Spotlight on Bankruptcy in California
The Situation in the Golden State
When Governor Schwarzenegger recently warned the California state Assembly that “Our wallet is empty. Our bank is closed. Our credit is dried up.”, many Californians could relate to that scenario. Bankruptcies filed in 2008 hit record levels with over 133,000 in California alone, and over 95% of those filed by consumers. It is estimated that 1.4 million consumer bankruptcies will be filed in the U.S. in 2009, the surge triggered by the foreclosure crisis and economic downturn.
California Bankruptcy Legal Advice
The Federal Bankruptcy Law involves processes, procedures and evaluations which can be complex and confusing, including major revisions made in 2005. Seek the advice of a California law firm with specific long-term experience in California bankruptcy matters. Check references, if possible. A competent California attorney will help you weigh your different options, make informed decisions, help you protect the security of your family and reduce your stress, while facing the realities of the situation.
Chapter 7 - The Most Common Consumer Bankruptcy Choice in California
Chapter 7 is the “fresh start” chapter of the Bankruptcy Code and most commonly used. This filing results in a fair distribution of your available nonexempt property to creditors. Unsecured debts are generally discharged. Included in this process is a “means test”, used to determine your ability to pay your creditors, verifying whether Chapter 7 is appropriate or indicating that you should be filing Chapter 13. Median Family Income by Family Size and current poverty guidelines are factors evaluated when determining appropriate filing status for a given situation.
Debts Which Generally Cannot be Discharged in Your California Bankruptcy:
- Taxes owed to government agencies, such as the I.R.S., State of California, County, etc.
- Student loans (unless undue hardship can be proved),
- Debts incurred after the bankruptcy is filed
- Debts owed to a spouse for divorce-related obligatory expenses
- Debts not listed or scheduled or which the debtor waived discharge
- Debts for willful and malicious injury by the debtor to another person or property owned by another
Alternatives to California Bankruptcy
Contact your creditors to try to work out payment arrangements that you can manage. Contact the non-profit Consumer Credit Counseling service to get help with a manageable repayment plan. Sell as many assets as you can and pay down your debt to a manageable level. Debt consolidation may be considered, but approach this option with caution to make sure it actually helps your situation.
Final Thoughts on California Bankruptcy
Californians continue to suffer, as the State’s economy struggles to recover. If you are considering filing for bankruptcy in California, decisions you make and actions you take now can have a positive or negative effect on the outcome of your bankruptcy proceedings. Although some filers elect to handle their bankruptcy on their own, The U.S. Bankruptcy Court cautions that “Bankruptcy has long-term financial and legal consequences -- hiring a competent attorney is strongly recommended.” Click here to find California attorney resources in your area.