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Bankruptcy and debt law in California governs how individuals and businesses address situations where they are unable to repay their debts. California follows federal bankruptcy laws, primarily set out in the U.S. Bankruptcy Code, but also has unique exemptions and procedures under state law. Bankruptcy is a legal process that can offer debt relief or a fresh start for those overwhelmed by financial challenges. Consumers may deal with issues like credit card debt, medical bills, foreclosure, and creditor harassment. California's laws provide specific protections related to property, wage garnishment, and the rights of creditors and debtors.
Legal issues around bankruptcy and debt can be complex, and the consequences of missteps are often serious. You may need a lawyer if you are experiencing any of the following situations:
A knowledgeable attorney can assess your finances, explain your rights, help you choose the best solution, and represent you in legal proceedings.
California's bankruptcy and debt laws work in conjunction with the federal bankruptcy system but offer important state-specific rules.
It is crucial to consult a qualified attorney to understand how these local laws may impact your specific situation.
Chapter 7 bankruptcy is also called liquidation bankruptcy. It allows you to eliminate most unsecured debts quickly, but some of your property may be sold to repay creditors. Chapter 13 bankruptcy lets you create a court-approved repayment plan to pay back all or part of your debt over three to five years and often allows you to keep more property.
Not necessarily. California’s exemption laws may let you keep your home and car, up to certain values. Which assets you can keep depends on the exemptions you choose and your specific situation.
Bankruptcy will lower your credit score and stay on your credit report for up to 10 years for Chapter 7 and up to 7 years for Chapter 13. However, many people begin rebuilding their credit soon after a bankruptcy discharge.
Once you file for bankruptcy, an automatic stay goes into effect, stopping most collection actions, including calls, letters, lawsuits, and wage garnishments.
No. Some debts cannot be erased, such as most student loans, recent taxes, child support, and some court fines.
Most bankruptcy cases require at least one court appearance, known as the meeting of creditors. Rarely, you may need to attend a court hearing if there are disputes or objections.
Yes, but there are waiting periods between filings, and prior bankruptcy may affect eligibility for different types of bankruptcy or debt discharge.
Co-signers may remain responsible for the loan even if your debt is discharged in bankruptcy, especially under Chapter 7. Chapter 13 may provide some protection as long as you keep up with your repayment plan.
California offers two sets of exemptions. System 1 is generally better for protecting home equity, while System 2 may help protect more personal property and cash. You must choose one system for all exemptions in your case.
While you can file on your own, bankruptcy law is complicated and mistakes can be costly. A lawyer can help you determine the best approach, make sure forms are filed correctly, and protect your interests.
If you are considering bankruptcy or need help with debt, these organizations and agencies may provide valuable assistance:
Community-based nonprofit credit counselors may also offer free or low-cost assistance for debt management and budgeting.
If you are struggling with debt or considering filing for bankruptcy in California, consider taking the following steps:
A legal professional can help you evaluate your situation and guide you toward the best solution. Acting sooner rather than later can help protect your assets, reduce stress, and provide a path to financial stability.
