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California Bankruptcy Basics

Understanding the basics of bankruptcy can help you to feel more confident that you are making the right choice for your financial future. California Bankruptcy laws were established with the express intent to provide immediate financial relief to the individual who has gotten in over his or her head in debt. By filing for bankruptcy, you have the opportunity to  wipe the slate clean and start over with a chance to regain your financial freedom and rebuilt your financial stability. By eliminating excessive debt, ending collection attempts, and in some cases renegotiating current obligations, bankruptcy gives individuals and businesses alike the chance to emerge from the bankruptcy process more financially sound and better able to be self-sustaining and prosperous.

Despite the benefits, filing for a California bankruptcy is not a simple process. In recent years, new laws have been introduced to make it more difficult for some individuals to file for certain types of bankruptcy. Whereas in years past you had a choice whether to file for Chapter 7 or Chapter 13 bankruptcy, now there are laws in place which place qualifications on those seeking bankruptcy relief. For those seeking a liquidation bankruptcy under Chapter 7, there is a means test which must be passed in order to file. And for those seeking to reorganize their debts and follow a repayment plan under Chapter 13, there are also qualifications that must be met. In both of these instances, it’s helpful to have reliable legal advice from an attorney who specializes in California bankruptcy law.

The main differences between Chapter 7 and Chapter 13 bankruptcy are listed below:

Chapter 7 Bankruptcy

Chapter 13 Bankruptcy

Liquidation bankruptcy – assets are sold to pay off creditors.

Reorganization Bankruptcy – uses a strict budget and repayment plan to pay back certain creditors

Unsecured debts are discharged; other types of debt may remain after bankruptcy discharge

Unsecured debts are discharged, secured and priority debts may be renegotiated

Generally available to those who make less than the median income in their state

Generally available to those who can afford to make repayment of debts and who have disposable income


For businesses, Chapter 11 bankruptcy provides reorganization in a similar fashion to the Chapter 13 bankruptcy for individuals. Businesses who file for Chapter 11 can, in many cases, continue to operate, pay employees, and conduct business as usual. Once the requirements of any reorganization plans are completed, the business emerges from Chapter 11 better prepared for financial growth and continued success. For individuals who own family farms or fisheries, Chapter 12 bankruptcy is tailored specifically to their unique circumstances, allowing for seasonal income to qualify for bankruptcy relief, as long as certain conditions are met.

The various types of bankruptcy can prove confusing to the average layperson, and if you have unique circumstances surrounding your situation, you may be uncertain as to which type of bankruptcy is best for you. When filing for bankruptcy in California, it is best to get advice from an experienced, reliable California Bankruptcy Attorney. Contact our premier California Bankruptcy Law Firm today – we offer a free initial case evaluation to all prospective clients. By providing you with timely information and stellar legal representation, our firm can give you the tools you need to make an informed choice about whether or not to file for bankruptcy in California. Don’t delay – the sooner you understand how bankruptcy can help you, the sooner you’ll be ready to take the first steps towards real financial freedom.