California Chapter 7 Bankruptcy

What Does This Mean, And How Can It Help Or Hurt You?

Chapter 7 bankruptcy provides a fresh start

In California, filing a Chapter 7 bankruptcy can erase your debts and allow you to essentially start over financially. In a Chapter 7 bankruptcy, your assets are collected by the bankruptcy trustee and sold. California provides specific exemptions for the sale of assets. The trustee will pay the exempted amount to you from the sale. The proceeds from the sale of your assets are then distributed by the bankruptcy trustee to your creditors.

Some debts cannot be discharged in Chapter 7 bankruptcy

Certain debts are not allowed to be discharged in Chapter 7 bankruptcy. For this reason you will need to analyze what type of debt you have and whether it would be discharged before filing Chapter 7 bankruptcy in California. Alimony, child support, tax debt and debt incurred by fraud are all debts that are not dischargeable in a Chapter 7 bankruptcy. This list is not exhaustive, but will give you a good idea if your debt could be discharged. Generally a Chapter 7 bankruptcy includes large amounts of credit card debt and other unsecured debt. A typical Chapter 7 bankruptcy filer in California has very few assets to liquidate.

Chapter 7 bankruptcy can help or hurt you

Filing Chapter 7 bankruptcy in California can be a blessing or a curse depending on your financial situation. If you have all dischargeable debts and very few assets, Chapter 7 bankruptcy would help you because you will have all of your debts discharged and essentially begin your financial life anew. However if you have numerous debts that are not dischargeable in Chapter 7 bankruptcy or if you have a large amount of assets, you may be hurt by filing bankruptcy because you will either end up with just as much debt or losing all of your many assets. In any bankruptcy, your credit is always hurt for several years following the bankruptcy.