How to File Bankruptcy in California

Step-by-Step Guide

1. 1

   Step 1: Avoid bankruptcy on your own.

   Before you dive into bankruptcy proceedings, try to take some steps to avoid the process altogether.
   
   If you're financial situation is not beyond repair, try:
   Reducing expenses; Increasing your income; Negotiating lower interest rates; and Selling your property.
2. 2

   Step 2: Contact creditors.

   If you cannot avoid bankruptcy without some help, start by contacting your creditors to work out a payment plan.If you do not want to do this on your own, hire a credit counseling agency or lawyer to act on your behalf.
   
   They can help you make a budget and negotiate repayment plans with lower interest rates and reduced principal.
   
   In addition, credit counseling agencies and lawyers can work to stop the harassing calls and aggressive collection practices.
   
   If you are going to hire a credit counseling agency, be aware of scammers.Do some research and make sure the agency you hire is legitimate. , An unsecured debt consolidation loan will pay off your creditors while you will be left to pay off the loan itself.
   
   If you have the means, you can also consolidate your debts through a second mortgage or a home equity line of credit.
   
   Be aware that if you choose to take out a second mortgage or a home equity loan, you will be required to use your home as collateral.
   
   If you fail to make the required payments, you could lose your home., If you enroll in a credit counseling plan, your creditors will be more likely to reduce interest rates and accept lower payments because you will enter into a debt repayment plan.
   
   As part of your plan, you will deposit money each month with the credit counseling service and they will pay your creditors according to the payment schedule you agree upon.
   
   When you are choosing a credit counseling service, be sure to look at the fees.
   
   Some services will charge little to no fee to manage the plan.
   
   Other services will charge monthly fees that will add up over time., Bankruptcy proceedings can be complicated and an attorney should be hired whenever possible.
   
   To hire an attorney, start by asking friends and family if they have any good referrals for you.
   
   Referrals are a valuable way to find attorneys.
   
   When a friend or family gives you the name of a lawyer, ask about their experiences with the attorney and why they think the person is right for the job. , If you cannot get a referral, visit your state's bar website and use their lawyer referral service or lawyer search function.
   
   For example, in California, you can get individualized assistance to guide you through the referral process.
   
   After answering a few questions about your case, you will be referred to a number of qualified attorneys who are required to have malpractice insurance., After you have a list of three to five attorneys, call them and set up an initial consultation.
   
   The initial consultation gives you an opportunity to interact with each attorney before you hire them.
   
   Bring as many relevant documents to the consultation as possible.
   
   In these types of cases, bank statements, credit reports, and collection letters are all important to bring.
   
   In addition, ask some of the following questions:
   How long have they been practicing bankruptcy law? How many cases similar to yours have they had? What is a likely outcome for your case? Do they have good relationships with opposing counsel and likely judges? Do they have a history of discipline? , Lawyer fees will vary based on where you live and the attorneys you contact.
   
   Once you agree on a fee arrangement with an attorney, make sure you get the agreement in writing.
   
   In general, attorneys' fees will take one of the following forms:
   Flat fees for certain services.
   
   In this scenario, you will pay the lawyer a flat, one-time fee, for certain services.
   
   For example, you may pay one fee to have the attorney file your case, another fee to have the attorney represent you at hearings, and another fee if you are filing jointly with your spouse.
   
   Hourly fees.
   
   A lot of lawyers charge by the hour for the work they complete on your case.
   
   You will get a detailed accounting of the work the lawyer completes and you will be required to pay every two weeks or every month. , In the end, choose the attorney that makes you feel comfortable and who can answer all of your questions in a way you understand.
   
   Pick the lawyer who specializes in bankruptcy law or does a large part of their practice in that arena., Before you can file for bankruptcy, you must complete an approved credit counseling course.
   
   This course is meant to determine whether you could handle your debts without going through bankruptcy and without adding to what you owe.
   
   Counseling is required even if it is obvious you need bankruptcy.
   
   Bankruptcy law only requires you participate in counseling; it does not require you to go along with whatever is recommended.
   
   Even if a repayment plan is feasible, you could still file for bankruptcy.
   
   However, when you file, you will be required to submit any recommendation you receive.
   
   The court will look at the plan and may try to push you out of Chapter 7 proceedings and into a Chapter 13 repayment plan., The counseling agency you choose must be approved by the U.S.
   
   Trustee Program, which is a part of the U.S.
   
   Department of Justice (DOJ).The DOJ offers a list of approved California Credit Counseling Agencies on their website., The U.S.
   
   Trustee Program has determined that agencies can charge a reasonable fee for their services, which they have determined ranges from free to $50.
   
   However, if you cannot afford the fee, the agency is required to give the services to you for free., During the counseling the agency will prepare a budget based on your income and expenses and will then review your possibilities for debt repayment.This counseling must be completed within 180 days before filing your bankruptcy case., After you complete the course you will receive a certificate of completion.
   
   You will need to file a copy of this certificate when you file for bankruptcy., There are four main options when you file for bankruptcy.
   
   Each one is named for the federal Bankruptcy Code chapter that describes them.
   
   Chapter 11 proceedings are most often used for corporations and Chapter 12 proceedings are for family farmers.
   
   Unless you fit into one of those categories, your focus will be on Chapters 7 and
   13., If you file for Chapter 7 bankruptcy, your qualifying assets will be liquidated (i.e., sold by the court) and the proceeds will be used to pay your creditors.
   
   You will keep exempt property and while most of your debts will be wiped out, some debts are excepted from these proceedings.
   
   You cannot file for Chapter 7 bankruptcy unless you pass the Means Test or are exempted., If you want to file for Chapter 7 bankruptcy you must pass the Means Test unless you are exempt.
   
   This test only applies to higher-income filers so if your income is below the California median for your household size you are exempt from the test and may file for Chapter 7 bankruptcy.
   
   You are also exempt from the test if your debts are not primarily consumer debts or if your debts were incurred while on active duty in the military and you are a disabled veteran.
   
   The Means Test is used to determine if Chapter 13 is a viable option as opposed to Chapter
   7., If you file for Chapter 13 bankruptcy, you will work out a repayment plan with the court and will pay off your debts over a three to five year period.
   
   To qualify, you must have a regular income that rises above a certain level.
   
   In Chapter 13 proceedings, you will keep your property.
   
   However, there are limits to how much debt and what type of debt you can have and still qualify for these proceedings., When bankruptcy proceedings occur, the court will discharge and release you from personal liability for certain types of debts.
   
   In general, more debts can be discharged by filing under Chapter 13 than filing for Chapter
   7.The types of debts that are usually dischargeable in Chapter 7 bankruptcy include:
   Credit card debt; Collection agency accounts; Medical bills; Personal loans; and Utility bills., Some debts cannot be discharged by going through bankruptcy proceedings.
   
   Chapter 7 excepts more debts than does Chapter
   13.
   
   In general, excepted debts include:
   Certain types of tax claims; Debts not included in your court filings; Debts for spousal or child support or alimony; Debts for student loans; Debts for injuries caused willfully or maliciously; and Debts for injuries caused by your operation of vehicle while intoxicated., When you file for bankruptcy you will be able to protect basic assets that are necessary for your "fresh start" after bankruptcy.
   
   This property is exempted.
   
   In California, you must choose between two sets of exemptions.Look at the California Code of Civil Procedure, sections
   703.140 and 704, for an exhaustive list of both sets of exemptions.These exemptions generally include:
   Homes and other dwellings (up to a certain dollar amount); Some personal property (e.g., clothes, appliances, food, and furnishings); Some insurance; Some pensions; and some wages., After you determine that filing for bankruptcy is the right option, you will need to obtain the large number of documents required to file.
   
   The federal courts in California provide you with a packet on their website.
   
   This packet includes all the required documents you will need as well as directions for filling them out., In addition to required court documents, you need to gather paperwork you will use to supplement your claims.
   
   In general, you should gather the following:
   Itemization of your current income sources; Evidence of major financial transactions from the past two years; Evidence of monthly living expenses; Evidence of your debts; Lists of all the property you own (real and personal); Tax returns; Deeds; Car titles; and Documents for any loans you may have., For a Chapter 7 filing, you will need to fill out over 20 forms and schedules that will be filed with the court at various times.
   
   All of these documents, along with directions, can be found at http://www.cacb.uscourts.gov/sites/cacb/files/documents/forms/Ch7%20IndividualPetitionPackage.pdf.
   
   In general, you will fill out the following documents and file them at the following times:
   You will start by filing a statement of your Social Security number, a voluntary petition, a master mailing list of all your creditors, and an electronic filing declaration if you are filing electronically.
   
   At the time of you file your initial documents, or within 14 days of filing the voluntary petition, you will need to file a debt repayment plan; a statement of related cases; a summary of your assets and liabilities; numerous schedules itemizing your assets and liabilities; a statement of your current income; a statement of exemption; the results to your Means Test; and your certificate of credit counseling.
   
   Finally, within 30 days of your initial filing, you will need to certify your intention to file for Chapter 7 bankruptcy., For a Chapter 13 filing, you will need to fill out over 20 forms and schedules that will be filed with the court at various times.
   
   All of these documents, along with directions, can be found at http://www.cacb.uscourts.gov/sites/cacb/files/documents/forms/Ch13%20Petition%20Package.pdf.
   
   In general, you will fill out the following documents at the following times:
   You will start by filing a statement of your Social Security number, a voluntary petition, a master mailing list of all your creditors, and an electronic filing declaration if you are filing electronically.
   
   At the time of you file your initial documents, or within 14 days of filing the voluntary petition, you will need to file a debt repayment plan; a statement of related cases; a summary of your assets and liabilities; numerous schedules itemizing your assets and liabilities; a statement of your current income and a calculation of your commitment period; a statement of your disposable income; your certificate of credit counseling; and your Chapter 13 Plan. , There are four federal judicial districts in California.
   
   You can file either in the court where you have been living for the greater part of the last 180 days or the district where you are domiciled.You can also use the federal court locator, which is a resource offered by the federal government online.If you choose "bankruptcy" for the court type and then type in your zip code, the locator will give you information about the courts you can file in. , If you are filing for Chapter 7 proceedings, you will be required to pay $335.If you are filing for Chapter 13 proceedings, you will be required to pay $310., Once you have filed all the required documents, the court will issue an automatic stay that stops listed creditors from pursuing you for any debts until the stay is lifted.
   
   While this will provide you with a short-term reprieve from any unwanted contact, the stay is unlikely to last long if you do not have any equity in the property at issue.
   
   For example, if you rent property on a month-to-month basis, you do not have any property interest to protect for the benefit of the creditor and your landlord will likely get the stay lifted relatively quickly., When you file for bankruptcy, the court will take legal control of your debts and any property not exempted.
   
   A trustee will be appointed to handle your property.
   
   The trustee's job is to make sure the creditors get paid as much as possible.
   
   The trustee can even challenge any element of your case., About one moth after filing, the trustee will call a meeting for all of the creditors and you must attend.
   
   Very few creditors actually show up. , Before, during, or after the meeting, creditors may challenge your assertions by filing a complaint in the bankruptcy court.
   
   This filing will start a lawsuit generally referred to as an "adversary proceeding." The creditor will then have to show why the debt should not be discharged.You and/or your attorney will be able to respond to any challenge brought. , Apart from any adversary proceedings, you will usually only need to attend hearings if you filed for Chapter 13 bankruptcy.
   
   There, you will need to attend a hearing where the judge will look over your Chapter 13 Repayment Plan and either confirm or deny it.
   
   If your plan is confirmed, you must follow it until your payment period is up., Before your will be discharged, you must complete a financial management course offered by an approved provider.This course will teach you about ways to avoid the problems you got yourself into before.
   
   There may be a fee associated with the course, but the fee must be based on your ability to pay.
   
   Once you complete the course, you will receive a certificate you will have to file with the court.
3. 3

   Step 3: Obtain a debt consolidation loan.

4. 4

   Step 4: Complete a credit counseling plan.

5. 5

   Step 5: Ask for referrals.

6. 6

   Step 6: Use your state's bar website.

7. 7

   Step 7: Conduct initial consultations.

8. 8

   Step 8: Ask about fees.

9. 9

   Step 9: Make a decision.

10. 10

    Step 10: Understand the course's purpose.

11. 11

    Step 11: Find an approved counseling agency.

12. 12

    Step 12: Pay any required fee.

13. 13

    Step 13: Complete the counseling.

14. 14

    Step 14: Obtain your certificate.

15. 15

    Step 15: Look at your options.

16. 16

    Step 16: Qualify for Chapter 7.

17. 17

    Step 17: Determine if you have to take the Means Test.

18. 18

    Step 18: Select Chapter 13.

19. 19

    Step 19: Consider the debts that will be discharged.

20. 20

    Step 20: Understand that some debts are excepted from discharge.

21. 21

    Step 21: Protect certain assets from creditors.

22. 22

    Step 22: Obtain the required documents.

23. 23

    Step 23: Gather paperwork.

24. 24

    Step 24: Fill out all required Chapter 7 documents.

25. 25

    Step 25: Fill out all required Chapter 13 documents.

26. 26

    Step 26: File your documents with the correct court.

27. 27

    Step 27: Pay the fees.

28. 28

    Step 28: Wait for the automatic stay to go into effect.

29. 29

    Step 29: Have a trustee appointed.

30. 30

    Step 30: Meet with creditors.

31. 31

    Step 31: Respond to any challenges.

32. 32

    Step 32: Attend hearings.

33. 33

    Step 33: Complete a financial management instructional course.

Detailed Guide

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