How To File for Bankruptcy in California
Key Takeaways:
- Bankruptcy is governed by federal law, but California law will also affect your case.
- California has two exemption systems that can be used to protect real and personal property.
- California bankruptcy filers cannot use federal exemptions.
If medical bills, credit card debt, or other issues are affecting your finances, you might be curious about filing for bankruptcy. Because bankruptcy is a serious decision, it’s normal to have many questions before you move forward. This article will answer some common questions about filing for bankruptcy in California.
Although this article provides helpful information, bankruptcy involves complex rules. Consult a California bankruptcy lawyer to ensure your bankruptcy is handled correctly.
Do I Have to Do Anything Before I File for Bankruptcy in California?
Yes. Bankruptcy law says all filers must attend a credit counseling course before filing. You must complete this course at some point in the six months (180 days) before you file for bankruptcy.
How Do I File for Bankruptcy?
To file for bankruptcy, you’ll submit the “Voluntary Petition for Individuals Filing for Bankruptcy.” This form asks for basic information about you. It will also ask you to choose between Chapter 7 and Chapter 13.
Along with the petition, you’ll also have to submit any bankruptcy forms that are relevant to your situation. The forms provide more detailed information about your financial situation, such as your income and expenses. For example, because Chapter 7 has income limits, people who file Chapter 7 must pass a “means test” to prove that their income falls under the allowable limit. So, if you choose Chapter 7, you must fill out the means test materials and the voluntary petition.
You can download all bankruptcy forms and schedules for free from the “Bankruptcy Forms” section of the U.S. Courts website.
Where Do I File for Bankruptcy in California?
Technically, there are no “California bankruptcy courts,” at least none operated by the state of California. Because bankruptcy is governed by federal law, all bankruptcy cases must be filed in federal court. Specifically, you must file your case in a federal bankruptcy court.
The federal bankruptcy code says you must live in California for at least 91 days before filing in one of California’s federal bankruptcy courts. Generally, you must file in the bankruptcy court of the federal district where you live. California’s federal courts are divided into four districts: Northern, Central, Eastern, and Southern.
Some larger districts are further split into divisions. You can use the search tool on the official U.S. courts website to find the bankruptcy court closest to your home.
How Much Does It Cost To File for Bankruptcy in California?
How much you’ll pay to file bankruptcy depends on your type of bankruptcy. As of 2023, it costs $313 to file a Chapter 13 bankruptcy and $338 to file a Chapter 7.
If you’re filing for Chapter 7 relief and can’t afford the filing fee, you have options. You may be eligible for a fee waiver if your income is less than 150% of the federal poverty level. If you earn over 150% of the poverty guidelines but still need help, you can ask the court to split the fee into four payments. Your petition contains a section where you can request a payment plan or fee waiver.
What Happens After I File for Bankruptcy?
After you file your bankruptcy petition, two things happen automatically. First, the court will assign you a bankruptcy trustee, who will guide your case through the bankruptcy process. Second, the court will grant an automatic stay to stop all debt collection activities.
About 20 to 40 days after your bankruptcy filing, there will be a creditors meeting. Before this meeting, you’ll give the trustee income verification, such as paycheck stubs, bank statements, and tax returns. If you file for Chapter 13, the trustee will evaluate your proposed reorganization plan at this meeting. In a Chapter 7 bankruptcy, the trustee will review your assets and exemptions. Your creditors can interview you under oath during this meeting.
You’ll then have 60 days to attend a financial management course. This is a second course in addition to the credit counseling course required prior to filing for bankruptcy.
If you complete these steps properly, your bankruptcy case will end with your debts being discharged.
How Does California Law Affect My Bankruptcy?
California law will play a key role in your bankruptcy. This is because California has specific rules about exemptions that you can use to protect some property.
In a Chapter 7 bankruptcy, the trustee can sell non-exempt property to pay your debts, but not exempt property. Because your Chapter 13 repayment plan is based on your non-exempt property, exemptions can lower your monthly payments.
Federal bankruptcy law lets states make their own exemptions and allows states to let their residents choose between federal and state exemptions or only the state’s exemptions.
If you file for bankruptcy in California, you must use California’s exemptions. To take advantage of California’s exemptions, you must live in California for two years (730 days) before filing. If you do not meet that requirement, you should speak to a bankruptcy lawyer about your options.
When You Need Help Filing for California Bankruptcy
Bankruptcy can provide debt relief and give you a fresh start. But bankruptcy can also affect your credit report and other aspects of your financial life for years.
Because they involve both federal and state law, bankruptcy cases can be very complex. Find a bankruptcy attorney with experience in the state of California. They will have the most up-to-date legal knowledge on how to apply the law to the facts of your case.