For many California residents, Chapter 7 bankruptcy may be an option for a fresh financial start. At issue, however, are questions regarding the various kinds of bankruptcy. Which is best for each individual? Well, it depends.
In terms of consumer bankruptcy, Chapter 7 is often the best option. Under Chapter 7, the individual (or family, if married) is able to erase his or her debts and start rebuilding credit with a clean slate. But this does not come free of charge. In exchange for this chance to start afresh, the debtor may have to sell or liquidate some of his or her personal belongings. The bankruptcy trustee, in this case, will collect any nonexempt property and liquidate it in order to repay some of the debt owed by the debtor.
It is important to remember that, in many instances, the debtor will not lose any of his or her personal property, including the family home and personal car. In California, when you file for Chapter 7 bankruptcy, deductions allow you to protect your assets. For many people, this means they lose nothing, which is not the case for a lot of people in other states where exemptions are severely limited.
In California, there are two systems that dictate what property the bankruptcy court can take and cannot take from people who are filing. The law can be found under California Code of Civil Procedure Sections 703 and 704. For individuals who are going through bankruptcy, one of the two options for exemptions must be chosen. Seeking assistance from professionals who are familiar with California bankruptcy law will help debtors make the appropriate decision.
Source: The Downey Patriot, "Going bankrupt doesn't mean losing all your assets," Steve Lopez, Dec. 8, 2011