Business & Finance Bankruptcy

What Are the Benefits of Chapter 7 Bankruptcy in California?

    Relief From Debt

    • If you qualify for bankruptcy in California and provide the court with all necessary information, you can receive a bankruptcy discharge. Through a Chapter 7 discharge, the court orders your creditors to not only leave you alone, but to report to the credit agencies that you no longer owe them any money. This discharge generally applies to all of your debt, unless you have secured debt, such as a car loan, or "priority" debt, such as back taxes or child support obligations.

    Two Exemption Systems

    • One of the unique features of Chapter 7 bankruptcy in California is that the state offers residents a choice of two sets of bankruptcy exemptions, as opposed to just one. While the details of the two exemption systems can vary substantially, system 1 is generally better if you have equity in a home, as the homestead exemption is substantially more under system 1. Under system 2, you have the option of using the lesser homestead exemption amount to protect any property you like, a "wildcard" provision that is missing under system 1. For example, if the motor vehicle exemption is only $2,000 but you have a car worth $3,000, you can usually use the wildcard or miscellaneous exemption to cover the excess equity in your car.

    High Median Income

    • If you want to file Chapter 7 bankruptcy in California, you must generally have a lower income than the California median income, as derived from Census Bureau data. California tends to have a higher median income than many other states, meaning you may qualify more easily for Chapter 7 in California than in other states. For example, if your annual income is $47,000, you may qualify in California but probably will not in states like Kentucky or Arkansas.

    Many Courthouses and Attorneys

    • As the number of bankruptcies in California is among the highest in the nation, plenty of bankruptcy attorneys are available to help you file your case. Additionally, given the population and sheer area of the state, California has four bankruptcy districts, generally located near large population centers such as San Francisco, Los Angeles and San Diego. Some states have only one bankruptcy district, so no matter where you live in the state you must travel to that courthouse to file your case.

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