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How To File For Personal Bankruptcy In California

A Guide To Filing Personal Bankruptcy In California

Which to file, personal or business bankruptcy?

The bankruptcy process can be no easy feat especially in California. While bankruptcy is governed by federal law, California sets its own boundaries regarding property exemptions and the amount you must repay your creditors. Although California has seen a decline in bankruptcies in the last six years, it does not mean that it is impossible to file for it. Personal bankruptcy in California falls into two categories:

  • Chapter 7: A straight liquidation bankruptcy that allows the debtor to completely write off all eligible debts without having to pay them back to creditors. Chapter 7 bankruptcy is the most common type of bankruptcy in the United States.
  • Chapter 13: Generally used for debtors that have certain assets they wish to keep, and those who earn a living wage. Chapter 13 bankruptcy sets up a 3-5 year payment plan for the debtor to pay back all or some of the debts owed to their creditors.

Some important things to consider are the types of debts you have, whether you would have to liquidate property you truly wish to keep, and if the debt you would be alleviating is enough to make bankruptcy worth your while. Many times, its best to sit down with a bankruptcy attorney and talk through your options. If you determine, whether on your own or with the help of an attorney, that bankruptcy is the best option for you there are certain federal and state laws you must comply with in California.

Dont Do It Alone: Contact Our Irvine Bankruptcy Attorney

How many times can you file for bankruptcy? The answer is: as many times as you need to within certain time limits.

If youre considering filing for bankruptcy in California and have filed in the past, its very important that you talk to an attorney. There are some exceptions to the rules and your attorney can let you know if youre eligible.

If you have any questions regarding bankruptcy in California, do not hesitate to reach out to our Irvine bankruptcy attorney today!

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California Chapter 7 Bankruptcy Court Locations

Many 341 meetings of creditors have been over the phone or over Zoom due to the pandemic. That said, you may want to see where the courthouse is in California if there are any meetings that need to take place in person. Below are the court locations for filing bankruptcy based on the bankruptcy district.

Ronald E. Stadtmueller 564-9310

In addition to the above, review California local bankruptcy rules before filing a bankruptcy case. Some local rules may differ slightly from the Federal Bankruptcy Rules.

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Chapter 7 Vs Chapter 13

Chapter 7 and Chapter 13 are the two most common types of personal bankruptcy.

In a Chapter 7 bankruptcy, a trustee appointed by the bankruptcy court will liquidate many of your assets and use the proceeds to pay your creditors some portion of what you owe them. Certain assets are exempt from liquidation. Those typically include part of the equity in your home and automobile, clothing, any tools you need for your work, pensions, and Social Security benefits.

Your nonexempt assets that can be sold off by the trustee include property , a second car or truck, recreational vehicles, boats, collections or other valuable items, and bank and investment accounts.

In Chapter 7, your debts are typically discharged about four months after you file your bankruptcy petition, according to the Administrative Office of the U.S. Courts.

In a Chapter 13 bankruptcy, by contrast, you commit to repaying an agreed-upon portion of your debts over a period of three to five years. As long as you meet the terms of the agreement, you are allowed to keep your otherwise-nonexempt assets. At the end of the period, your remaining debts are discharged.

In general, people with fewer financial resources choose Chapter 7. In fact, to be eligible for Chapter 7, you must submit to a means test, proving that you would be unable to repay your debts. Otherwise, the court may determine that Chapter 13 is your only option.

How Does Chapter 7 Work

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  • Trustee review of financials: In a Chapter 7 bankruptcy, a trustee is given authority to examine all financial records in order to review the bankruptcy petition. It is the trustees job to verify that the information provided to the court matches your financial documents, such as pay stubs and bank statements, and ensure they are accurate.
  • Assets are liquidated to pay debt: The trustee will then decide which assets or properties to sell in order to pay back creditors. While your Chapter 7 case is pending, there is anautomatic stay that halts all credit collection activities.

Although Chapter 7 bankruptcies have declined in California over the years, it should not discourage you from reaching out to a legal professional to explore your options.

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All Required Chapter 13 Documents Need To Be Filled Out

You will need to fill out over 20 forms for a Chapter 13 filing.All of the documents, along with directions, can be found at http://www.cacb.uscourts.gov.If you are filing electronically, you will need to fill out a statement of your Social Security number, voluntary petition, master mailing list, and electronic filing declaration.Within 14 days of filing the voluntary petition, you will need to file a debt repayment plan, a statement of related cases, and a summary of your assets and liabilities.

Some Assets Should Be Protected From The Creditor

You will be able to protect basic assets when you file for bankruptcy.The property is exempt.There are two sets of exemptions in California.There are two sets of exemptions in the California Code of Civil Procedure.Some of the exemptions include: homes and other dwellings, personal property, insurance, and pensions.

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Dealing With Your Car

If you own your car free and clear , make sure to claim the appropriate bankruptcy exemption under California law to protect this value. If you have a car loan, bankruptcy law gives you 3 options for dealing with it. You can surrender it to the bank and discharge the loan, you can purchase the car for its current value and discharge the rest of the loan, or you can keep everything the same by entering a reaffirmation agreement with the bank.

Can You Afford Chapter 13 Bankruptcy

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Lets say you do not qualify for a California Chapter 7 bankruptcy and are wondering whether you should pursue a Chapter 13 bankruptcy. Can you afford it? It may be odd to ask whether you can afford bankruptcy, but its an important question to ask.

To understand whether you can potentially afford a Chapter 13 bankruptcy, you may want to take the Chapter 13 calculator below to estimate whether you can afford the monthly payment.

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Meet The Credit Counseling Requirement

Before your bankruptcy process starts, youll need to attend a credit counseling session through a court-approved service. Theyll help you go over your finances and decide whether bankruptcy is the best choice for you. This is not optional failing to attend credit counseling can get your case dismissed.

Important: Chapter 7 Qualification Via California Means Test

An important element in filing for bankruptcy relief is the Bankruptcy Means Test. The Means Test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in California.

If your average annual income or median income is below the California median income, you may qualify for a bankruptcy discharge under Chapter 7. You can estimate whether you qualify for a Chapter 7 bankruptcy using the free California Chapter 7 Bankruptcy Means Test Calculator below.

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Avoid Future Legal Problems With Creditors

When someone has to pay off debt, they often have to deal with many creditors, which can get overwhelming. In a sense, filing bankruptcy can give the individual relief from having to deal with all creditors at once, especially if they get to avoid paying some of their financial obligations. Keep in mind this process may vary depending on the bankruptcy type.

Newfoundland & Labrador Bankruptcy Exemptions

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In Newfoundland and Labrador, property exempt from seizure in bankruptcy is set by the provincial government and applies to the equity in an asset. Equity is the difference between the value of the asset and what you owe on the asset.

Example: If you have a car worth $6,000 and you still owe $4,000 on the loan, the equity you have in the car is $2,000. In Newfoundland and Labrador, the exemption for a car is $2,000. In this case, you would be entitled to keep the car and your unsecured creditors cannot take this from you when you file for bankruptcy.

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What Is Chapter 11 Bankruptcy

Chapter 11 is a form of bankruptcy involving the reorganization of a business’s debt and assets. The debtor business must create a repayment or, rather, reorganization plan, and if that plan is followed through, the remaining debt will likely be discharged. The terms of the plan, however, must be fulfilled. And if fulfilled, then a Chapter 11 bankruptcy can benefit you in more than one way, including reducing interest rates and reducing monthly payments.

This type of bankruptcy is the most expensive to file and can be quite complex. Before filing Chapter 11 bankruptcy, it is important to carefully analyze and explore all other options a business may have with regard to its debt. If Chapter 11 bankruptcy is the right course of action, it has the potential to help businesses to secure a solid financial footing again.

California Bankruptcy Information: How Can I Keep My House

Filing for bankruptcy is tough. Homeowners facing this decision worry about losing their homes. If youre overwhelmed by debt, however, bankruptcy gives you the opportunity to wipe the slate clean and start over. As long as youre current on your mortgage payments and not in foreclosure, the chances are good in California that youll get to keep your home. You need to continue making your monthly mortgage payments to keep your lender from filing for foreclosure.

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Take Bankruptcy Course 2

The Bankruptcy Code requires everyone to take this course after filing bankruptcy even if there is nothing someone could have done differently to avoid it. Itâs important to take this course from one of the approved providers, and while you don’t have to get it done before your 341 meeting, you certainly can.

Once you have completed bankruptcy course 2, your certificate of completion will need to be filed with the bankruptcy court. Make sure you ask your course provider whether they will file the certificate in your Chapter 7 bankruptcy case for you, or if you are required to do it yourself.

If you donât complete this course, you will not receive your discharge however, the case administration continues. Since the discharge is the main benefit of filing Chapter 7 bankruptcy in California, it is important not to forget this step.

Means Test Options: Median Income Vs Full Means Test

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To be eligible to file for bankruptcy under Chapter 7, you must satisfy the Means Test. The easiest way to qualify for Chapter 7 is to have an income below the state median. Even debtors whose household income is above the state median may qualify for Chapter 7 by going through the more thorough, full Means Test.

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Doesnt Filing For Bankruptcy Ruin My Reputation And My Life

Not if it gets you out of debt. You might be able to run from creditors for a while, but eventually the stress of that overwhelms people. Bankruptcy lets you stop running and start over again. It may take a few years for you to get loans and obtain credit again, but at least youll have that opportunity. Bankruptcy is meant to give people who made financial mistakes a second chance. In todays turbulent economy, that is a good thing.

Chapter 7 Bankruptcy California: 3 Things You Need To Know

You may have experienced a financial hardship and are considering filing bankruptcy in California, specifically Chapter 7 bankruptcy.

There are 3 important things to consider when pursuing Chapter 7 bankruptcy in California:

  • Do you qualify for a Chapter 7 bankruptcy?
  • What are the alternatives to Chapter 7 bankruptcy?
  • What is specific need-to-know Chapter 7 bankruptcy information for California?
  • Chapter 7 bankruptcy is the most common bankruptcy in the United States. For example, I would not be surprised if the majority of the 45,831 bankruptcies filed in California in the year ending June 30th, 2021 were Chapter 7 bankruptcy.

    Lets get started to understand why Chapter 7 is a popular choice in California.

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    Can A Chapter 7 Bankruptcy Trustee Take Away A Homestead Exemption For Bad Faith Conduct In Bankruptcy

    Luckily for California homeowners and Chapter 7 bankruptcy filers, the homestead exemption cannot be taken away by the Bankruptcy Court for bad faith conduct. This issue went to the United States Supreme Court in 2014, where the court found that: The Bankruptcy Court thus violated § 522s express terms when it ordered that the $75,000 protected by s homestead exemption be made available to pay s attorneys fees, an administrative expense. In doing so, the court exceeded the limits of its authority under § 105 and its inherent powers. Law v. Siegel, 571 U.S. 415, 42223 .

    How Many Times Can You File For Bankruptcy In California

    Can You File Bankruptcy If You Are Unemployed 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.

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    Chapter 7 And Chapter 1: Know The Difference

    Before we hop into the timing specifics, lets review the two types of personal bankruptcy available to you.

    Chapter 7 bankruptcy is often referred to as liquidation bankruptcy. With this type of filing, many of your debts can be eliminated through a discharge .

    However, not all debts go away with a Chapter 7 filing. Student loans, child support, and certain tax debts are some examples of debts that dont go away with Chapter 7. Talk to your attorney to get more specifics on what debts are eligible for discharge.

    Chapter 13 bankruptcy, also called a wage earners plan, doesnt actually get rid of your debts. It creates a more realistic payment plan that will allow you to keep your assets and continuing paying your debts. This plan only works if you have sufficient income to make the debt payments on the new plan.

    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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    Documents From The Most Recent Six Months

    You need to present a list of documents that are no older than six months when you file. Such forms include:

    • Proof of income from your employee
    • Other proof of income
    • Bank statements your trustee is going to want the most recent two months
    • Retirement and investment statements your trustee is going to want the most recent two months

    Do You Need To Take The Means Test

    California Bankruptcy Attorney, Chapter 7 Bankruptcy Lawyer

    Unless you are exempt, you must pass the Means Test to file for Chapter 7.If your income is below the California median for your household size, you are exempt from the test and can file for Chapter 7 bankruptcy.If your debts are not primarily consumer debts or if they were incurred while on active duty in the military, you are exempt from the test.The Means Test is used to determine if Chapter 13 is a viable option.

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    Finding Alternatives To Bankruptcy

  • 1Avoid bankruptcy on your own. Before you dive into bankruptcy proceedings, try to take some steps to avoid the process altogether. If you’re financial situation is not beyond repair, try:
  • Reducing expenses
  • Negotiating lower interest rates and
  • Selling your property.XResearch source
  • 2Contact creditors. If you cannot avoid bankruptcy without some help, start by contacting your creditors to work out a payment plan.XResearch source If you do not want to do this on your own, hire a credit counseling agency or lawyer to act on your behalf. They can help you make a budget and negotiate repayment plans with lower interest rates and reduced principal. In addition, credit counseling agencies and lawyers can work to stop the harassing calls and aggressive collection practices.
  • If you are going to hire a credit counseling agency, be aware of scammers.XResearch source Do some research and make sure the agency you hire is legitimate.
  • 3Obtain a debt consolidation loan. An unsecured debt consolidation loan will pay off your creditors while you will be left to pay off the loan itself. If you have the means, you can also consolidate your debts through a second mortgage or a home equity line of credit.
  • Be aware that if you choose to take out a second mortgage or a home equity loan, you will be required to use your home as collateral. If you fail to make the required payments, you could lose your home.XResearch source
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