If you have started looking into bankruptcy as a way to take control over debt, you probably already know that there are some preparations you need to take before starting the case. One of the most important is determining which type of bankruptcy will best suit your needs and goals. For many individuals and married couples, Chapter 7 and Chapter 13 are options. A second essential part of your preparation for bankruptcy is getting your paperwork together, so you should know what documents you need before filing for bankruptcy in California.
Going through your financial papers is crucial for deciding on bankruptcy options, and you will also need documentation when preparing your petition. Because Chapter 7 and Chapter 13 rely heavily on rules and details, your success with bankruptcy starts with making sure you have all information on hand. It is also critical to consult with a California bankruptcy lawyer for guidance throughout the process, from preparations to the court proceedings to post-bankruptcy. To get started, you can get an overview on the documents you will need.
Synopsis of Bankruptcy Laws in California
The paperwork required for a bankruptcy case will vary according to which type of case you pursue, which depends upon your eligibility and your goals for resolving debt. Through Chapter 7, you can wipe out qualifying debt if you qualify under the strict rules. Your income must meet one of two tests, and it is measured by state median income level. Your earnings may automatically make you eligible, or you could qualify under the Means Test that accounts for your monthly expenses. Note that there is a possibility of liquidation of your assets with Chapter 7. The bankruptcy trustee has the power to sell nonexempt real estate and personal property.
With Chapter 13, there is no liquidation. You can still qualify to discharge debt, but you will be required to complete a debt repayment plan to satisfy debt to creditors. For this reason, the primary eligibility criteria is that you have a job to pay. Your debt repayment plan lasts for 3 to 5 years, at which point your case is over and qualifying debt is eliminated.
Documents Needed to File Bankruptcy
Some of the paperwork required for bankruptcy will apply across the board, but other rules are different for Chapter 7 and Chapter 13. The US Bankruptcy Court for the Northern District of California lists out the petition, schedules, and other forms you will need according to the type of bankruptcy you choose. You may not realize which documents are necessary, but your California bankruptcy attorney will advise you. In preparation for filing bankruptcy, you should gather and organize:
- All papers regarding income from all sources, including your job, investments, and interest;
- Documents showing your receipt of unemployment, workers’ compensation, public benefits, funds from a personal injury lawsuit;
- Details on your retirement savings, accounts, and pensions;
- Information on all debts you owe, along with the name of the creditor an amount outstanding;
- Documentation reflecting your assets, such as deeds to real estate, statements for bank accounts, and income tax details; and,
- Paperwork covering your monthly expenses, including your mortgage, utilities, payments for alimony or child support, cell phone and cable service.
Additional Steps for Bankruptcy Cases
Though gathering and organizing your financial documents is an important part of filing for bankruptcy, there are also legal steps for Chapter 7 and Chapter 13 proceedings. Depending on the facts of your case, the requirements and process include:
- Attending a credit counseling course within 180 days prior to filing for bankruptcy;
- Preparing your Chapter 7 or Chapter 13 bankruptcy petition and schedules;
- Participating in the meeting of creditors with you, where you will be asked questions and confirm the details of your petition; and,
- Finalizing the bankruptcy case and obtaining the final discharge order.
With a Chapter 7 case, you must also address and confirm the types of exemptions you will use to protect property. There are two systems of exemptions in California, and this will also affect the documents you need before filing. When you pursue Chapter 13, you will need to develop and prepare your debt repayment plan for acceptance by the court and creditors.
Bankruptcy and Your Credit Score
One of the biggest concerns for debtors considering Chapter 7 and Chapter 13 is the implications for your credit. It is true that your score will drop when you file either type of case, and the number of points will vary. However, many debtors will discover that their credit score is already suffering. It will only continue to drop unless and until you solve debt problems.
Another factor to keep in mind is that bankruptcy will remain on your credit history, for 10 years with Chapter 7 and 7 years with Chapter 13. Financial institutions, potential lenders, and possibly employers will be able to see your case, using the information to make decisions regarding credit and business transactions. Still, you must consider what your credit history would be without bankruptcy. It might take you much longer to get control over your debt if you do not file. Many debtors find that they may need decades to pay off debt, considering how late fees and interest add up.
Benefits of Chapter 7 and Chapter 13
The most powerful impact of filing bankruptcy is emerging from the process debt-free and not owing creditors anything for qualifying debts. Your stress is greatly reduced, and you can see a future of increased financial opportunities. Plus:
- The automatic stay goes into effect when you file, so creditors cannot take action to collect your debt.
- With bankruptcy, you can discharge credit cards, lines of credit, personal loans, and most other unsecured debts;
- You cannot eliminate all debts, such as alimony and child support. However, you free up some of your income to pay the amounts that you were unable to wipe out.
- You can protect your home if you stay current with your mortgage. With Chapter 13, you can even discharge some of the arrearages you may owe.
Contact Our California Bankruptcy Attorneys Today
You can prepare for Chapter 7 and Chapter 13 by knowing what documents you need before filing for bankruptcy in California. These preparations will also ensure a smooth process free of any errors or omissions. However, it is important to rely on skilled legal representation for preparing your petition, going to court, and related details. Our team at Kostopoulos Bankruptcy Law will handle all essential tasks and offer personalized advice about your case. Please contact us to set up a consultation with a California bankruptcy lawyer. We can discuss options after reviewing your financial circumstances.