Understanding the California Bankruptcy Process

Assistance from Skilled California Bankruptcy Attorneys

If you are struggling with debt and considering bankruptcy, you may have concerns about the bankruptcy process. Some people avoid bankruptcy altogether because they think it is just too complex. While bankruptcy is a complex area of law, an experienced attorney can make the process as straightforward and simple as possible for you.

At RHM LAW LLP, our attorneys know the bankruptcy process from A to Z and have helped numerous clients achieve debt relief by filing for Chapter 7 and Chapter 13 bankruptcy. Our bankruptcy lawyers in Los Angeles will work with you personally to help you explore your debt relief options. If you decide bankruptcy is right for you, we will guide you through the process and handle all of the legal details. We represent clients in San Fernando Valley and throughout Los Angeles, Riverside, San Bernardino, and Orange Counties.

For a 30-minute risk-free consultation, contact our firm today. It could be your first step on the road to debt relief. 

Chapter 7 Bankruptcy Process in California

In a Chapter 7 bankruptcy, a trustee “steps into the shoes of the debtor” for a short period of time. Assets that cannot be protected can be liquidated and The Trustee will make distributions to creditors. Keep in mind, the majority of Chapter 7 bankruptcies are “no asset” cases, meaning the debtor’s assets are entirely exempt from being seized and liquidated. It is extremely important to obtain the proper bankruptcy counsel to preserve and protect what is important to you and your family!

Following is a general outline of what you can expect from the Chapter 7 bankruptcy process:

• We will review your financial situation, including looking at your last two months of pay stubs, credit reports, lawsuits against you, and other details
• If you decide bankruptcy is right for you, you will have to undergo a means test to determine if you qualify for Chapter 7
• If you qualify, we can file the bankruptcy petition, enacting the automatic stay, and stopping your creditors from taking further actions against you
• You must attend a meeting with your trustee, which takes place 30 to 45 days after filing
• When your bankruptcy is successful, your debt is discharged after four to six months from the date of filing

Chapter 13 Bankruptcy Process in California

If you file for Chapter 13 bankruptcy, you face a different process. Debt is not discharged immediately, but rather after the completion of a three- to five-year payment plan. All collection efforts are stopped! You will propose a feasible payment plan to the bankruptcy court, based on a number of factors, including the amount and nature of your debt, your assets, and your “disposable” income. You can even cure the arrears on your home and force the lender to cure the payments over 60 months! This can be accomplished for other secure debt as well including but not limited to your car, tools of the trade, and even IRS debt!

Filing for Chapter 13 immediately enacts the automatic stay, which protects you from home foreclosure, repossession, creditor harassment, and other consequences of debt. Whether you file for Chapter 7 or Chapter 13 bankruptcy, our Los Angeles bankruptcy lawyers will guide you through every step of the process.

Here is a FAQ section to address common questions about the bankruptcy process in California:

Frequently Asked Questions (FAQ)

1. What is the difference between Chapter 7 and Chapter 13 bankruptcy?

The main difference between Chapter 7 and Chapter 13 bankruptcy lies in how debts are handled:

Chapter 7 Bankruptcy: Often referred to as "liquidation," Chapter 7 allows you to eliminate most of your unsecured debt, such as credit card bills, medical bills, and personal loans. It typically takes about 4 to 6 months to complete and may involve the sale of non-exempt assets to pay creditors. However, most Chapter 7 cases are “no asset” cases, meaning that debtors get to keep all of their property.

Chapter 13 Bankruptcy: Also known as "reorganization," Chapter 13 allows you to keep your property while you repay your debts through a court-approved payment plan that lasts 3 to 5 years. This type of bankruptcy is typically used by individuals with a regular income who can make partial repayments and need to address secured debts, such as mortgage arrears, car loans, and other secured obligations.

2. How do I know if I qualify for Chapter 7 bankruptcy?

To qualify for Chapter 7 bankruptcy in California, you must pass the means test, which compares your income to the median income for a household of your size in California. If your income is below the median, you can usually qualify for Chapter 7. If your income is above the median, your disposable income will be analyzed to determine if you can afford to repay creditors. Our bankruptcy lawyers will help you determine if you qualify based on your unique financial situation.

3. What is the "automatic stay" in bankruptcy?

An automatic stay is a legal protection that goes into effect as soon as you file for bankruptcy. It stops creditors from pursuing any further collection actions, such as:

• Harassment from debt collectors
• Foreclosure proceedings
• Wage garnishments
• Repossession of property
• Lawsuits or judgments

This immediate protection helps give you breathing room as you work through the bankruptcy process.

4. What types of debts can be discharged in Chapter 7 bankruptcy?

Chapter 7 bankruptcy can discharge most unsecured debts, including:

• Credit card debt
• Medical bills
• Personal loans
• Utility bills
• Some tax debts (under certain conditions)

However, certain debts cannot be discharged, such as:

• Child support or spousal support (alimony)
• Most student loans
• Certain taxes (if they are recent or if you have committed fraud)
• Debts incurred through fraud or dishonest actions

A bankruptcy attorney can help you understand what debts are dischargeable based on your specific case.

5. What is the process for filing Chapter 13 bankruptcy?

The Chapter 13 bankruptcy process is as follows:

1. Initial Consultation: We’ll review your finances to determine if Chapter 13 is the right choice for you.
2. Filing the Petition: We file your bankruptcy petition with the court, which immediately stops creditors from pursuing you.
3. Proposal of a Payment Plan: You will submit a feasible payment plan to the court based on your income, assets, and debt.
4. Court Approval: Once the court approves your plan, you will begin making monthly payments to a trustee who will distribute the funds to your creditors.
5. Debt Repayment: Over 3 to 5 years, you will work toward paying off a portion of your debt under the approved plan.
6. Debt Discharge: After completing your repayment plan, any remaining unsecured debts will be discharged.

6. How long does bankruptcy take in California?

The duration of the bankruptcy process depends on which chapter you file under:

• Chapter 7 Bankruptcy: Typically takes 4 to 6 months to complete from filing to discharge.
• Chapter 13 Bankruptcy: Usually lasts 3 to 5 years while you make payments to your creditors under the repayment plan.

7. Will I lose all of my property if I file for Chapter 7?

Not necessarily. While Chapter 7 bankruptcy involves liquidating non-exempt assets to pay off creditors, most people who file for Chapter 7 in California have no assets that are not exempt. California has generous exemptions that protect most of your property, such as your home, car, personal belongings, and retirement accounts. A skilled bankruptcy attorney will help you maximize your exemptions and protect your assets.

8. How does bankruptcy affect my credit?

Filing for bankruptcy will have a temporary negative effect on your credit score, but it can help you rebuild your credit over time. A Chapter 7 bankruptcy will stay on your credit report for 10 years, while a Chapter 13 bankruptcy will remain for 7 years. However, by eliminating or reducing your debts, bankruptcy can provide you with a fresh financial start, and you may be able to start rebuilding your credit soon after your case is complete.

Contact Our Bankruptcy Lawyers in California Today!

Our California law offices are open weekdays from 7:00 a.m. to 7:00 p.m., and we serve clients in the Los Angeles area and San Fernando Valley through offices in Encino and Los Angeles.

Call RHM LAW LLP today at (213) 344-0043 to speak to a member of our team. We can help you get a fresh start.