The Useful Options in a California Bankruptcy

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How, when and why people file for bankruptcy has changed over the years. Throughout this time, it has been a legal means to manage debt, pay off creditors as best as possible and enable the filer to regain a solid financial footing.

In many cultures, filing for bankruptcy is considered a complete failure. This may explain why small business bankruptcies among first-generation Americans were lower than expected.

Later generations of Americans recognize the benefits of personal bankruptcy. It is the better of other options when a complete loss of all assets is possible. This is due to how American-style bankruptcy creates an orderly means of handling debt. As in all 50 states, California law also offers options for protecting assets. Additionally, two types of bankruptcy filings, Chapters 7 and 13, allow for different sets of debt circumstances. This breaks down as follows:

·Chapter 7 vs. Chapter 13

Within certain restrictions, a Chapter 7 filing is typically made when there is little hope of paying off debts. A Chapter 13 filing enables the filer to maintain ownership of property if he or she can repay debts over a three- to five-year time period.

·System 1 exemptions

A Chapter 7 filer must liquidate most assets, but can retain value in one’s principle residence in the schedule of exemptions allowed under California law. System 1 allows that to be $75,000 per single filer, $100,000 for families/couples, $175,000 if over age 65 and disabled or earning less than $20,000 and over age 55.

·System 2 exemptions

While roughly $20,000 of one’s residential property can be exempt, any unused portion (for example, if the filer has no property or very little equity) can be applied to other assets such as a car.

In other words, the bankruptcy system is another means of managing money and assets in times of financial distress (Chapter 13 is also called the wage earner plan and is a form of reorganization).