Regardless of which state you reside in, if you are having financial difficulties, claiming bankruptcy may be your only option. Those who are unable to pay their bills and who are witnessing their debts continue to accumulate, may have to file a personal bankruptcy petition to wipe their debts, or at least reorganize them so that the payments are more manageable. While there are many issues to consider when filing a bankruptcy claim, the following article will deal specifically with filing bankruptcy in California without an attorney.
Claiming bankruptcy in California is very similar to filing in the rest of the U.S. as the U.S. Bankruptcy Code follows federal laws. As such, the forms required to file for personal bankruptcy under either Chapter 7 or Chapter 13 are identical, regardless of where you are when you file them. That is not to say that filing for bankruptcy in California is identical to other states. The main differences arise in the exemptions that individuals are allowed in their filing, as California uses state exemptions instead of federal ones. In addition, California is also considered to be one of the nine Community Property states in the U.S. which means that the effects of only one spouse filing are quite different than in other states.
Generally speaking, if you are considering filing bankruptcy in California, the first thing you should do is set up an appointment with a qualified bankruptcy attorney. They will be able to best advise you on which chapter to file under, how to maximize your savings, and they will ensure that all the paperwork is handled correctly. When dealing with 30-90 pages of forms, it is essential that you understand not only the federal bankruptcy code, but also state law. However, bankruptcy attorneys can charge exorbitantly high fees and for those needing to declare bankruptcy, it might simply not be possible to pay them. If you are in this situation, you should still schedule a no-obligation initial consultation with an attorney as they are normally free and will provide you with a wealth of helpful tips to get you started on filing bankruptcy in California without an attorney.
Your first step will be to complete the California Income Test, or Means Test. This will calculate whether you are eligible to file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, based on your household income and expenses compared to the median income in California. Going online to do a free Bankruptcy Means Test will give you a quick idea of where you stand. Basically, the test will look at the amount of disposable income that you have and the amount and type of your debts. In order to be eligible for Chapter 7, you must not have sufficient disposable income to pay off your creditors. If you do, then you will probably be required to file under Chapter 13.
Chapter 7 is often called ‘Liquidation Bankruptcy’ as any items not normally used for your support and maintenance, such as your clothing, furniture, and household goods, will be handed over to a court-appointed trustee and liquidated to pay off your creditors. Chapter 7 is considered to be more simple and more easily done without the aid of a lawyer, but if you have lots of property, complex agreements with creditors, or joint debts, your case may not be so straightforward.
Generally speaking, you will first have to complete a credit counselling course then include your certificate of completion along with all other forms and paperwork to be filed at the Bankruptcy Court in your area of residence. At this point you will have to pay a non-refundable fee of $299. While the file is being reviewed by the California division of the U.S. Bankruptcy Court, you will have time to complete the second phase of your financial education. This certificate must be submitted within 45 days of the initial filing or your case could be dismissed without your debts being discharged. Once the court has appointed a trustee to handle the liquidation of your assets, your Creditor’s Hearing will also be scheduled. If no creditors object to your bankruptcy petition, your debts will be discharged and your bankruptcy will be finalized. Depending on the complexity of your case and how busy the court is, your Chapter 7 may take as little as 3-4 months. Keep in mind that if you are planning on filing Bankruptcy Chapter 7 in California without an attorney, you must make every effort to fill all the paperwork out correctly. Omitting a creditor, even by accident, or providing the courts with incorrect information as to your financial situation, could be considered fraud and result in a dismissal.
Chapter 13 is known as “Reorganization” as your eligible debts will be discharged and the remaining debts will be included in a repayment plan which a court appointed trustee will be in charge of. Depending on your plan you will end up paying off 0-100% of your debts over a period of 3-5 years. It is a good option if you have too much disposable income to qualify for Chapter 7 and if you wish to retain certain assets that may otherwise be liquidated. In order to be eligible for filing under Chapter 13, you must have a regular income and have unsecured debts totaling less than $336,900 and secured debts totaling less than $1,010,650. If the Means Test indicates that you have $100-$167 of monthly disposable income to pay to your creditors, Chapter 13 will be the right decision for you.
The process of filing Chapter 13 is very similar to that of Chapter 7. When you pay the fees of $274, you will have to submit a repayment plan in addition to all the other standard bankruptcy forms. This repayment plan should have been covered in your pre-bankruptcy financial education course. After it has been reviewed by the court and your creditors, a trustee will be appointed and be in charge of collecting monthly payments from you for the duration of the repayment plan. You will have no interaction with creditors and any harassment in the form of wage garnishments or threats from collection agencies will be ceased by an automatic stay. At the end of the 3-5 year period, you will only be responsible for any non-eligible debts such as student loans, back taxes, and any you have chosen to reaffirm.
Filing for bankruptcy in California without an attorney is certainly possible, but there are many occasions where having qualified legal advice could be invaluable. If you are planning on handling the petition on your own, at least schedule an initial consultation with a qualified bankruptcy attorney to ensure you fully understand the procedure beforehand.