Bankruptcy is a legal procedure that allows an individual or business to have some or all of their debts discharged. It is usually considered as an option of last resort, because while it can stave off financial disaster, it has some significant long-term consequences warranting careful consideration of the costs and benefits. Bankruptcy is a formation of federal law, and goes through federal courts. Therefore, the process governing bankruptcy in California will be roughly the same as it is everywhere else in the U.S. But individual courts have different rules for what property is exempt, so you should consult a local Orinda, California before you file.
Chapter 7 Bankruptcy in Orinda, California
In Orinda, California, there are 2 main types of commonly-used consumer bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves liquidation of some of the debtor's assets. It requires some percentage of the debtor's property to be sold in order to pay off as much of his or her debt as possible. However, the majority of property that most people own is exempt. This usually includes homes, vehicles, insurance policies, and retirement accounts. These do not have to be sold.
Once the eligible property is sold, and the funds transferred to the creditors, the dischargeable debt is excused. Some forms of debt, however, can't be discharged in Chapter 7 Bankruptcy in Orinda, California. These include student loans, criminal fines, and taxes, among others. If most of your debt can't be discharged, Chapter 7 may not be the best choice for you.
Chapter 13 Bankruptcy in Orinda, California
Chapter 13 Bankruptcy in Orinda, California differs significantly from Chapter 7. It might be a better option than Chapter 7, depending on the facts of your case. Chapter 13 bankruptcy does not discharge debt. Instead, it restructures it. This involves the bankruptcy court coming up with a new payment plan that supersedes the terms of the agreements that gave rise to the debt in the first place. This results in a new payment plan that the debtor should find manageable, if he or she can make a few sacrifices.
Which Type of Consumer Bankruptcy Should I File in Orinda, California
Which Bankruptcy type to file under depends strongly on the facts of each individual case. If you have a stable stream of income (enough to make a payment plan manageable), and a large amount of non-exempt property that you don't want to part with, Chapter 13 may be best for you. If you don't have a stable income or large amounts of non-exempt property, you may be better off filing for Chapter 7.
Whatever your situation, you should speak with a local Orinda, California bankruptcy lawyer. Your attorney will be able to advise you of your options and their likely consequences, which will help you make a more educated decision.