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How To File Bankruptcy In California

Keeping Your Property In Bankruptcy

How To File For Bankruptcy In California During Covid-19 | Gamez Law Firm

One of the most common questions people ask before filing for bankruptcy is, can I keep my property? The short answer is that it depends on the type of bankruptcy you file , along with the type of property and the value of said property at the time of the bankruptcy. We previously wrote about the differences between Chapter 7 and Chapter 13 bankruptcy. In this article, we will discuss what real or personal property can be kept when filing Chapter 7 or Chapter 13 bankruptcy.

Part 7 Of 7: Completing The Process

  • 1Wait for the automatic stay to go into effect. Once you have filed all the required documents, the court will issue an automatic stay that stops listed creditors from pursuing you for any debts until the stay is lifted. While this will provide you with a short-term reprieve from any unwanted contact, the stay is unlikely to last long if you do not have any equity in the property at issue.
  • For example, if you rent property on a month-to-month basis, you do not have any property interest to protect for the benefit of the creditor and your landlord will likely get the stay lifted relatively quickly.XResearch source
  • 2Have a trustee appointed. When you file for bankruptcy, the court will take legal control of your debts and any property not exempted. A trustee will be appointed to handle your property. The trustee’s job is to make sure the creditors get paid as much as possible. The trustee can even challenge any element of your case.XResearch source
  • 3Meet with creditors. About one moth after filing, the trustee will call a meeting for all of the creditors and you must attend. Very few creditors actually show up.
  • You and/or your attorney will be able to respond to any challenge brought.
  • What Not To Do When Declaring Bankruptcy In Ca

    Even if you are just considering declaring bankruptcy in the future, the process will be much easier if you avoid making certain types of transactions within a specified period of time before you file. Some purchases and transfers of money are seen as fraudulent by the court, meaning it appears that you are taking these actions to hide some of your assets before the bankruptcy court gets a look at them. Even something done innocently without any intent to defraud the court can be illegal, sometimes even resulting in criminal charges.

    One of the most common mistakes made is to transfer money or assets into another persons name to keep them out of the bankruptcy estate. Many people dont think that there would be anything wrong with transferring a car into your spouses name, or making a gift of it to one of your children. But even these can be viewed as fraudulent transactions by the court.

    In most cases, the court will look at your transactions from the past 90 days to determine if any of them may be a problem for your bankruptcy. If they find any, they might actually clawback the transaction, meaning theyll take that money or property back from the other party and make it a part of your bankruptcy estate.

    Some other types of transactions that could be interpreted as fraud include:

    Other actions you should avoid prior to filing your bankruptcy petition include the following.

    Recommended Reading: How To Access Bankruptcy Court Filings

    Dont Pay Off Certain Creditors But Not Others

    If a creditor has been patient with you when you are behind on payments, you may feel like you owe them special treatment and decide to pay them in full before all of your other creditors are named in your bankruptcy petition. But the bankruptcy court considers these to be preferential transfers that can not only lead to issues in your bankruptcy proceeding, but can also result in a clawback. If the bankruptcy Trustee feels that a payment has been made to avoid putting that creditor into the bankruptcy plan, he or she can actually sue the creditor to bring the amount paid back into the bankruptcy estate. Trying to be fair or nice to certain creditors can create more trouble for them than writing off the percentage of the debt that they lose through your bankruptcy plan.

    See also:;Paying Debts to Family Members Before Filing for Bankruptcy

    Part 4 Of 7: Choosing A Path

    How to File for Bankruptcy in California
  • 1Look at your options. There are four main options when you file for bankruptcy. Each one is named for the federal Bankruptcy Code chapter that describes them. Chapter 11 proceedings are most often used for corporations and Chapter 12 proceedings are for family farmers. Unless you fit into one of those categories, your focus will be on Chapters 7 and 13.XResearch source
  • 2Qualify for Chapter 7. If you file for Chapter 7 bankruptcy, your qualifying assets will be liquidated and the proceeds will be used to pay your creditors. You will keep exempt property and while most of your debts will be wiped out, some debts are excepted from these proceedings.
  • You cannot file for Chapter 7 bankruptcy unless you pass the Means Test or are exempted.XResearch source
  • 3Determine if you have to take the Means Test. If you want to file for Chapter 7 bankruptcy you must pass the Means Test unless you are exempt. This test only applies to higher-income filers so if your income is below the California median for your household size you are exempt from the test and may file for Chapter 7 bankruptcy. You are also exempt from the test if your debts are not primarily consumer debts or if your debts were incurred while on active duty in the military and you are a disabled veteran.
  • The Means Test is used to determine if Chapter 13 is a viable option as opposed to Chapter 7.XResearch source
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    Cost Of Chapter 7 And Chapter 13 In California

    Any important question that you are probably asking yourself is what is the cost of attorney fees, filing fees, and whatever other costs are associated with bankruptcy.

    • California Bankruptcy Lawyer Fees: Often different cities and counties in California will have different attorney costs, including variability of cost based on experience. You may want to check out a bankruptcy cost estimator to estimate the cost of your zip code.
    • Filing, Admin, and/or trustee surcharge fee: The fee for Chapter 7 is $335 and the fee for Chapter 13 is $310 .

    Southern District Of California Requirements

    Bankruptcy filers can get instruction packets for free on the court’s website and Local Form 1901 lists all the Chapter 7 bankruptcy filing requirements for individuals.Â;

    This district covers the southernmost counties in California: San Diego County and Imperial County and houses a single bankruptcy court building in San Diego. The Southern District also holds 341 meetings in El Centro.Â;

    Read Also: What Is A Bankruptcy Petition Preparer

    The Aftermath Of Filing For Bankruptcy

    After you have filed for bankruptcy with the court, whether it is Chapter 7 or 13, the court will assume legal control of all non-exempt property and debts, and will put an automatic stay in place which will prevent creditors from contacting you or claiming any of your property. The court will then appoint a trustee to your case, who will act as a non-partisan figure in ensuring that creditors are paid as much as possible. One month into the bankruptcy process, the court will hold a meeting known as the 341 Meeting of Creditors, where you and your creditors meet to discuss any objections or discrepancies with the bankruptcy filing. No matter whether you filed for Chapter 7 or 13, you will be updated on your case every step of the way. If you chose to hire a bankruptcy attorney, they will act as a liaison between you and the court and can simplify the process for you.

    Reasons Not To File For Bankruptcy

    Do I qualify for a California chapter 7 bankruptcy MUST SEE!

    No matter which type of bankruptcy you file for, the process will demand a great deal of emotional and personal sacrifice. Here are some reasons you might not want to declare bankruptcy:

    • Your Credit Score Will Plummet: As soon as you declare bankruptcy, your credit score will plunge to record lows, and itll sustain this damage for several years to come. This virtually guarantees that youll be unable to take out loans, like home mortgages and auto loans, or open lines of credit for the foreseeable future .
    • Your Financial History will be Made Public: Since youll be required to share all of your personal financial information in a public court of law, all of the nitty-gritty details of your current finances will be made available in the public domain. Potential employers, lenders, clients and business partners will readily have access to your bankruptcy filing for the rest of your life you might think twice if theres a detail or two youd prefer to keep out of the public eye
    • Filing is Expensive: The process of filing for bankruptcy itself isnt cheap. According to this article, the filing fee for Chapter 13 bankruptcy is $310, and attorney fees typically fall somewhere between $1,500 $6,000. In the case of a Chapter 7 bankruptcy, youd pay $335 for filing fees and $500 $3,500 for your attorney. In either case, youll need a chunk of change just to legally proclaim that you have no money

    Read Also: How Long Before My Bankruptcy Is Off My Credit Report

    How Many Times Can You File For Bankruptcy In California

    Bankruptcy is a financial tool available to everyone in their time of greatest need. And it is often the only way to lay down your burden and relieve;that overwhelming;sense of financial stress.;

    But if youve ever filed in the past,;its important that you understand when youre eligible to file bankruptcy again. There are some limits to keep in mind as you move past your previous bankruptcy filings.;

    Keep reading to learn how often you can file bankruptcy in the state of California.;

    Where Do I File Bankruptcy In California

    As mentioned, bankruptcy is part of the federal judiciary system. There are four federal court districts in the Golden State.

    If you live in Los Angeles, Riverside, Santa Ana, San Bernardino, SLO, Santa Barbara, or Orange County, you should file your petition in the Central District. There is an east, west, and south division. If you live east of Sacramento or Fresno, you probably need to file in the Eastern District. This district includes the High Desert and most of the Sierra Madres. People in the San Diego area should file in the Southern District. Everyone else would file in the Northern District.

    The bankruptcy case trustee usually has an office outside the courthouse. Most trustees are not judges. Many of them are not even lawyers. But they are highly experienced in bankruptcy matters. Generally, the 341 meeting occurs about six weeks after you file your petition. The court paperwork will list all the details.

    Recommended Reading: Who Pays For Chapter 11 Bankruptcies

    Complete The Bankruptcy Forms

    The bankruptcy forms are the same for everyone that files in the same district as you. Some of thenational forms are pretty self-explanatory and easy to complete by yourself. Others, like the one asking you to list your exempt property, can be a little more technical.Â;

    If you hire a bankruptcy attorney, theyâll ask you all the questions that they need answered to prepare the California bankruptcy forms. If youâre using Upsolveâs free app, itâll walk you through all of the questions on the forms, then generate them for you.Â;

    Since you are the one signing the bankruptcy forms before they are filed with the court, it’s important for you to carefully review everything. You can learn more about the California bankruptcy process by visiting the courtâs self-help center in San Diego or the self-help desk at the Sacramento courthouse.Â;

    How Does Chapter 11 Bankruptcy Work

    How Often Can You File for Bankruptcy in California?

    During a Chapter 11 bankruptcy, the debtor continues to operate the business, but the bankruptcy court must approve all major decisions the debtor business makes. A trustee may also be appointed to help manage the business to prevent things like fraud and dishonesty.

    To start the process, either the business makes the decision to file so that it can restructure its finances to pay bills or three or more creditors file a petition with the bankruptcy court. Once the petition is filed either by the business itself or three or more creditors creditors are temporarily prohibited from taking any action.

    The business has up to four months or so to develop a reorganization plan . If the business doesn’t propose a plan, the creditors can propose their own reorganization plans.

    A reorganization plan is essentially a contract between the business and the creditors and outlines how debt will be repaid, among other obligations. ;Part of the plan often is negotiating debt and downsizing the company so that expenses are reduced to free up assets for repayment. Plans can also include liquidating all or some assets.

    Once the business files the plan, creditors vote whether or not to accept it. If the creditors do not accept it, the debtor business can as the judge to force the creditors to accept it.

    The debt included in the reorganization plan includes:

    • priority debt
    • unsecured debt.

    Recommended Reading: Can You File Bankruptcy On Your Own

    What California Chapter 7 Bankruptcy Questions Can We Answer

    Hope this article helped you understand a Chapter 7 bankruptcy in California and can even be a resource for you in the future when you decide whether to pursue a debt relief option.

    If you have made it this far, you probably have some questions about a Chapter 7 bankruptcy in California. Please reach out to us directly with any and all questions, and we will make sure they get an answer quickly. If you havent done so already, check out whether you qualify for a Chapter 7 bankruptcy below and compare your debt relief options.

    What Is The Exemption Amount In California

    Some assets have value-based exemptions in the Golden State. For example, you can protect up to $600,000 in home equity in some cases. The motor vehicle equity exemption usually varies between $3,325 and $5,350. Other exemptions are item-based. For example, retirement accounts are normally 100% exempt, regardless of their value.

    Recommended Reading: Does Declaring Bankruptcy Affect Your Spouse

    How To File Bankruptcy For Free In California

    Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we’ll never ask you for a credit card. Explore our free tool

    In a Nutshell

    Getting debt relief through bankruptcy doesnât have to be expensive. If you canât afford to hire a bankruptcy lawyer, you can file bankruptcy without one. This guide will take you through the 10-steps of filing Chapter 7 bankruptcy in California without a lawyer.

    Written by Attorney Andrea Wimmer. Â;

    Living in California comes with a lot of benefits, but it also often comes with a high cost of living, which makes slipping into debt really easy. After all, if most of your income is spent on just housing and transportation expenses, not much is left for any other expenses.Â;

    Filing bankruptcy in California can help you wipe your slate clean and get a fresh start. Bankruptcy law provides for an automatic stay of debt collection actions. This means wage garnishments and repossessions have to stop as soon as your case is filed.

    The goal of every bankruptcy is to eliminate your debts. This happens when the bankruptcy discharge is entered. Not all debts are dischargeable in bankruptcy. Things like unpaid child support, recent tax debt and most student loans are not erased by filing bankruptcy.Â;

    Can You File Bankruptcy If You Are Unemployed In California

    California city to file for bankruptcy

    If you are unemployed and are considering filing for bankruptcy in California, there are considerations that can determine if your bankruptcy filing is successful, or not. Being unemployed means your funds are limited, and filing bankruptcy seems like a sound financial move. But, because some courts may consider unemployment compensation as income, instead of being excluded as social security income it is best to obtain the services of an experienced;bankruptcy attorney in LA, to determine your best course of action.

    At issue is whether the court that accepts your bankruptcy filing believes that Federal mandates enacted by Congress should take the greater authority in these cases, or if they are willing to consider legislative intent and;apply a case by case ruling. In either case, if you are unemployed, it is to your advantage to consult with a lawyer to discuss your options in the state of California.

    Recommended Reading: How Many Different Chapters Of Bankruptcy Are There

    What Happens When You File Chapter 7 Bankruptcy In California

    No one opens a business expecting that it will fail, but the data can be grim. According to the U.S. Bureau of Labor Statistics, about 20% of small businesses fail within their first year of operations; by year five, roughly 50% have shuttered.

    When your small business fails, you can be on the hook for thousands of dollars or worse, saddled with insurmountable debt. Are you stuck with that financial burden forever?

    Whether youre a business owner who has decided to close up shop or an individual whose debts have simply become unmanageable, your liabilities do not have to hang over your head for the rest of your life.

    Bankruptcy is designed to help people and businesses resolve their debts so they can start anew.

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