How to File Bankruptcy in California
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.
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 bankruptcy.
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.