No doubt that if you are contemplating claiming bankruptcy in California that you will have many questions that you want and need answered. Each state in the US has its’ own criteria for making a bankruptcy claim so I have taken the liberty of compiling the most frequent questions asked when making a claim and have answered them to the best of my ability, in layman’s terms. This list is not exhaustive but should provide you with a clear and realistic overview on the process of claiming bankruptcy in California.
o Which type of bankruptcy is for me? – There are five types of bankruptcies in California with the main types being Chapter 7 and Chapter 13. To relieve yourself of all/most debts and possibly lose your assets choose Chapter 7; Chapter 13 usually allows one to retain their assets including their home and a repayment plan drawn up with a term anywhere between 3-5 years.
o How long does the process take? – A Chapter 7 filing usually takes in the region of 4-6 months whereas a Chapter 13 filing takes 3-5 years.
o What happens at the meeting of creditors? – Your file will be examined and you will be asked to swear on oath that all the information is present and correct. Your creditors may dispute the discharge and the trustee who has been assigned to your case will see if there are any assets that can be sold to pay off your creditors.
o Will my mortgage company foreclose on my home? – As long as you continue to make your monthly repayments your home is not at risk.
o What about my car? Do I risk losing that too? – Normally yes, you can. In most cases, the value of the vehicle is less than what is owed on it so it is not a viable decision on behalf of the trustee to take it away from you.
o Can I discharge my student loan? – Unfortunately for you, no. Not unless you can prove that by continuing to pay the loan that you are placing you and your family ‘undue hardship’. This has to be proved in the eyes of the court and this is not an easy thing to do.
o What are the fees involved? – To file for Chapter 7 or Chapter 13 is a little less than $300 and lawyers vary from place to place.
o What happens to my credit scoring when I have made a claim? – The fact that you made a claim will remain on file for up to ten years and you may inevitably find it almost impossible to seek further credit in the future.