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 San Fernando, California before you file.

Chapter 7 Bankruptcy in San Fernando, California

In San Fernando, California, there are 2 main types of commonly-used consumer bankruptcy: Chapter 7 and Chapter 13. Chapter 7 involves liquidation of part of a debtor's assets. It requires that a certain percentage of the debtor's property to be sold to pay off as much debt as possible. The majority of property that most people own, however, is exempt. This usually includes homes, vehicles, retirement accounts, and others. These are not available to creditors.

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 San Fernando, 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 San Fernando, California

Chapter 13 Bankruptcy in San Fernando, California is very different from Chapter 7. Whether or not it is a better option is very dependent on the facts of each individual case. Chapter 13 bankruptcy does not eliminate debt, it restructures it. This involves a court coming up with a new repayment plan designed to be manageable for the debtor. This new plan sets aside the terms of the original agreements that created the debt in the first place. This creates a new payment structure, usually involving a single monthly payment, that the debtor should find manageable.

Which Type of Consumer Bankruptcy Should I File in San Fernando, California

Chapter 13 is usually a good option for people who have a stable income, and a large amount of non-exempt property that they can't part with. On the other hand, if most of the debtor's property is exempt, and he or she does not have a stable income, Chapter 7 might be more beneficial.

Of course, you should always seek the counsel of an accomplished local San Fernando, California bankruptcy attorney before you make the decision to file. He or she will be able to advise you of your options, and suggest the best possible course of action for your particular situation.