How to File for Bankruptcy in California

Filing for bankruptcy can be a daunting decision, but for many individuals facing insurmountable debt, it can provide a necessary lifeline and a fresh financial start. If you are considering bankruptcy, it is important to understand how to file for bankruptcy in California. This blog discusses the basic steps involved in filing for bankruptcy, from initial considerations to the final discharge of debts.

Step 1: Evaluate Financial Situations
In considering bankruptcy, debtors should take a comprehensive look at their complete financial situation. Consider all debts, income, expenses, and assets. Determine if other alternatives, such as debt consolidation or settlement, might be appropriate before filing for bankruptcy

Step 2: Choosing the Right Type of Bankruptcy
Individuals typically file for bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code

Chapter 7 Bankruptcy: Known as liquidation bankruptcy, Chapter 7 involves the sale of non-exempt assets to pay off creditors. It is suitable for individuals with little to no disposable income and can discharge most unsecured debts.

Chapter 13 Bankruptcy: Also known as reorganization bankruptcy, Chapter 13 allows individuals with a regular income to develop a repayment plan to pay off debts over three to five years. Chapter 13 bankruptcy may be ideal for those who want to keep their property and are able to guarantee and manage a monthly repayment plan.

Step 3: Complete Credit Counseling
As part of the bankruptcy filing process, debtors must complete a credit counseling course from an approved agency. This course is designed to help debtors understand their financial situation and explore alternatives to bankruptcy. The certificate of completion must be filed within the bankruptcy petition.

Step 4: Gather Necessary Documentation
Bankruptcy filers will need to collect a variety of financial documents to file for bankruptcy. These typically include:

• A list of all creditors and the amounts owed.
• Proof of income (pay stubs, tax returns, etc.).
• Recent bank statements.
• A detailed list of assets and property.
• A complete list of all monthly living expenses.
• Details regarding any existing debt repayment plans.

Step 5: File the Bankruptcy Petition

To initiate the bankruptcy process, a bankruptcy petition must be filed with the appropriate California bankruptcy court. There are four federal judicial districts in California: Northern, Eastern, Central, and Southern. Petitioners must file in the district where they reside.

The petition includes forms detailing financial situations, such as schedules of assets and liabilities, current income and expenditures, and a statement of financial affairs. Current filing fees for Chapter 7 are $338.00 and $313.00 for Chapter 13s, though fee waivers or payment plans may be available for qualified individuals.

Step 6: Automatic Stay
Upon filing the bankruptcy petition, an automatic stay goes into effect. This stay halts most collection actions against the filer, including lawsuits, wage garnishments, and creditor calls, providing the debtor immediate relief.

Step 7: Appointment of a Trustee
A bankruptcy trustee is appointed to oversee the case. The trustee will review documents, conduct the 341 meeting of creditors, and, in Chapter 7 cases, liquidate non-exempt assets to pay creditors. In Chapter 13 cases, the trustee will oversee the repayment plan.

Step 8: Attend the 341 Meeting
Approximately 20-40 days after filing, the petitioner must attend a meeting of creditors, also known as the 341 meeting. During this meeting, the trustee and any creditors who choose to attend will ask questions about the financial situation and the information provided in bankruptcy documents.

Step 9: Complete a Debtor Education Course
Before receiving a discharge, the filer must complete a debtor education course from an approved provider. This course focuses on financial management and preventing future financial issues. The certificate of completion must be filed with the court.

Step 10: Chapter-Specific Requirements

Chapter 7: The trustee will sell any non-exempt assets and distribute the proceeds to creditors. Once this process is complete, usually within a few months, the filer will receive a discharge of qualifying debts.

Chapter 13: The petitioner must propose a repayment plan detailing how the debt will be paid back debts over three to five years. The plan must be approved by the court and creditors. Once the repayment plan is successfully completed, remaining qualifying debts may be discharged.

 Step 11: Receive The Discharge
The ultimate goal of bankruptcy is to receive a discharge of debts. A discharge releases the filer from personal liability for most debts and prevents creditors from taking any collection actions on the discharged debts. In Chapter 7, the discharge is typically granted within 4-6 months of filing. In Chapter 13, it occurs after the completion of the repayment plan.

How to File for Bankruptcy in California Conclusion
Filing for bankruptcy in California involves several steps, but with careful preparation and understanding, the process can be navigated successfully. Bankruptcy offers a fresh start for those overwhelmed by debt, but it is essential to consider all the options and seek professional advice. A bankruptcy attorney can help clients understand the complexities of the process, ensure all requirements are met, and guide them towards a more secure financial future.

Experienced bankruptcy attorneys at RJS LAW are available to discuss your situation and provide guidance from the initial decision, through the bankruptcy filing, and beyond completion.  For a free consultation, please contact us on the web at RJS LAW or by phone at 619-595-1655.

Written by Marco A. Torres