California Bankruptcy With the economy in a bad state, many people are having a
difficult time paying their debts and may be considering bankruptcy.
Bankruptcy is technically controlled by Federal guidelines, but each
state has certain mandates that may change bankruptcy proceedings.
Types of Bankruptcy There are three types of bankruptcy, Chapter 7, 11 and 13.
Chapter 7 and 13 are both personal bankruptcy with different
implications and are based on the amount of debt a person has. Chapter
11 bankruptcy is for businesses.
Community Property California is a community property state, meaning spouses share
property that is acquired during their marriage equally. This means
that even if only one spouse files for bankruptcy, all community
property is under the bankruptcy terms.
Debts Released in Bankruptcy There are certain debts that can not be released during
bankruptcy. These debts include, taxes, alimony, child and spousal
support, debt acquired from fraud, student loans unless bankruptcy
occurs seven years after the person was a student. Debts that are
secured such as credit cards will be discharged. The debtor also must
go to debt counseling for six months before they can even file
The process to file bankruptcy in California is actually governed by
Federal guidelines. As with any legal matters, it is a lengthy process
full of paperwork. Each state has their own bankruptcy court so all
proceedings will take place there. Once paperwork is filed, a judge
will determine if a person is eligible to file bankruptcy. Although a
judge is involved in the process, the debtor will have very limited if
any interaction with them. Many filings do not require the debtor to
appear in court at all. Usually the only proceeding the debtor needs to
appear for is the meeting with the creditors.
Effect on credit Unfortunately, once you file bankruptcy your credit rating will
decline significantly for several years. You will be able to obtain a
mortgage three to four years after the bankruptcy. Receiving new credit
such as credit cards or car loans will be difficult until the
bankruptcy has fallen off your credit report. Having a bankruptcy show
up on your credit report shows potential creditors that you have had
financial problems in the past so offering you new credit is a huge
risk for them.
Restrictions on filing There may be instances when you are not able to file bankruptcy.
In California, for spouses you can have only one spouse file
bankruptcy. Take caution with this if spouses share debt. If you have
filed bankruptcy before, you must wait six years before you can file
again. You must also reside in the United States, or have a business
here. You must also pass a means test that sees if you financially
qualify for bankruptcy. You also must not have had a bankruptcy
discharged in the past 180 days from the new filing.
It is always important to speak with a bankruptcy attorney before you
file as there may be limitations to the type of bankruptcy you can
file. Knowing and understanding your rights before filing for
bankruptcy can save you money in the long run.