Bankruptcy in California

The decision to file bankruptcy in California is a difficult one and usually causes a lot of stress and uncertainty. However, bankruptcy laws were enacted to allow people and businesses the opportunity of a “fresh start” financially. Be assured, there are consequences to filing bankruptcy. For example you will not be able to qualify for a home loan for several years in most cases. In addition, the bankruptcy filing will be on your credit report for years to come.

However, if your debt obligations have gotten to the point where you can not maintain payments due to an illness, job loss or other serious life or economic event, filing bankruptcy in California could be a wise decision. As with any serious event in life it is wise to consult with a legal expert to obtain more information about the options available to you in your specific situation. An experienced California bankruptcy attorney can help guide you through the California bankruptcy process.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[blockquote][I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.[/blockquote]

If you are considering filing bankruptcy in California please call our toll free bankruptcy hot line (855.700.0753) to request a free legal consultation for a California bankruptcy attorney in your area.

Common Types of California Bankruptcy

  • Chapter 7 – the most common form of bankruptcy for individuals. It is a liquidation bankruptcy, which means that the court sells all your assets for cash and then pays your creditors. You can keep assets that are exempt from sale either under federal law or the law of your home state. Chapter 7 bankruptcy can wipe out most of your debts. There is a “means test” for filing this type of bankruptcy. You must make less than a certain amount of money. Talk to a lawyer to see if you qualify for this type of bankruptcy. You cannot repeat this type of bankruptcy filing for 6 years.
  • Chapter 13 – like Chapter 11 but for individuals. It is a repayment plan for individuals with regular income. Under this type of bankruptcy, you pay your debts off over a 3- to 5-year period and you keep your property. There are limits to how much debt and what type of debt you can owe to qualify for Chapter 13 bankruptcy. Talk to a lawyer to see if you qualify for a Chapter 13 bankruptcy.
  • Chapter 11 – a reorganization proceeding, usually for corporations or partnerships because of its complexity, but individuals can file too. The debtor usually keeps his or her assets and continues to operate the business and tries to work out a reorganization plan to pay off the creditors.

California Bankruptcy Credit Counseling

Generally refers to two events in individual bankruptcy cases:

  1. The “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and
  2. The “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.

There are exceptions to both requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.

California Bankruptcy Exemptions

The Bankruptcy Code allows each individual who files for bankruptcy to keep basic assets that are necessary for the debtor’s “fresh start” after bankruptcy. That property is the debtor’s “exempt property.”

Each state has its own list of property that can be exempt. California gives debtors a choice between the state law exemptions found in Code of Civil Procedure section 704 and a set of bankruptcy-only exemptions in Code of Civil Procedure section 703.140 that mirror the Bankruptcy Code exemptions that were in the federal law when the California law was adopted.

Discharging Debts In A California Bankruptcy

A bankruptcy discharge releases a debtor from being personally responsible for certain types of debts. So, after a bankruptcy discharge, the debtor is no longer legally required to pay any debts that are discharged.

The discharge prohibits the creditors of the debtor from collecting on the debts that have been discharged. This means that creditors have to stop all legal action, telephone calls, letters, and other type of contact with the debtor. This prohibition is permanent for the debts that have been discharged by the bankruptcy court.

You cannot discharge all debts in bankruptcy. Some of the most common debts that you cannot get rid of in bankruptcy are debts from child or spousal support, most student loans, most tax debts, wages you owe people who worked for you, damages for personal injury you caused when driving while intoxicated, debts to government agencies for fines or penalties, and more.

2013 1st Quarter Bankruptcy Filings in California by Bankruptcy Court District

California Bankruptcies 1st Quarter of 2013
District Total Chapter 7 Chapter 11 Chapter 13
Northern 5,457 3,355 62 2,040
Eastern 7,729 6,327 38 1,364
Central 21,133 16,962 167 4,004
Southern 3,490 2,812 28 650
California 37,809

California Bankruptcy Court Districts

California Bankruptcy Districts Map