When debt payments leave too little for housing, food, transportation, and other needs—or your balances continue growing despite your payments—you may need a legal way to regain control. Bankruptcy may stop most collection efforts, eliminate debts that bankruptcy law permits a court to discharge, or give you time to repay debts. Your income, property, debts, and goals will help determine whether Chapter 7, Chapter 13, or another option fits your situation.
Working with a bankruptcy attorney in California can help you understand what each option would mean for your household. At Pakpour Banks LLP, we review your finances, compare bankruptcy with possible agreements with creditors, prepare bankruptcy filings, and represent you when a dispute requires court action. From our Davis office, we serve clients in both English and Spanish throughout Northern California.
How Does Bankruptcy Work in California?
If you need a bankruptcy attorney in California, you may need to stop a garnishment or lawsuit, protect property you rely on, reduce unsecured debt, or create time to catch up on missed payments. Bankruptcy provides a court-supervised process for pursuing those goals.
Filing for bankruptcy can change three parts of your financial situation:
- What creditors may do to collect on the debt in the short term,
- What happens to your property, and
- Which debts you must pay afterward.
Different parts of the bankruptcy process create the following results:
- Automatic stay. If creditors are pursuing collection, filing for bankruptcy creates an automatic stay that generally pauses lawsuits, wage garnishments, foreclosure activity, and collection calls. The stay gives your case time to proceed, though a creditor may seek court permission to resume certain collection efforts.
- Exemptions. If you want to keep a home, vehicle, savings, or other belongings, you can claim exemptions in your bankruptcy forms. An exemption protects qualifying property or equity from being used to pay creditors.
- Debt discharge. Completing a bankruptcy case may discharge certain debts, removing your personal legal responsibility to pay those debts.
Bankruptcy court can only discharge certain debts, such as:
- Credit card balances,
- Medical bills, and
- Unsecured personal loans.
The specifics of how bankruptcy works depend on which type you pursue.
What Types of Bankruptcy Are Available in California?
Once you identify what you need bankruptcy to accomplish, you can compare the chapters that provide different kinds of relief. Individuals usually consider Chapter 7 or Chapter 13, while businesses and some individuals may use Chapter 11. Your California bankruptcy attorney advises you on which chapter makes the most sense to pursue in your unique circumstances.
Chapter 7 Bankruptcy
Chapter 7 may be appropriate when unsecured debts, such as credit card balances and medical bills, are the main source of financial pressure. It uses a liquidation process, meaning a trustee may sell property that an exemption does not protect and distribute the proceeds to creditors before the court discharges eligible debts. Yet, many Chapter 7 cases do not involve a property sale because exemptions protect everything the filer owns.
Chapter 13 Bankruptcy
Chapter 13 may help when you have regular income but need time to catch up on a mortgage, vehicle loan, taxes, or other obligations. You make payments to a trustee under a three- to five-year plan, and the trustee distributes the money to creditors.
A Chapter 13 plan may allow you to keep property that a Chapter 7 trustee could sell. Your income, necessary expenses, debts, and unprotected property help determine how much you must pay.
Chapter 11 Bankruptcy
Chapter 11 may apply when you operate a business that needs to continue during a financial reorganization. A business generally remains in control of its operations while proposing a plan that changes how and when it will pay debts.
An individual may consider Chapter 11 when their debts exceed Chapter 13 limits. Chapter 11 typically requires more reports, negotiations, hearings, and expenses than Chapter 7 or Chapter 13.
What Property Can You Protect in a California Bankruptcy?
The property you own can affect whether bankruptcy provides the result you want and which chapter works better for you. Exemptions protect equity in qualifying property up to an amount set by law. Equity is the property’s value minus any debt secured by it. If a vehicle is worth $20,000 and you owe $15,000 on its loan, you have $5,000 in equity to protect.
California provides two alternative lists of exemptions. The Section 704 system includes California’s homestead exemption and may better protect equity in a primary residence. The Section 703 system provides a smaller residence exemption but includes a wildcard exemption that you may apply to cash or other property. Both systems protect specified amounts of property such as vehicles, household goods, retirement benefits, and tools used for work.
What Happens When You File for Bankruptcy?
Once you choose bankruptcy, you and your attorney prepare a complete account of your finances, then:
- Collect financial records and credit counseling. You complete the required credit counseling and provide your attorney with records showing your income, expenses, debts, property, and recent financial activity.
- Draft and file a petition. Your attorney prepares a petition that opens the case, along with forms reporting your finances. You review the information for accuracy before your attorney files the documents with the appropriate bankruptcy court.
- Automatic stay. Filing generally creates an automatic stay that directs creditors to pause most collection efforts. Your attorney can contact a creditor that continues collection or respond if a creditor asks the court for permission to proceed.
- Meeting of creditors and bankruptcy trustee. A trustee reviews your forms and supporting records. Your attorney provides requested documents, prepares you for the meeting of creditors, and attends while you answer the trustee’s questions under oath.
- Complete bankruptcy requirements. After the meeting, the next steps depend on your chapter. In Chapter 7, your attorney can address questions about your exemptions, property, or right to a discharge, while in Chapter 13, your attorney prepares a repayment plan, responds to objections, and seeks court approval of the plan.
- Work toward discharge. You complete a debtor education course and the remaining requirements of your chapter. When the court enters a discharge, your attorney can explain which debts and liens remain and respond if a creditor continues trying to collect a discharged debt.
Throughout the case, a bankruptcy lawyer in California can advise you on the important legal considerations of your decisions, provide information to the trustee and court, negotiate with creditors, and present your position to a bankruptcy judge when necessary.
Speak with a California Bankruptcy Attorney at Pakpour Banks LLP
You may be looking for a way to reduce monthly debt payments, respond to collection activity, catch up on secured debts, or protect property as you reorganize your finances. Pakpour Banks LLP explains your bankruptcy and nonbankruptcy options and helps you choose a path forward.
Based in Davis, we serve clients in Davis, Woodland, Sacramento, West Sacramento, Vacaville, Dixon, Fairfield, Roseville, Elk Grove, and surrounding Northern California communities. Contact us to discuss your situation with our bankruptcy attorneys.
Legal References Used to Inform This Page
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