Bankruptcy ✦ Chapter 7
The Debt Stops the Day You File.
Chapter 7 is the fastest form of debt relief federal law offers. Most Central District of California cases are over in about four months, the unsecured debt is gone, and with California’s inflation-indexed homestead exemption now protecting several hundred thousand dollars of home equity, most Inland Empire filers keep everything they own. North Star Law Firm handles Chapter 7 statewide for a flat fee, with a tax discharge analysis no ordinary bankruptcy firm can run.
Overview
What does Chapter 7 actually do?
Two things happen the moment your petition reaches the United States Bankruptcy Court for the Central District of California. The automatic stay of 11 U.S.C. § 362 takes effect, and every garnishment, levy, repossession, lawsuit, and collection call has to stop that day. A Chapter 7 trustee is then appointed from the Riverside Division panel to look for property worth selling for creditors. In the great majority of Inland Empire consumer cases there is none, because the exemptions cover it all. Those cases end with a discharge order under 11 U.S.C. § 727 wiping out credit cards, medical bills, personal loans, payday loans, deficiency balances, personal guaranties, and older income taxes that meet the timing rules.
- Collections, garnishments, and lawsuits stop at filing (11 U.S.C. § 362)
- Typical case: 90 to 120 days from petition to discharge
- Flat-fee representation, quoted before you commit
- Tax discharge analysis from your actual IRS and FTB transcripts
- Choice of California’s § 704 or § 703.140 exemption system, whichever protects more
- Remote representation anywhere in California; 341 meetings are held by video
Eligibility
Do you pass the means test?
Chapter 7 eligibility runs through the means test of 11 U.S.C. § 707(b). Step one compares your household income for the six months before filing against the California median for a household your size. At or below the median, you presumptively qualify. These are the figures the U.S. Trustee Program applies to California cases filed on or after July 15, 2026:
| Household size | California annual median income |
|---|---|
| 1 person | $79,253 |
| 2 people | $102,797 |
| 3 people | $116,541 |
| 4 people | $139,071 |
| Each additional person | add $11,100 |
Earning above the median is not a disqualification. It just triggers the long-form calculation, where allowed living expenses under the IRS standards for Riverside or San Bernardino County, secured payments, and priority taxes are netted against income. That form is arithmetic with legal consequences, and it is where an attorney-CPA earns the fee. One California wrinkle: because of community property (Fam. Code § 760), a non-filing spouse’s income is counted in the household figure even when only one spouse files. If your debts are mostly business debts rather than consumer debts, the means test does not apply at all.
Your Property
What do you keep? Almost always, everything.
Exemption law decides what is off limits to the trustee. California has opted out of the federal exemptions (CCP § 703.130), so a California filer chooses between two state systems and must use one or the other in full. The § 704 system is built for homeowners: its homestead exemption under CCP § 704.730 protects the greater of an inflation-indexed floor (about $371,500 in 2026) or your county’s prior-year median home sale price, up to an indexed cap of $743,681. Riverside and San Bernardino County filers generally fall between the two, at roughly the prior year’s county median. The § 703.140 system has a much smaller homestead but a wildcard that protects cash, tax refunds, and anything else, and it is usually the better choice for renters. The § 703.140 amounts below are from Judicial Council form EJ-156, effective April 1, 2025, and adjust again on April 1, 2028.
| Property | § 704 system (homeowners) | § 703.140 system (renters, low equity) |
|---|---|---|
| Homestead | Greater of the indexed floor or the county median home price, capped at $743,681 (2026) | $36,750 |
| Motor vehicle | $8,625 of equity, spread across one or more vehicles | $8,625 |
| Household goods and furnishings | Fully exempt if ordinarily and reasonably necessary | $925 per item |
| Jewelry, heirlooms, art | $10,950 | $2,175 |
| Tools of the trade | $10,950 ($21,900 if both spouses work in the same trade) | $10,950 |
| Wildcard (cash, refunds, anything) | None (a small automatic deposit-account exemption under § 704.220) | $1,950 plus any unused homestead, roughly $38,700 total |
| Retirement accounts, pensions, IRAs | Generally fully protected under CCP § 704.115 and 11 U.S.C. § 522 | |
The choice is the single most consequential decision in a California Chapter 7. A homeowner with real equity needs § 704; a renter with $20,000 in savings and a paid-off car needs § 703.140. Picking wrong can cost you a house or a bank account, and it cannot be undone after the trustee acts. We model your assets under both systems before filing and tell you which one protects more.
Can Chapter 7 wipe out IRS and Franchise Tax Board debt?
Sometimes, and this is the analysis most bankruptcy firms get wrong because they are not tax practitioners. Income taxes discharge only if the return was due more than three years before filing (11 U.S.C. § 507(a)(8)(A)(i)), the return was actually filed more than two years before the petition (§ 523(a)(1)(B)), any assessment is more than 240 days old (§ 507(a)(8)(A)(ii)), and there was no fraud or willful evasion (§ 523(a)(1)(C)). The same four tests apply to California income tax owed to the FTB. Prior offers in compromise, collection due process hearings, and earlier bankruptcies pause those clocks, so the only honest answer comes from reading your IRS account transcripts and your FTB account history. We pull both before every filing. Sometimes the right advice is to wait sixty days so a $40,000 tax year clears the three-year rule, and that advice is free here.
Some debts survive any Chapter 7: domestic support, most student loans absent an undue-hardship showing, recent income taxes, trust-fund payroll taxes and sales taxes collected from customers, and debts incurred by fraud. If your debt is concentrated there, a Chapter 13 plan or a direct IRS and FTB resolution strategy may serve you better, and because this firm does both, you will hear an honest comparison instead of a pitch.
How does a Chapter 7 case run in the Riverside Division?
Riverside and San Bernardino County residents file in the Riverside Division of the Central District of California, one of the busiest bankruptcy courts in the country. Filing is electronic, so the automatic stay can be in place the same day you sign. About four to six weeks later the trustee holds the meeting of creditors under 11 U.S.C. § 341, which the Central District conducts by video; it usually lasts ten minutes and creditors rarely appear. Sixty days after that meeting, if no one has objected, the discharge order is entered. Before filing you complete a credit counseling course, and before discharge a financial management course, both online.
We prepare the petition, the schedules, the statement of financial affairs, and the means test forms from your documents, attend the 341 meeting with you, and handle any trustee requests. Most clients never see the courthouse.
The Attorney-CPA Difference
One professional. Both halves of the problem.
- Means test and § 704 vs. § 703.140 exemption analysis completed before you decide anything
- IRS and FTB transcript review to catch dischargeable tax years and timing traps
- Statewide remote representation: the Central, Eastern, Northern, and Southern Districts of California all hold 341 meetings by video
- Flat fee, start to finish, including the 341 meeting of creditors
Questions & Answers
Chapter 7 questions, answered
Will I lose my house?
Almost certainly not, if your equity fits within the § 704 homestead exemption and you stay current on the mortgage. In Riverside and San Bernardino County that exemption is roughly the prior year’s county median home price, which covers most Inland Empire homeowners. The discharge wipes out your personal liability, but a consensual mortgage lien survives the case. Keep paying and you keep the house.
Will filing stop a garnishment that is already running?
Yes. The automatic stay stops wage garnishments, bank levies, and FTB Orders to Withhold the day the petition is filed, and that includes most IRS collection. Employers and banks comply quickly once they receive notice of the case.
How much does Chapter 7 cost in California?
A flat fee quoted at the free consultation, plus the court filing fee and the required credit counseling courses. No hourly billing and no surprises, and you will know the full number before you commit to anything.
My spouse isn’t filing. Does that matter in California?
It matters more here than in most states. Community property, including your spouse’s wages, is property of the bankruptcy estate under 11 U.S.C. § 541(a)(2), and the non-filing spouse’s income counts on the means test. The discharge also protects community property from community debts. We plan around all three effects.
I filed bankruptcy years ago. Can I file again?
Eight years must pass between Chapter 7 discharges under 11 U.S.C. § 727(a)(8). Prior cases can also shorten or eliminate the automatic stay in a new filing, so bring your full history to the first call and we will map the timing.
A fresh start is not failure. Find out if you qualify.
A free case review with an attorney-CPA, a written exemption analysis, and a flat fee before you commit.