Bankruptcy Overview

It's important to note that California doesn't permit the use of federal bankruptcy exemptions. Residents filing for bankruptcy in California must adhere to the state's exemption laws. California offers two sets of exemptions: Set 1 (704 exemptions) and Set 2 (703 exemptions), giving filers flexibility in protecting assets like clothing, furniture, tools, pensions, cars, and homes. You can choose one set but not both.

California's exemption system is designed to ensure you don't lose your essential property while seeking debt relief. In essence, these exemptions provide a safety net, allowing you to preserve important possessions during your bankruptcy process and begin anew with a more stable financial footing.

Filing for bankruptcy in California can erase various unsecured debts, including:

• Credit Card Balances
• Overdue Utility Bills
• Medical Bills
• Personal Loans

Secured debts include things that can be taken back such as cars, houses, boats and even that new shed you bought for the yard. The only way to eliminate these secured debts is to be current on them or give them back.

Non-Dischargeable Debts means ones you can’t get rid of easily or at all and they include:

• Debts arising from fraud are generally not dischargeable in bankruptcy. Creditors must prove fraud to prevent discharge.
• Certain tax debts may be dischargeable, but they must meet specific criteria, including the timing of tax returns and assessments.
• Student loans, in most cases, are not easily discharged, and you need to prove "undue hardship" to eliminate them. As of 2023 there is a path to discharging student loans.
• Debts related to injury or death caused by drunk driving are typically not dischargeable.
• Spousal or child support obligations are usually not dischargeable in bankruptcy.

The bankruptcy discharge stops creditors from collecting, and the automatic stay protects debtors during bankruptcy. The automatic stay ends when the discharge is granted. If someone is coming to take your house or car soon, in order to stop them you will need an automatic stay.

What it does: When you file for bankruptcy, an automatic stay order from the court stops most lawsuits against you and actions by creditors, agencies, or the government to collect money from your assets.

Effects: It can help you prevent foreclosure, wage garnishment, lawsuits, and annoying calls from creditors and collectors.

Secure debts: The automatic stay lasts as long as you make your payments. If you miss payments, your creditor can ask the court to end the stay.

Motion to end the stay: If a creditor wants to take your property or restart collections, they file a motion with the court to get permission.

When you're drowning in debt and there seems to be no way out, bankruptcy becomes a lifeline. Bankruptcy should be your last resort, after exploring options like credit counseling, debt management, or debt settlement. But if bankruptcy is your only hope for breaking free from overwhelming debt, you face a crucial choice: Chapter 7 or Chapter 13.

Chapter 7, also known as liquidation bankruptcy, offers a fresh start for those with little to no disposable income. To qualify for Chapter 7, you must pass a means test to prove you can't afford to pay back your debt. The process is relatively quick, typically taking around 90 to 100 days. Once approved, your eligible debts, like credit card balances, medical bills, and unsecured personal loans, are discharged. This means you're no longer legally required to repay them. However, there are exceptions to the debts that can be discharged, so seeking advice from a bankruptcy lawyer is wise. While Chapter 7 provides debt relief, it comes at a cost: you may lose some assets, and it can significantly impact your credit, staying on your credit reports for up to 10 years.

Chapter 13, known as the wage earner's plan, is designed for individuals with regular monthly income. It allows you to keep your assets while creating a three to five-year reorganization plan to pay off your debts. If you're facing foreclosure or have significant secured debts like a home or car, Chapter 13 can help you catch up on payments while also discharging unsecured debts. However, the process takes longer compared to Chapter 7.

The choice between Chapter 7 and Chapter 13 hinges on your financial situation, income, and specific debts. Both paths offer a chance to break free from the burden of debt, but they have different timelines, eligibility requirements, and consequences. Ultimately, bankruptcy can provide relief from debt collectors and reduce your monthly debt-repayment load, but it's a decision that should be made after careful consideration of your unique circumstances.

Bankruptcy can be a lifeline when financial troubles have you feeling trapped. It's not just for big companies or business owners; regular people, like you and me, can use it too. Imagine you've been dealing with debts that seem impossible to pay off, like credit card bills or medical expenses. Bankruptcy is there to help you get back on your feet. It's like a safety net for people who are struggling.

You'll also need to work with a bankruptcy lawyer to guide you through the process. They'll help you prepare all the necessary paperwork and explain the rules to you. Once everything is in order, you'll go to court, where a judge will review your case. Please note that currently in California most bankruptcy cases are done over the phone or with Zoom so you usually won’t even need to go to court.

Bankruptcy is a way to protect you from the stress of creditors hounding you day and night. It's not an easy decision, and it can affect your credit score, but it's designed to help you rebuild your financial life. Remember, bankruptcy is just one option out there. You can also explore alternatives like debt counseling or negotiation with your creditors. The important thing is that you're not alone, and there are ways to get your financial life back on track.