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 creation of federal law, and goes through federal courts. Therefore, the procedure governing bankruptcy in California will be roughly the same as it is anywhere else in the U.S. But individual courts have different rules for what property is exempt, so you should consult a local Santa Clara County, California before you file.
Chapter 7 Bankruptcy in Santa Clara County, California
In Santa Clara County, California, there are 2 main forms of commonly-used consumer bankruptcy: Chapter 7 and Chapter 13. Chapter 7 involves liquidation of some 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 types of debt, however, can't be discharged in Chapter 7 Bankruptcy in Santa Clara County, California. These include student loans, criminal fines, and taxes, among others. If most of your debt can't be discharged, Chapter 7 might not be the best choice for you.
Chapter 13 Bankruptcy in Santa Clara County, California
Chapter 13 Bankruptcy in Santa Clara County, California differs significantly from Chapter 7. It might be a better option than Chapter 7, depending on the facts of your case. Chapter 13 does not eliminate any debt, but it creates a new payment plan that should give the debtor some breathing room. Usually, all of the debts are consolidated into 1 periodic payment. While this might make it take longer to pay off the debt, if the debtor is willing to make a few sacrifices, the plan should be manageable.
Which Type of Consumer Bankruptcy Should I File in Santa Clara County, California
Chapter 13 is usually a good option for people who have a steady 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 steady income, Chapter 7 might be more beneficial.
Regardless of your situation, you should speak with an attorney in Santa Clara County, California who is experienced in bankruptcy before making a decision. They will be able to advise you of your options, and the likely consequences of each one, allowing you to make a much more informed decision.