Who Pays for Bankruptcies in California?

Breakdown of Bankruptcy Fees

In California, the filer of bankruptcies in California is responsible for all associated costs, including:

Court fees
Trustee fees
Attorney fees

These fees can vary depending on the complexity of the case and the specific bankruptcy chapter (Chapter 7 or Chapter 13).

Bankruptcy can be complex and daunting, especially when understanding who is responsible for the costs involved. When you are already in a financial predicament, it is understandable that you would be concerned about how to pay fees for bankruptcy.

This comprehensive guide aims to clarify who pays for bankruptcies in California, offering useful and helpful information for those seeking assistance with bankruptcy proceedings. You should still work with a skilled bankruptcy attorney in California to help with details, but this overview does provide background.

Fees: What is the Payment Method for Bankruptcy Court Fees?

Bankruptcy court fees are a significant part of the costs of filing for bankruptcy. In California, these fees are typically paid directly to the court at the time of filing. The payment methods accepted include:

Cashier’s Check or Money Order: Most bankruptcy courts in California accept these forms of payment.
Credit or Debit Card: Some courts may allow payments via credit or debit card, but it’s best to check with the specific court.
Cash: While less common, some courts may accept cash payments.

The fees vary depending on the type of bankruptcy being filed. For instance, Chapter 7 bankruptcy has a fee structure different from that of Chapter 13 bankruptcy. It’s important to understand these fees upfront to avoid any surprises.

Costs to File for Bankruptcy in California

The cost to file for bankruptcy in California includes several components:

Filing Fees: As of 2024, the filing fee for Chapter 7 bankruptcy is $338, the fee to file Chapter 13 is $313. These fees are subject to change, so checking the latest fee schedule on the U.S. Courts website is advisable.
Attorney Fees: Hiring an attorney can significantly impact the overall cost. In California, attorney fees for Chapter 7 can range from $1,000 to $2,000, while for Chapter 13, they can be between $3,000 and $5,000.
Credit Counseling and Debtor Education: These mandatory classes typically cost between $50 to $100 each.

Qualifying for a Waiver of Bankruptcy Fees

Qualifying for a waiver of bankruptcy fees in California depends on your financial situation and ability to pay. Your income must be below 150% of the federal poverty line to be eligible. This threshold ensures that those who cannot afford the fees are not barred from seeking bankruptcy relief. Reviewing the most current federal poverty guidelines to determine if your income level meets this requirement is important.

In addition to meeting the income criteria, you must demonstrate that paying the fees, even in installments, would be a significant hardship. This means providing detailed information about your financial circumstances, including your monthly income, expenses, and any other pertinent financial obligations. The court will carefully evaluate this information to determine whether you genuinely lack the means to pay the fees without compromising your basic living expenses.

You must submit Form B3B (Application to Have the Chapter 7 Filing Fee Waived) and your bankruptcy petition to apply for a fee waiver. This form requires a thorough account of your financial situation, so it’s crucial to be accurate and comprehensive.

Consulting with a bankruptcy attorney can help ensure the completion of your application and increase your chances of obtaining a waiver.

How Debts are Paid in Bankruptcy: Comparing Chapter 7 and Chapter 13

Understanding how debts are paid in bankruptcy is crucial, so review this comparison of Chapter 7 and Chapter 13:

Chapter 7 Bankruptcy: This is a liquidation bankruptcy in which non-exempt real or personal property is sold to pay off creditors. Chapter 7 bankruptcy wipes qualifying debt and it’s generally quicker and simpler. However, you must meet strict criteria.
Chapter 13 Bankruptcy centers on a repayment plan that lasts three to five years. Debtors keep their assets but must make regular payments to a trustee, who distributes the funds to creditors.

The choice between Chapter 7 and Chapter 13 depends on individual circumstances, including income, assets, and the type of debt.

Do I Qualify for Chapter 7 or Chapter 13 Bankruptcy in California?

Qualification for Chapter 7 or Chapter 13 bankruptcy in California involves several criteria:

Chapter 7

Means Test: Your income must be below the state median to qualify. If it exceeds this amount, you must pass the means test that assesses your disposable income.
No Recent Bankruptcies: You must not have filed a Chapter 7 bankruptcy within the last eight years.

Chapter 13:

Regular Income: You must have a regular income to make the required payments.
Debt Limits: Your secured debts must be less than $1,257,850, and unsecured debts must be less than $419,275.

Keep Property in California Using Bankruptcy Exemptions

Bankruptcy exemptions allow you to protect certain property from being liquidated in Chapter 7 or included in a repayment plan in Chapter 13. California offers two sets of exemptions:

System 1: Includes a homestead exemption up to $600,000, personal property exemptions, and wage exemptions.
System 2: Offers a wildcard exemption that can be applied to any property, making it flexible for those without significant home equity.

Choosing the right exemption system is crucial to maximizing the protection of your assets.

Ways to Prevent Bankruptcy Exemption Problems

Preventing exemption problems involves careful planning and understanding the rules:

Proper Valuation of Assets: Accurately valuing your assets ensures you can properly claim exemptions.
Avoid Fraudulent Transfers: Transferring assets to friends or family before filing can be considered fraudulent and may result in losing those exemptions.
Consult an Attorney: A bankruptcy attorney can help navigate the complexities of exemptions and ensure you make the right choices.

Steps Involved in a California Bankruptcy

Filing for bankruptcy in California involves several steps:

Credit Counseling: Complete a credit counseling course from an approved provider.
Filing the Petition: Submit the necessary forms and fees to the bankruptcy court.
Automatic Stay: Once filed, an automatic stay goes into effect, stopping most collection actions. Note that certain secured creditors, such as a lender on your mortgage, can request that the court lift the automatic stay.
341 Meeting: Attend a meeting of creditors where the trustee and creditors can ask questions.
Debtor Education Course: Complete a post-filing debtor education course.
Discharge: If all requirements are met, the court issues a discharge, releasing you from the obligation to repay dischargeable debts.

How Do I Pay a California Bankruptcy Lawyer?

Paying for a bankruptcy lawyer involves understanding the fee structure and payment options:

Flat Fee vs. Hourly Rate: Most bankruptcy lawyers charge a flat fee for Chapter 7 and an hourly rate for Chapter 13 cases.
Payment Plans: Many attorneys offer payment plans for bankruptcy services, allowing you to spread the cost over several months.
Upfront Fees: Some fees may need to be paid upfront, particularly for Chapter 7 cases.

Benefits of Hiring a Bankruptcy Lawyer in California

Hiring a bankruptcy lawyer provides several benefits:

Expert Guidance: Lawyers can help you understand the complex bankruptcy laws and procedures.

Avoid Mistakes: A lawyer can help you avoid costly mistakes, such as missing deadlines or improperly filing forms.

Negotiation with Creditors: Lawyers can negotiate with creditors on your behalf, potentially reducing the amount you owe.

Contact Our Bankruptcy Attorneys Right Away

Facing bankruptcy can be overwhelming, but you don’t have to go through it alone. At Kostopoulos Bankruptcy Law, we specialize in helping individuals in California navigate the complexities of bankruptcy law to find the best solution for their financial situation.

Please call us at (877) 705-1326 or go online to schedule a free consultation with one of our experienced attorneys and learn how to get started on your path to financial freedom today.

Answers to FAQs About Who Pays for Bankruptcies in California

What are the main costs involved in filing for bankruptcy in California?

The main costs include court filing fees, attorney fees, mandatory credit counseling, and debtor education courses. Chapter 7 has a filing fee of $338, while Chapter 13’s fee is $313. Attorney fees vary but typically range from $1,000 to $5,000.

Can I get a waiver for the bankruptcy filing fees?

Yes, you can apply for a fee waiver if your income exceeds 150% of the federal poverty guidelines and you cannot pay the fees in installments. The court will review your application to determine eligibility.

How are debts handled differently in Chapter 7 and Chapter 13 bankruptcies?

In a Chapter 7 bankruptcy case, non-exempt assets are liquidated to pay off creditors, and the remaining debts are discharged. In Chapter 13, you set up a repayment plan over three to five years to pay back debts, and you keep your assets.

What is the means test for Chapter 7 bankruptcy?

The means test determines if your income is low enough to qualify for Chapter 7. It compares your average monthly income to the median income for a household of your size in California. If you fail the means test, you must file for Chapter 13 instead.

What exemptions can I use to protect my property in a California bankruptcy?

California offers two sets of exemptions. System 1 includes a homestead exemption of up to $600,000 and other specific exemptions. System 2 offers a wildcard exemption that can be applied to any property. Choosing the right system is crucial for protecting your assets.

What steps should I take to avoid exemption problems?

Properly value your assets, avoid transferring property before filing, and consult a bankruptcy attorney to ensure you claim the correct exemptions and comply with the law.

What happens at the 341 meeting of creditors?

The 341 meeting, also known as the creditors’ meeting, is where the bankruptcy trustee and creditors can ask you questions. It typically occurs about a month after filing.

How do payment plans work for attorney fees in bankruptcy cases?

Many bankruptcy attorneys offer payment plans, allowing you to spread out the cost of their services over several months. This can make hiring legal representation for your bankruptcy case more affordable.

Why should I hire a bankruptcy lawyer?

A bankruptcy lawyer can provide expert guidance, help you avoid mistakes, negotiate with creditors, and ensure that you comply with all legal requirements, increasing the chances of a successful bankruptcy filing.

What is the automatic stay in bankruptcy?

The automatic stay is an injunction issued by the federal court that goes into effect immediately upon filing for bankruptcy. It stops most collection actions, including lawsuits, wage garnishments, and phone calls from creditors, providing relief while your case is being processed.

What is the Income Limit for Chapter 7 in California?

The income limit for qualifying for Chapter 7 bankruptcy in California is determined by the state’s median income levels, which vary based on household size. As of the latest figures, the median income for a single-person household in California is approximately $63,000 annually. For a household of two, it’s around $83,000, increasing with the number of household members. If your income is below these median levels, you typically qualify for Chapter 7 bankruptcy.

You must pass the means test under federal law if your income exceeds the median. This test calculates your disposable income by deducting specific expenses from your total income to determine if you can repay some of your debts. Passing the means test allows you to file for Chapter 7, while failing it usually means you’ll need to file for Chapter 13 instead.

How are debts paid in bankruptcies?

The debt repayment method in bankruptcy depends on the type of bankruptcy filed. In Chapter 7 bankruptcy, also known as liquidation bankruptcy, non-exempt assets are sold. The proceeds are used to pay off creditors. Once the assets are liquidated and the proceeds distributed, most remaining unsecured debts, such as credit card debt and medical bills, are discharged. The debtor is no longer legally required to pay them.

In Chapter 13 bankruptcy, often called reorganization bankruptcy, debts are repaid through a court-approved repayment plan over three to five years. The debtor’s disposable income is used to make regular payments to a trustee, who then distributes the funds to creditors according to the priority of their claims. Secured debts, like mortgages and car loans, are paid in full, while unsecured debts may only be partially repaid.

Any remaining unsecured debt is typically discharged at the end of the repayment period. This type of bankruptcy allows debtors to keep their assets while catching up on overdue payments.

Trust Our Team to Guide You in Bankruptcy

Don’t let the fear of bankruptcy fees and legal procedures hold you back from achieving a fresh financial start. The dedicated team at Kostopoulos Bankruptcy Law is here to guide you every step of the way.

For more information, please call (877) 705-1326 or visit our website. You can also set up a free consultation with a knowledgeable bankruptcy attorney who can help you understand your options and take control of your financial future.