If you are in the unfortunate situation of contemplating bankruptcy in California, it is essential to understand the process and what to expect. Being prepared can help ease the stress and uncertainty of what lies ahead.
Before you file for chapter 7 bankruptcy in California, there are several considerations you need to take into account. First, will you hire an attorney to help with the process or try to do it alone? While we always recommend having a lawyer help individuals through bankruptcy, it is not required. Below we discuss the seven steps you need to take for a successful chapter 7 bankruptcy discharge.
7 Steps to California Chapter 7 Bankruptcy
Regardless of whether you represent yourself or hire an attorney, here are the seven general steps to chapter 7 bankruptcy in California.
To file for bankruptcy, there are certain required documents that you must include with your application. The first step in the process is to gather the necessary documents. The paperwork you need consists of the following:
- Six months of pay stubs. If you are unemployed or earn income from another source, you must provide that information and documentation. For instance, if you are a business owner and do not receive a typical paycheck, you still must include the necessary verification of what you earned over the last six months.
- Credit debt information. You must gather information about your creditors (i.e., individuals or entities you owe money to). You must include an estimated amount of what you owe to each creditor. An excellent way to do this is to request a copy of your credit report. There are several reporting agencies you could pull your credit report from.
- List of assets. As with debts, you must gather documents about your assets, including bank accounts, 401ks, life insurance policies, vehicles, property, etc.
- Two years of filed tax returns. For chapter 7 bankruptcy, you must file the two most recent years of your filed tax returns. You are required to provide a copy of the entire return, not just the first page. Your bankruptcy petition will be incomplete without tax returns. If you have not filed within the last two years, you must provide the previous two returns that you did file.
If you do not gather all the appropriate documentation, it can delay the process of getting your bankruptcy approved.
Decide Whether You Will Hire an Attorney
Even if you want to represent yourself, meeting with a California bankruptcy attorney before proceeding is a good idea. Take all the information and documents you gathered initially to your consultation.
An attorney can help you decide whether bankruptcy is right for you and whether you qualify for Chapter 7. Speak with a lawyer about your case.
In addition to gathering and providing the necessary documentation and information, you must complete a credit counseling class before filing for bankruptcy. You can take the course online, and it can be completed relatively quickly.
Complete Petition Packet & Schedules
It is time to complete your petition and schedules that you will file with the court. The court where you file these documents is typically determined by where you live.
The blank bankruptcy petition and schedule forms are available online. Be sure to choose the documents relating to Chapter 7. All information you supply in these forms should be accurate and truthful to the best of your knowledge.
If you have an attorney, they will complete and review these forms with you before filing in the appropriate jurisdiction. As with most court applications, there is a filing fee. You can request that the court waive the filing fee, but it will be granted only if you make a certain amount below the poverty line.
The Case Is Assigned to a Trustee
Every bankruptcy case is assigned to a trustee. The trustee acts as a middleman between you and the creditors and will oversee and manage the entire process.
The trustee must assess your assets and determine if any qualify as non-exempt. California has two different types of exemptions to protect your assets. Generally, they both preserve the equity you have in certain assets, up to a set limit. For instance, if the home you live in is worth $500,000 and you have a remaining mortgage of $400,000, your equity of $100,000 would be exempt.
Attend 341 Hearing a.k.a “Meeting of the Creditors”
Once you have filed your bankruptcy petition, the court will schedule a 341 hearing, also called a “meeting of the creditors,” which you will attend. You’ll need to bring a photo ID and proof of social security. The trustee will swear you in and ask you questions regarding your petition, including questions about your creditors, income, and assets. If you have an attorney, they will attend this hearing with you, and if any creditors object to your application, they may also participate and ask questions. For instance, they may ask how you intend to pay for your secured debt (e.g., mortgage or loan).
Debtor Education Class
Unfortunately, the credit counseling class will not be your last in the bankruptcy process. You must complete a second class after you file for bankruptcy. Once you finish the course, you must file proof with the court that you completed the debtor education class. To do this, you must fill out a specific form called the B23 form, which you can obtain from the court. If you hire an attorney to assist you with the bankruptcy process, they usually file the B23 form.
Importantly, your bankruptcy petition is complete once you file this form, so it is best to complete it as soon as possible.
Typically, your debt is discharged 60-90 days after the 341 hearing if there are no objections to your petition. If creditors object, it will likely take longer.
California Chapter 7 Bankruptcy Attorneys
If you are contemplating filing for chapter 7 bankruptcy in California, give us a call to speak with one of our knowledgeable attorneys. We understand this may be a difficult time in your life, and devising a plan and course of action can feel overwhelming. The process is complex. Let us help. At Pakpour Banks, we are award-winning attorneys with a strong commitment to our community. We prioritize working with you to find the best solution for you and your family. Contact us to schedule an appointment with one of our experienced lawyers today.