California is one several states in America that leaves filing Chapter 7 bankruptcy fairly friendly to individuals. Other forms of bankruptcy in the state, such as Chapter 13, are standard procedure from federal laws as the majority of states are. Bankruptcy may be worrisome, but in certain circumstances, which a bankruptcy attorney can help you ascertain, it is the best option an individual or business has. Although it will rarely relieve all debts, it will help individuals back to financial security faster in most cases. The recently added Fair Labor Standards Act in California state law requires business to complete unpaid wages, no matter what stage of bankruptcy the company has fallen into, and from employers, individuals who file Bankruptcy in California are still entitled to their wages until a bankruptcy filing is sorted out in the courts.
California Bankruptcy Topics
- Personal Bankruptcy Options
- Keep Your Home: Bankruptcy and Foreclosure
- California Exemptions to Bankruptcy Liquidation
- Options for Filing Bankruptcy
- Local Bankruptcy Courts and Trustees
Though there are many different forms of bankruptcy, two are most common for individuals. These two options include filing for bankruptcy under Chapter 7 and Chapter 13 of the United States bankruptcy code.
- Chapter 7 Bankruptcy - In the state of California, those who wish to file bankruptcy under Chapter 7 have relatively more options than if they lived in many other states throughout the country. This is because chapter 7 bankruptcy in California involves two schemes for exempted property. However, before one is able to file bankruptcy, they must pass a means test. If passed, the bankruptcy filing may continue. This type of bankruptcy case is often called ‘liquidation or a ‘fresh start’, because all possessions are liquidated to pay creditors in order to free debtors from existing debts. In this manner, they earn a ‘fresh start.’ Chapter 7 bankruptcy, or any other form, cannot remove all debts from an individual, however, and certain obligations cannot be discharged in a Chapter 7 filing. However, in order to start fresh and remain debt free, all wages earned after Chapter 7 bankruptcy are only subject to repayment of these outstanding, non-dischargeable debts at a pro-rated level.
- Chapter 13 Bankruptcy - What is known as a ‘wage earner’ bankruptcy is Chapter 13 bankruptcy. To qualify for filing under Chapter 13 bankruptcy, one must also pass the means test. One more qualification to file under Chapter 13 is an overall possession of secured debt no more than $1,010,650 or in secured debt a max of $336,900. Once passed and the bankruptcy process is allowed by the courts, the debtor works with a court mandated bankruptcy trustee in order to develop a plan to pay back their debtors in a timely manner, with the wage the debtor maintains. In this manner, the debtor is still able to maintain all his or her possessions. Repayment of debts under Chapter 13 bankruptcy will occur according to a pre-specified repayment plan lasting anywhere from three to five years. Extensions to the original Chapter 13 plan or amendments to payment amounts are available, but must be approved but the bankruptcy court in light of recent developments in one’s life and other reasons. (See more on Filing Chapter 13 in California).
Foreclosure is a very long process, and so is bankruptcy. If bankruptcy is filed before the creditor forecloses on an individual’s home, it will save the homeowner, even if temporarily. This is because after successfully filing for bankruptcy an ‘order to relief’ is mandated. This requires creditors to cease all collections actions and activity against debtors for the time being. After filing Chapter 7 or Chapter 13, the repayment plan or exemptions list may make foreclosure not possible, and individuals can retain their residence. However, this legal strategy cannot always save the owner from foreclosure. If the foreclosure was filed before the bankruptcy, it may continue. Chapter 13 is especially important for homeowners being foreclosed on before during or after bankruptcy, because it, in some cases, removes 2nd or 3rd mortgages.
Exemptions in California are complicated with two different schemes available to debtors, which are neither part of any uniform federal bankruptcy exemptions list. Each system is known as exemption list one and exemptions list two, below is a brief overview of the exemptions available in system one.
Type of Asset(s)
Details on Applicable Exemption(s)
Real estate property $50,000 if single and not disabled; $75,000 if family and no other member has homestead; $150,000 if 65 or older or if physically or mentally disabled; $150,000 if creditors are seeking to force sale of your home and you are either (a) 55 or older, single and earn under $15,000 per year, or (b) 55 or older, married and earn under $20,000 per year
Disability benefits up to an average of $250/month.
Life insurance benefits from parent, if individual claiming exemptions is child or spouse.
Annuity benefits up to an average of $250/month.
Property of joint business ventures are exempt
Pension benefits of law enforcement officers, judges, teachers, and other state servants are exempt.
Workers compensation benefits and unemployment benefits are exempt assets.
Up to seventy-five percent of unpaid earnings, and more if low-income earners
All Federal Supplemental Exemptions are included in exempt assets in CA bankruptcy filings.
- Use a Bankruptcy Lawyer - For people in dire need of financial assistance, a bankruptcy lawyer is extremely useful. Even if the debtor does not want, or cannot afford to hire the lawyer full time to work their bankruptcy, a consultation can be very enlightening. The bankruptcy lawyer will be able to assess the situation and help guide which path would be best for the debtor. They may cost money, but provide invaluable assistance for most individuals having a financial downfall.
- Use a Filing Service - For individuals who have filed bankruptcy and either, know the ins and outs and are confident in their ability to navigate the situation, or simply do not have enough money for a bankruptcy lawyer, a filing service can help. They will relieve the stress of having to fill out seemingly endless paperwork. Filing services will not provide the very necessary legal assistance. Filing services can be of great use to businesses with a large amount of finances to track, but again, they are not an equitable substitute for bankruptcy attorney.
- File “Pro Se” - For those who have been left without enough money for a bankruptcy lawyer or filing service, or for those who simply do not desire either, they will be filing Pro Se. To file bankruptcy Pro Se is to file alone or unaided by professional help. Doing so can be extremely stressful during one’s financial crisis, however, will save much money. One must be extremely careful assessing their possessions as to avoid bankruptcy fraud.
California Central Bankruptcy Court Main Office
Edward R. Roybal Federal Bldg and Courthouse
255 East Temple Street
Los Angeles, CA 90012-3332
California Eastern District Bankruptcy Court Main Office
3-200 Robert T. Matsui
United States Courthouse
501 I Street
Sacramento, CA 95814-7300
California Southern District Bankruptcy Court Main Office
United States Courthouse
325 West F Street
San Diego, CA 92101-6017
California Northern District Bankruptcy Court Main Office
United States Courthouse,19th Floor
235 Pine Street
San Francisco, CA 94104-2716