If you’re struggling under a mountain of debt, you may feel like your situation is hopeless. Debt can quickly snowball out of control, and interest rates cause the problem to grow larger with every passing month.
Bankruptcy is an often-misunderstood tool that can help you regain control of your finances. But how does one file for bankruptcy in California?
Here’s How to File for Bankruptcy in California
- Sign-Up for Credit Counseling
Once you know you are going to file for bankruptcy, it’s a good idea to go ahead and sign-up for credit counseling. According to federal law, anyone who files for bankruptcy must attend a credit counseling course. Whether you plan to file under Chapter 7 or 13, this is a requirement.
Make sure you choose an authorized institution when scheduling your counseling. You can reference this list of Approved Credit Counseling Agencies from the U.S. Department of Justice. Also, be sure to check the price – these classes should not cost more than $50, according to federal regulations.
- Perform A Means Test
If you are filing as an individual or family, you will need to decide which chapter of the bankruptcy code to file under. If you file under the wrong chapter, your petition could be rejected, and you will have to start the process all over again.
In California, if your monthly household income is less than the state median income, you are eligible for Chapter 7 bankruptcy without having your income subject to the “means test.” At the time of writing, the median income for a household with one member is $47,798.00. With each additional member in a household, this limit is raised.
If your income is above the median income, you may still qualify for chapter 7 after performing the “means test” to your income and expenses.
The median income used for the means test changes annually, and you should use current guidelines when determining which chapter to file under.
- Fill Out the Required Forms and Gather Documents
Once you know which chapter is right for you, you will have to fill out a series of forms. Federal and state documents are required to complete your petition for bankruptcy.
Because California is so large, the state is broken into four districts with distinct bankruptcy courts. Make sure you request your application from the correct district. Residents of Mission Hills, Riverside, and the San Fernando Valley are in the Central District. Be sure to request your application from the correct district for your residence.
You will also need to submit documentation of your finances along with your petition. Be sure to gather:
- Your last two annual tax returns
- Real estate deeds
- Car title(s)
- A list of your current sources of income
- A breakdown of your monthly living expenses (rent, mortgage, car payments, loan payments, etc.)
- Documentation for any loans
- A list of all your secured and unsecured debts
- Any major financial transactions from the past 2 years
- An inventory of all your property (all assets and possessions, including jewelry, musical instruments, artwork, etc.)
- File Your Petition with The Courts
When your paperwork is complete and your documentation is assembled, it’s time to file your petition with the courts. If you are filing without a lawyer’s assistance (or “pro se”) you can submit your petition online. If you have a lawyer, your lawyer will file the petition on your behalf (usually electronically).
You will have to pay a filing fee to finalize your petition. At the time of writing, the fee for a new Chapter 7 case is $338. You can submit an application to waive this fee if your income is less than 150% of the federal poverty guidelines. The fee to file for Chapter 13 is $313, and it cannot be waived.
- Follow Your Trustee’s Instructions
Once your petition is filed, a bankruptcy trustee will be assigned to your case. Your trustee oversees your bankruptcy and has different functions depending on the type of bankruptcy you file, Chapter 7 or 13.
If you filed for Chapter 7, your trustee oversees the sale of any of your nonexempt properties and distribute the proceeds to your creditors. The vast majority of Californians (95%) do not have any property that is eligible for liquidation.
In Chapter 13, the Trustee reviews your proposed plan to make sure it is reasonable and that you can make the proposed payment. Throughout the repayment process, the trustee disburses monies to your creditors.
Your trustee may request additional documentation from you, like bank statements or pay stubs. It is crucial to follow their instructions promptly.
You Don’t Have to Navigate Bankruptcy in California Alone
Filing for bankruptcy can be complicated. While it is possible to file pro se, it’s also easy to make mistakes when you do so. An incorrect petition could be thrown-out by the courts, costing you precious time. Statistics show that almost all chapter 13 petitions filed pro se in the Central District are unable to confirm their plan.
If your debt has become unmanageable, consider meeting a Certified Bankruptcy Specialist, like the attorneys at the Law Offices of Larry D. Simons. We have helped thousands of people in Mission Hills and Riverside shed their debts and start fresh with a clean financial slate.
Contact us right now and see if bankruptcy can work for you.
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