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How to File Bankruptcy in California

If you are struggling with overwhelming debt, bankruptcy can offer a fresh financial start. However, the process of filing for bankruptcy in California involves several legal steps and requirements, and failing to understand the process can result in unnecessary delays, failure to make the most of what bankruptcy has to offer, or even leading to the rejection of your application. See below for a step-by-step guide to filing bankruptcy in California. For practical advice and professional assistance every step of the way, beginning with an evaluation of whether bankruptcy is right for you, contact Rounds & Sutter, LLP, to speak with an experienced and dedicated Ventura bankruptcy lawyer.

Step 1: Determine the Right Bankruptcy Chapter

The two most common types of bankruptcy for individuals are:

Chapter 7 Bankruptcy – Also known as “straight” bankruptcy, this option allows you to discharge most unsecured debts. In theory, you may have to sell non-exempt assets to repay creditors first, but with the help of a skilled attorney, you can likely have your debts discharged without selling any property. Chapter 7 is often the preferred option for individuals looking to make a fresh start with a clean slate.
Chapter 13 Bankruptcy – This “reorganization” bankruptcy allows individuals with a steady income to create a repayment plan to pay off debts over three or five years. Chapter 13 can be a good option for individuals who have too much disposable income to qualify for Chapter 7 or who have valuable secured assets they want to keep, such as a home or vehicle, but need assistance managing their debts.

Step 2: Determine Eligibility

To qualify for Chapter 7 bankruptcy, you must pass the means test, which compares your income to the median income for a household of your size in California. If your income is too high, you may need to file for Chapter 13 instead. The means test also considers allowable expenses to determine whether you have enough disposable income to repay some of your debts.

For Chapter 13 bankruptcy, you must have a regular income and ensure that your secured and unsecured debts do not exceed specific limits. The repayment plan must be feasible based on your income and expenses.

Step 3: Complete Credit Counseling

Before filing, California law requires individuals to complete a credit counseling course from a government-approved agency. You must obtain a certificate of completion, which will be submitted with your bankruptcy petition. This counseling session provides an overview of your financial situation and explores potential alternatives to bankruptcy.

Step 4: File Bankruptcy Forms with the Court

You must prepare and submit several forms to the U.S. Bankruptcy Court serving your district in California. In Ventura County, this is the United States Bankruptcy Court for the Central District of California. Required forms include:

A petition for bankruptcy
Schedules of assets, liabilities, income, and expenses
A statement of financial affairs
A list of exempt property (under California’s bankruptcy exemptions)
A proposed repayment plan (for Chapter 13 filers)

A filing fee is required, though a waiver or installment payments may be available for those who qualify.

Step 5: Automatic Stay Goes Into Effect

Once your bankruptcy petition is filed, the automatic stay goes into effect. This prevents creditors from pursuing collections, foreclosures, wage garnishments, and lawsuits against you while the bankruptcy case is pending. This protection can provide much-needed relief from financial pressure and allow you time to work through the bankruptcy process.

Step 6: Attend the 341 Meeting of Creditors

Approximately 20 to 40 days after filing, you will be required to attend a Meeting of Creditors (also called a 341 hearing). During this meeting, the bankruptcy trustee and any attending creditors may ask questions about your finances and bankruptcy petition. It is important to be honest and prepared for this meeting, as it plays a crucial role in the progress of your case. Creditors don’t always show up to this meeting, which typically only lasts a few minutes long and is conducted online. Your attorney will prepare you for the meeting and attend along with you.

Step 7: Follow Through with Bankruptcy Requirements

Depending on your case type, you may need to complete additional steps:

Chapter 7: The trustee may liquidate non-exempt assets to pay creditors. However, California allows filers to protect certain assets through bankruptcy exemptions, such as homestead exemptions for primary residences. Your attorney can help you qualify for a “no-asset” bankruptcy, where the trustee does not liquidate any of your property.
Chapter 13: You must adhere to the court-approved repayment plan, making timely payments to the trustee. Missing payments can result in dismissal of your case or conversion to Chapter 7.

Additionally, all filers must complete a debtor education course before receiving a discharge. This course provides guidance on budgeting and financial management to help prevent future financial difficulties.

Step 8: Receive Your Bankruptcy Discharge

If you comply with all requirements, the court will issue a bankruptcy discharge, eliminating qualifying debts. For Chapter 7, this typically occurs within a few months. For Chapter 13, it happens after the completion of the repayment plan. Certain types of debts, such as child support, alimony, and some tax debts, are not dischargeable in bankruptcy.

Common Pitfalls to Avoid

Failing to disclose all debts and assets: Omitting information can result in delays or even case dismissal.
Incurring new debt before filing: Large purchases made shortly before filing can be considered fraudulent and may not be discharged.
Not making required payments: In Chapter 13 cases, failing to adhere to the repayment plan can lead to case dismissal.

Get Help from an Experienced Bankruptcy Attorney

Filing for bankruptcy in California can be complex, and making mistakes could result in delays or case dismissal. The experienced bankruptcy attorneys at Rounds & Sutter, LLP can guide you through the process, ensuring you understand your rights and obligations.

We will work with you to determine the best bankruptcy option for your situation, protect your assets where possible, and provide representation at court hearings. Our firm understands the challenges individuals and business owners face when dealing with overwhelming debt, and we are committed to helping our clients achieve financial stability.

If you are considering bankruptcy in Oxnard, Camarillo, or surrounding areas in Southern California, contact us today at our offices in Ventura and Westlake Village for a free consultation to discuss your options and take the first step toward financial relief.