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California Bankruptcy Laws



California Bankruptcy Laws should be known by every resident of the state of California. Financially strapped individuals and couples who struggle to pay their debts turn to bankruptcy declaration to relieve their financial burden and start anew. If all options have been exhausted and there is no other solution to your debt problems, file for bankruptcy. If you are a permanent resident of the state of California, take the time out to read specific California bankruptcy laws to compare the advantages and disadvantages of filing for bankruptcy.

A lawyer’s role in a bankruptcy petition is very important. Hiring a well-experienced lawyer who is also an expert on the laws of the state of California is a must. Once hired, it is his duty to inform you of the two different forms of bankruptcy that best fit with your financial problems. He explains the details of the process and is ready to answer any clarifications you ask.

There are two bankruptcy forms. Chapter 7, also known as liquidation, is perhaps the most common bankruptcy filed by individuals and families. If you choose Chapter 7 the most likely scenario is that a trustee will be assigned to your case. This person controls your non-exempt assets and sells these assets to buy off your creditors according to the priority structure determined by the bankruptcy court. However, not all who apply for Chapter 7 are approved. To ensure that you really need a fresh start in your financial issues you will be evaluated. A debtor’s income below the median income level of California as determined by the US Census Bureau will guarantee an approval of a Chapter 7 bankruptcy petition. There are also some instances where the debtor displays deceptive behaviors by transferring their assets before they declare bankruptcy to prevent confiscation to repay the creditors. This will not only disapprove your bankruptcy petition but will also trigger criminal charges from the state’s judicial system.

Most of the time, when debtors won’t qualify for Chapter 7 the only option left is to file for Chapter 13. In this form of bankruptcy, you get to keep your assets as long as you propose a repayment plan to be implemented in 3 to 5 years. This plan should be implemented in a way that all the creditors are paid of the appropriate amount the debtor owes. Once this repayment plan is approved by the court, the debtor will then start to send the necessary funds to the trustee, who in turn will pay it to the various creditors.

Federal laws usually set assets that are protected from the creditors called exemptions; however, California bankruptcy laws are unique because it specifies two systems of exemptions. The debtor is given the option to choose either of the two system exemptions. The first exemption includes:

• The house you live in provided equity is not more than $50,000 for individuals and $75,000 for families;
• Vehicle with equity up to $2,550;
• Personal belongings like jewelry and heirlooms up to $6,750; and
• Health aids, burial plots, life insurance, and government benefits.

The second set of exemptions includes:
• The house you live in provided equity is less than $17,425;
• Vehicle with equity up to $2,775;
• Personal belongings like jewelry up to $1,150, and $450 per piece for furniture, books, appliances, and musical instruments; and
• Retirement plans, health aids, life insurance and public benefits.

If there is no other choice but bankruptcy protection, make sure to enlist the help of your lawyer to go through the whole proceeding smoothly.