Filing for Bankruptcy in California with Multiple Debts

Filing for bankruptcy in California with multiple debts can be a complex process, but understanding the different options available can help ease the burden. Whether you are burdened with credit card bills, medical expenses, or loans, knowing how to navigate bankruptcy can provide a fresh start.

In California, there are primarily two types of bankruptcy filings for individuals: Chapter 7 and Chapter 13. Each type has its own eligibility requirements and implications for your debts and assets.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," is designed for individuals who have little disposable income. In this process, your non-exempt assets may be sold to pay off your creditors. However, California has exemptions that allow you to protect certain assets such as your home, vehicle, and personal belongings up to a certain value.

To qualify for Chapter 7 bankruptcy, you must pass the means test, which assesses your income relative to the median income for a household of your size in California. If your income is below the median, you are eligible to file. If it's above, you may need to consider Chapter 13 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, is often referred to as a "reorganization bankruptcy." This option is suitable for individuals with a regular income who want to retain their assets while paying off debts over time. In a Chapter 13 filing, you propose a repayment plan to your creditors, which usually lasts between three to five years.

This type of bankruptcy allows you to catch up on missed mortgage or car payments, and it can stop foreclosure proceedings. The repayment amount is based on your disposable income and the amount of debt you owe, which can vary based on your financial situation.

Filing Process

The process of filing for bankruptcy in California begins with gathering all of your financial documents, including debt statements, income information, and asset valuations. Once your paperwork is organized, you will need to complete the necessary bankruptcy forms and file them with the court.

It's crucial to attend mandatory credit counseling before you file, as well as the 341 meeting of creditors after your filing. During the 341 meeting, you will answer questions from the bankruptcy trustee and creditors regarding your financial situation.

Implications of Bankruptcy