Bankruptcy in San Diego California

Common Questions Asked When Filing Bankruptcy in San Diego – Southern District of California

DISCLAIMER – It should be noted that although bankruptcy is Federal Law there are many distinctions that exist between different states and jurisdictions. Many jurisdictions have their own set of laws that apply to exemptions as well as median income. For this reason this article should only be considered a rough guide, and by no means a definitive answer. If you need a certain answer you should contact a bankruptcy attorney who is knowledgeable and practices in your jurisdiction.

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As a Bankruptcy Attorney I receive calls everyday from people that want to know if bankruptcy is right for them. This is a question that is much more complex than it may seem. Bankruptcy has many variables, as do the clients. Certain clients might benefit from filing for bankruptcy under Chapter 7 of title 11 of the Bankruptcy code, while others might find Chapter 13 to be more beneficial. Unfortunately I won’t be able to provide you with all the answers in a simple article right now. But I will provide a little bit of direction that will help get you started.

Before we get started you should understand the different Chapters of bankruptcy. For most individuals you will only need to know about two – Chapter 7 and Chapter 13. Chapter 7 is the liquidation of one’s debts. In other words it will usually allow a debtor to wipe out his/her debts without having to make any additional payments. It does get more complicated than that, specifically when you have equity in some of your properties. We will go into that a bit more later. Chapter 13 bankruptcy requires a debtor to propose a payment plan to the United States Trustee. This payment plan will be used to pay a percentage of your debts, sometimes all of them, over the next 3-5 years. There are many other differences between the various chapters of bankruptcy but that should be good enough to keep us moving right along!

After explaining the difference in the chapters to clients they usually want to do a Chapter 7 since it does not require a payment plan. The concern at that point is whether or not you actually qualify for a Chapter 7 bankruptcy. Determining if you qualify usually requires your attorney to conduct what is called the “means test.” This is essentially a formula that weighs your incomes versus your expenses. However, it is not simply a test subtracting expenses from income. It actually is a formula that is averaged out over a 60 month period. This means that some of your expenses might come out lower on the means test than they do in your current payments. Debtors whose income is higher than the median income in their jurisdiction will be required to run an in depth and detailed means test which requires more information. Having a higher income doesn’t automatically disqualify you from bankruptcy. It just means you would have to show a higher amount of expenses.

For explanation purposes let’s say you do qualify for a Chapter 7 bankruptcy under the means test, congratulations! The next thing you need to consider is what property you own. Real property and personal property. That means houses, cars, jewelry, and anything else that is of considerable value. The reason this is important is because once you file bankruptcy everything you own technically becomes part of the “bankruptcy estate.” Once in the bankruptcy estate the United States Trustee has the ability to take possession of that property and sell it, using the proceeds to pay back your creditors. This might sound bad, but don’t worry! If your property is “upside-down” (i.e. – you owe more than it is worth) than you do not have to worry since no equity exists.

But lets say you do own property and it does have equity. What can you do? Does this mean you can’t file bankruptcy?

NO! You can still file bankruptcy so long as you are protected by what are called exemptions. Exemptions are basically laws that allow debtors to keep property from being taken by the Trustee and sold. In the Southern District of California CCP Section 704 provides that a debtor is able to exempt anywhere between $50,000 up to $125,000. These numbers increase based on being married and/or disabled.

As for your car – In the Southern District you can exempt up to $3,525. And many of you might say, “well that is not enough, my car is worth more.” And that is a common problem. But don’t worry – the law makers didn’t forget about those of you in this situation! CCP 703.140(b)(5) outlines what is called the “wildcard” exemption. This is basically an exemption in the amount of $23,250 that can be used on a variety of assets. So if the exemption allocated to the automobile is not enough in your case, you can also apply the wildcard exemption to cover the difference. This way your entire vehicle would be protected during the bankruptcy.

There are many other exemptions outlined in the California Code of Civil Procedure sections 703 and 704, as well the United States Bankruptcy code. These exemptions allow you to protect many of your personal belongings – homes, cars, jewelry, tools of the trade, personal injury recoveries and more.

Please note that this article wasn’t intended to give you all the answers, but provide you with a very basic understanding of bankruptcy and how it might be possible for you, if you need it. Many people think that because they own property there is no way they could file for bankruptcy. This article hopefully provides you with enough information to get the ball rolling. If you still think it might be right for you I recommend you contact a competent attorney in your area. To view other articles written by the same author, and additional articles relevant to bankruptcy please read these articles

Best of luck!

-Nothing in this article shall be construed as legal advice. Nor shall anything in this article be construed to create an attorney/client relationship. Nothing in this article shall be considered privileged. Bankruptcy can be very complicated and requires the interpretation of many laws. Laws can only be interpreted by a bar certified attorney. Beware of any paralegal or bankruptcy petition preparer that is not an attorney. It is illegal for them to interpret laws and apply exemptions, thus, there are times the Trustee will have issues with your petition.

Daniel L. Warren, Esq. is a bankruptcy attorney in San Diego, CA. For more information relating to bankruptcy please contact Daniel L. Warren, Esq. His contact information, and more information regarding bankruptcy can be found at http://sandiegobkattorney.com

Common Questions Asked When Filing Bankruptcy in San Diego – Southern District of California
By Daniel L. Warren

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