If you just searched for “bankruptcy laws California“, you are most likely wondering if the bankruptcy laws covering California is different from the rest of the country. Well, we are here to tell you that a bankruptcy court, no matter which state it is in, is a federal court so that the laws governing California are the same laws that cover all bankruptcy proceedings all over the country.
Bankruptcy Laws California – Understanding Personal Filings and Corporate Filings
If you know anything about bankruptcy laws in the United States and bankruptcy laws California, you already know that there are basically two types of filings: personal filings and corporate filings.
Corporate filings that are not liquidation proceedings are also known as Chapter 11 filings and the aim is to reorganize a company and restructure debt so that the creditors are paid, with preference given to secured creditors like banks. Corporate filings that require the liquidation of company assets and the dissolution of a company are classified as Bankruptcy Chapter 7.
For personal filings, there is the Bankruptcy Chapter 13 individual debt adjustment. Another type of bankruptcy is Chapter 9 or Municipality bankruptcy, which is filed when a municipal government goes bankrupt. Still, another type of bankruptcy filing is called Chapter 12, which offers debt relief for fishermen and farmers.
If you feel that you need to file for bankruptcy, the first thing you need to do is to have your case evaluated by a professional. Really, just because you are overwhelmed by payments, it does not mean that you can automatically file for bankruptcy. The number one factor that is considered when determining whether or not you qualify for bankruptcy is your capacity to pay your debt. This is true no matter who is filing, be it a company, a person, a local government or a fisherman or farmer.
If there is no hope of you ever making payments in a timely fashion because you lost your job, for example, you can file for bankruptcy. You can file in any bankruptcy court. During the early part of the century, the largest company to file for bankruptcy, Enron, filed in Delaware just because it is bankruptcy heaven where you will find a bevy of bankruptcy lawyers.
Bankruptcy Laws California – What happens when you file for bankruptcy?
Once you file, the judge will pass an order protecting the filer from its creditors. At this stage, no creditor can force payments, credit they can only file a claim with the court for payment of amounts outstanding.
With protection in place, lawyers for the debtor, or the one who filed for bankruptcy, and the lawyers for the creditors will go back and forth inside the court for the creation of a bankruptcy plan for paying different creditors, with priority going to the creditors with secured debt. Often, credit card debt is the last one to be paid or not paid at all because it is an unsecured type of debt.
Please take note that while filing for bankruptcy will protect you against collections, it does leave a permanent dent in your credit report.