C.P”), Sections 703 and 704. There is significant amount of case law that expands upon these statutes to ensure that they are applied in a specific manner, should that arise in your case. Make sure you are using valid case law that would support the California Code of Civil Procedure and that it is not overturned by new law, or that the law is specific to your jurisdiction.

Under California’s Code of Civil Procedure 703, these are the main items for exemption:

1. PRIMARY RESIDENCE OR BURIAL PLOT — C.C.P. § 703.140(b)(1) A $29,275 exemption is allowed in real property or personal property (including a mobile home) that the debtor or a dependent of the debtor uses as a residence.

2. MOTOR VEHICLE — C.C.P. § 703.140(b)(2) The maximum allowed is $5,680 in one or more motor vehicles.

3. HOUSEHOLD FURNISHINGS & PERSONAL EFFECTS — C.C.P. § 703.140(b)(3) An unlimited exemption is allowed in household goods and furnishings, clothes and shoes, appliances, books, animals, crops, or musical instruments, which are held primarily for personal, family, or household use, so long as no single item is worth more than $725.

4. WILD CARD — C.C.P. § 703.140(b)(5) The “wild card” can exempt any asset(s). It totals $1,550, plus any unused portion of the $29,275 exemption for a primary residence listed above in # 1. In other words, someone who does not use any of exemption #1 has a $30,825 exemption to protect any asset or assets. You can also use the “wild card” to supplement other exemption(s) in this set of exemptions.

Under California’s Code of Civil Procedure 704, these are the main items for exemption:

1. PRIMARY RESIDENCE — C.C.P. § 704.730 The amount of this exemption is: $75,000 for a single person; $100,000 for a married person or head of household; $175,000 for: (a) a person 65 or older, or (b) a physically or mentally disabled person, (c) a person 55 or older with annual income under $25,000 ($35,000 for a married couple).

   To qualify for the homestead exemption, the property must be the primary residence of the debtor or the debtor’s spouse. Under Bankruptcy Code, a person is entitled to a maximum homestead of $125,000 until that person has lived in that state for approximately 3.4 years. (This is relevant only to those seeking the $175,000 homestead amount.) The exemption is for equity in the property. For exemption purposes, equity is determined by taking the fair market value of the property and subtracting the value of any consensual liens (e.g., mortgages and deeds of trust).

2. MOTOR VEHICLE — C.C.P. § 704.010 The maximum allowed is $3,325 total equity in motor vehicles.

3. HOUSEHOLD FURNISHINGS & PERSONAL EFFECTS — C.C.P. § 704.020 Household furnishings, personal effects and appliances are free from creditors’ claims when they are reasonable and necessary. A household item with an unusually high value (such as an extremely rare antique) may not be exempt.

4. HEIRLOOMS — C.C.P. § 704.040 The maximum exemption is $8,725 in jewelry, heirlooms, and works of art.

5. PRE-PETITION WAGES — C.C.P. § 704.070 Wages earned 30 days prior to the bankruptcy are partially exempt. This exemption protects 75 percent of the amount you received during this period. If these wages were subject to garnishment, all of these funds are exempt. (All wages received after the bankruptcy is filed are free of creditors’ claims.

6. INMATE TRUST ACCOUNT — C.C.P. § 704.090 The maximum exemption is $1,750. For a restitution fine or order, the maximum is $325.

7. LIFE INSURANCE — C.C.P. § 704.100 A policy with no cash value is totally exempt. The maximum exemption for the cash value of a policy is $13,975, or doubled if married. Benefits from matured life insurance or annuity policies are exempt to the extent reasonably necessary for the support of the debtor and his or her spouse or dependents.

8. WRONGFUL DEATH CLAIMS — C.C.P. § 704.150 A wrongful death claim is exempt to the same extent as a personal injury claim.

9. CEMETERY PLOT — C.C.P. § 704.200 Any cemetery plot owned is exempt.

Chapter 7 Filing Fees and Costs

Below is a breakdown of costs, some of which may be waived, for filing Chapter 7 without an attorney:

1. $338 in court fees – The fee is the sum of a $245 filing fee, a $78 administrative fee, and a $15 trustee surcharge.

• The court filing fees can be paid in installments. The fee may also be waived for individuals whose household income is below 150% of the federal poverty level – see 28 U.S.C. § 1930(f). To qualify for the fee waiver, you must submit Form 103B – Application to Have the Chapter 7 Filing Fee Waived – along with your bankruptcy filing. This form requires you to certify your income and attest that you cannot afford to make installment payments.

1. About $50 total in court required courses – individuals seeking to file for bankruptcy must receive credit counseling from an approved credit counseling agency within 180 days before filing – see 11 U.S.C. §§ 109, and an approved financial management course after filing to be eligible for a bankruptcy discharge – see 11 U.S.C. § 727. If you cannot afford these fees, you can request a waiver from the agency or organization handling your case.

In summary, filing for Chapter 7 will cost $388.00, which includes $338 in court fees and $50 in court-required courses. However, you may be eligible to waive these fees and file Chapter 7 with no money down.

When filing for bankruptcy, your attorney’s fees are usually your most significant expense. Typical fees can range depending on the complexity of the case and the chosen attorney’s experience. Filing for Chapter 7 bankruptcy can have profound legal implications and may result in the loss of improperly unexempted assets. While it’s possible to file without an attorney (pro se), it’s highly recommended that you have an attorney represent you.

It’s good to know that many bankruptcy attorneys offer a free initial consultation. This consultation will help you make an informed decision about whether bankruptcy is the right option for you. During the consultation, you can also find out if you’re eligible to file, learn about the possible implications of filing for bankruptcy, and explore alternative options.

Reasons to File a Chapter 7 Bankruptcy

1. Elimination of Most Unsecured Debt: Chapter 7 bankruptcy can wipe out unsecured debts like credit card balances, medical bills, and personal loans. This relief mainly benefits individuals struggling to manage their finances, offering a chance to regain control and rebuild credit.

2. Stopping Wage Garnishments: Filing for Chapter 7 can halt wage garnishments immediately through an automatic stay, which prevents creditors from continuing collection actions. This stay remains in effect during the bankruptcy process, potentially allowing for the discharge of the underlying debt, causing the garnishment.

3. Halting Evictions and Foreclosures: If facing eviction or foreclosure, Chapter 7 can temporarily stop these actions, providing time to catch up on payments. However, it may not offer a long-term solution, and landlords or lenders can seek to lift the stay under certain circumstances. Consider Chapter 13 for cases concerning secured loans such as Mortgages.

4. A Fresh Financial Start: Chapter 7 can provide a clean slate by eliminating debt and allowing individuals to retain exempt property. This fresh start, coupled with sound financial planning and guidance from a bankruptcy attorney, can help rebuild credit and restore economic stability.

Alternatives to Filing Chapter 7

It’s essential for people who owe money to know that other options are available besides Chapter 7 bankruptcy. If you own a business, like a corporation, partnership, or sole proprietorship, you may want to keep operating and avoid selling everything to pay off your debt. 

In this case, filing for Chapter 11 bankruptcy might be a better option. Chapter 11 allows you to try to work out a plan to pay off your debt, which could include things like reducing the amount you owe, getting more time to pay, or even completely changing how your business operates. If you’re a sole proprietor, you may get debt relief through Chapter 13 bankruptcy.

Individual debtors with regular income can opt for debt adjustment under Chapter 13, which offers the advantage of potentially saving their homes from foreclosure. This lets them catch up on past-due payments through a structured payment plan.

It’s important for debtors to understand that negotiating with creditors or seeking help from debt counseling services may offer alternatives to bankruptcy.

Schedule a Free Consultation with a California Bankruptcy Attorney Today

Filing for bankruptcy can be daunting, especially if you don’t have money to spare. However, filing for Chapter 7 bankruptcy with no upfront costs is possible. At Bankruptcy Near Me Law Firm we understand this can be overwhelming, but we offer affordable payment plans to ensure you receive the necessary representation, advocacy, and guidance for a better financial future. For a free consultation, please call us at (714) 798-2544 or fill out the form below to get started.

Resources:

1. You can obtain a free copy of your credit report by visiting https://www.annualcreditreport.com/index.action

2. Bankruptcy forms are also available for download via the US Courts website. More resources are available in our post where attorney Iris Kwon discusses Chapter 7 Bankruptcy Forms California.

Sources:

1. US Courts- Poverty Guidelines. Retrieved from https://www.uscourts.gov/sites/default/files/poverty-guidelines.pdf

2. 28 U.S. Code § 1930 – Bankruptcy fees. Retrieved from https://www.govinfo.gov/content/pkg/USCODE-2015-title28/html/USCODE-2015-title28-partV-chap123-sec1930.htm

3. US Trustee Program – List of Credit Counseling Agencies Approved Pursuant to 11 U.S.C. § 111. Retrieved from https://www.justice.gov/ust/list-credit-counseling-agencies-approved-pursuant-11-usc-111

4. 11 U.S. Code § 109 – Who may be a debtor. Retrieved from https://www.law.cornell.edu/uscode/text/11/109

5. 11 U.S. Code § 727 – Discharge. Retrieved from https://www.law.cornell.edu/uscode/text/11/727

6. US Trustee Program – Census Bureau Median Family Income By Family Size (Cases Filed On or After November 1, 2023). Retrieved from https://www.justice.gov/ust/eo/bapcpa/20231101/bci_data/median_income_table.htm

7. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Retrieved from https://www.congress.gov/bill/109th-congress/senate-bill/256

8. Federal Rules of Bankruptcy Procedure – Rule 1007. Lists, Schedules, Statements, and Other Documents; Time Limits. Retrieved from https://www.law.cornell.edu/rules/frbp/rule_1007

9. US Courts – Bankruptcy Forms. Retrieved from https://www.uscourts.gov/forms/bankruptcy-forms

10. 11 U.S. Code § 521 – Debtor’s duties. Retrieved from https://www.law.cornell.edu/uscode/text/11/521