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The Downsides of Filing For Bankruptcy in California 

The Negative Consequences of Filing For Bankruptcy in Simi Valley

Most often people file for bankruptcy to erase their debts and have to begin afresh. However, there are also downsides associated with Chapter 7 of the Bankruptcy Code. Some of these downsides include:

  1. Probability of Losing Your Expensive Property

Bankruptcy can cause you to lose your expensive property. In case you own expensive properties like cars and real estate always check if they fall under one of the property exemptions under Chapter 7 Bankruptcy Law.

  1. All Your Creditors Will be Given an Alert

Once you decide to file for bankruptcy,  the court sends a letter to everyone you owe money to. It is wise to notify them including all the friends and relatives you owe before they receive a letter from the court. People may assist you to start afresh as they will protect you from paying back the debts.

  1. Your Credit Score Decreases

You may have a high credit score before filing for Chapter 7. However, after filing your credit score automatically decreases. This should not worry you since as time progresses your credit score will greatly improve.

  1. Your Student Loans Won’t be Erased

Once you decide to file for bankruptcy, the court sends a letter to everyone you owe money to. It is wise to notify them including all the friends and relatives you owe before they receive a letter from the court. People may assist you to start afresh as they will protect you from paying back the debts.

  1. Filing for Bankruptcy is Expensive

Filing for bankruptcy is very expensive and often times many ask the court to waive the filing fee of $335 or ask them to allow you to pay in installments. There is also the mandatory credit counseling of $50. Hiring an attorney is even more expensive when filing for bankruptcy and many cannot afford it.

Other downsides include;

  1. You have to wait for 8years before you are eligible to file another discharge.
  2. Only some of the tax debts are erased.
  3. You cannot get a mortgage or car loan immediately.
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California Courts Ruling on PG&E’s $23 Billion Bankruptcy Package

PG&E Bankruptcy Proceedings New Development

Bankruptcy cases in California are not limited to personal or individuals only. Corporations operating in the states also periodically come across situations where they have to consider filing for bankruptcy as a means to escape the actions of creditors after their assets. Such cases abound in the state, with varying expectations as to the outcomes.

Sacramento bankruptcy cases for corporate companies differ from individual bankruptcy cases in that the former involves large entities with a host of property to protect. Failure to take immediate action in a company facing significant long term financial challenges could potentially lead to numerous losses not only for the company and its stakeholders but also for the employees in such an organization.

What with the rampant retrenchments and conventional loan defaulting tendencies that are typically observed to accompany financial challenges in private and national organizations.

A prime case of large corporations in the state of California facing bankruptcy in recent times is the Pacific Gas and Electric Company that services more than 16 million California residents over a 70,000 square mile area.

The company is host to more than 23,000 employees who rely on its successful operation for a living at one level or the other.

Financial challenges in such a large organization are thus likely to cause significant ramifications in the economy of the state.

On March 16, 2020, the company won a landmark bankruptcy case allowing it to raise $23 billion to help pay its bills following recurrent wildfires that cause widespread damage to property.

The bankruptcy case was filed after the court awarded victims compensation benefits from the company following extensive fires caused by PG&E’s equipment in 2017 and 2018.

The company was required to raise $40 billion in compensation costs for the victims of the wildfires. Coupled with the economic impacts of the COVID-19 pandemic that has rocked the world over the past few months, the company found itself with no option but to file for bankruptcy under the California State Laws to protect itself from the action of its creditors.

The PG&E Company is just one amongst many large organizations in California that have been forced to consider bankruptcy motions as a means of handling their financial troubles. This case is a classic demonstration to the fact 

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Why You Should Declare Bankruptcy

Benefits of Filing for Bankruptcy

If you are unable to repay debts to creditors, you are advised to seek relief by filing for bankruptcy. Although declaring bankruptcy may taint your credit history for several years, this complicated legal process is sometimes the best option. One should consult a qualified bankruptcy attorney who will guide you in deciding whether to proceed with the process.

The benefits of declaring bankruptcy outweigh the cons. These benefits include;

A. Filing for bankruptcy triggers an automatic stay against creditors. This temporarily suspends any debt collection efforts of your debtors until your bankruptcy case is complete or the stay is lifted. This stops;

  1. Calls or letters from debt collectors
  2. Property repossession
  3. Foreclosures
  4. Lawsuits on the debts
  5. Wage garnishments

B. It gives you a chance to discharge your obligation to repay any of your dischargeable debts. These include credit card debt, medical and utility bills, and personal loans.

C. It allows you to maintain possession of your property pending the conclusion of the proceedings.

D. Filing for bankruptcy in time allows you to improve your credit score.

E. Anyone who declares bankruptcy is required to undergo mandatory credit counselling. This offers the lender the necessary education in debt management and financial habit.

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Cost of Filing Bankruptcy in California

How Much Does Bankruptcy Cost in California?

So, you have come to that point in your life when finances are getting tight. It may be due to a medical emergency, job loss or other life-changing and financial draining event that you are unable to get out of. You have consulted with family and friends and so far have still been unable to creep out of this financial hole, with no near end in sight. With unrelenting creditors on your back at every turn threatening to auction your property, you are now considering other legal options for salvation from this situation.

Fortunately for you, California laws are there for your rescue with the option to file for bankruptcy. With two schemes to choose from under Chapter 7 proceedings and an additional opportunity with Chapter 13, the California Civil Codes are there to protect your property from the action of creditors in precisely this type of situation.

What then, should you consider before choosing these options?

Among other basic things one should look into when considering these options aside from the California laws, the cost of filing for bankruptcy proceedings should be looked into by the individual wishing to initiate the proceedings.

How much, thus, does it cost to file for bankruptcy in California?

The answer lies in the specific bankruptcy option that one hopes to initiate under the California bankruptcy laws. Aside from the regular attorney fees, bankruptcy courts in California will charge you varying amounts as filing fees depending on the type of injunction and the stage of the proceedings.

New petitions under Chapter 7 bankruptcy laws in California attract court fees of $335 while proceedings under Chapter 13 will cost you $310. A total of $260 will be charged for Chapter 7 case reopening while the Chapter 13 option would be charged $235 for the same.

Filing for case conversions for Chapter 7 to Chapter 13 is not charged under the California bankruptcy laws.

Aside from the standard charges mentioned, other charges may be applied including filing for amendments, additional motions, and appeals, among others. All the fees charged by the bankruptcy courts in California are collected at the bankruptcy clerk’s office.

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Bankruptcy Laws and Medical Emergencies in California

California Bankruptcy and Medical Debt Laws

Filing for bankruptcy is a significant step in one’s life, and requires much thought beforehand to arrive at the decision to proceed with such a plan. As such, one would have to be undergoing significant economic and financial hardships even to consider initiating bankruptcy proceedings.

One of the most common causes of bankruptcy cases in California is financial difficulties due to medical reasons. The health sector in California and medical rates have long been observed to be among the highest in the US.  Consequently, out-of-pocket expenditure will be high for someone with a significant medical emergency that puts them out of work. Such a situation would quickly put even the most financially conscious individual at risk of medical debt.

Fortunately, California laws recognize the difficulties of such a fix and have in place measures to alleviate such an individual from medical debt.

While there is no specific law for medical bankruptcy, such a proceeding would be treated by the state as if it were a regular credit debt. A person, thus dealing with overwhelming medical debt, would have the convenience of reserving their mental peace by filing for bankruptcy under Chapter 7 and Chapter 13.

However, is such a move as medical bankruptcy the most viable way to deal with medical debt?  

While the law would not allow you to limit your discharges to cover medical expenses only, you would still benefit from California’s bankruptcy codes and schemes, allowing you to retain a substantial amount of your property and assets from debtors as you deal with your medical emergency.

The medical bankruptcy move would thus be a viable option to a resident of California dealing with significant debt due to medical expenses.

However, such a move would not exclude the impacts on credit points as would typically be on other bankruptcy cases. Since filing for bankruptcy due to medical reasons would be treated as a regular bankruptcy under the California laws, the records would reflect on your credit information for the next seven to ten years. On the upside, however, you would get relief to deal with your medical emergency without worrying about your creditors, including the doctors providing you with the medical services.

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What You Should Know About Divorce and Bankruptcy Exemptions in California

An Overview of Community Property and Its Implications under California Laws

Emergencies are some of the leading economic and financial constraints driving up the rates of bankruptcies in the US. However, family issues such as divorce cases account for a significant number of bankruptcy cases filed in the country. Different states have within their civil structures laws and guidelines to drive divorce proceedings when bankruptcy is involved.

In California, unlike other states, federal bankruptcy laws are not incorporated in the civil codes. Thus one would not be able to apply for bankruptcy in the state using the federal regulations. Instead, they would have to tailor their plans to match the permissible terms as per the state rules.

When it comes to bankruptcy filing due to domestic issues such as divorce, the California state laws permit spouses to file for bankruptcy either individually or jointly.

Thus if one is to opt to file for bankruptcy separately, the couple’s property would be protected as though it were joint, effectively preventing the action of creditors against such property. However, this would mean that the spouse would not be allowed to file for the same on their part.

The benefit of this arrangement is that such a development would not affect your spouse’s credit reports in any manner as it would your own.

Being a community property state, California laws recognize property acquired during the marriage as belonging to both partners. Such property thus would be known as being part of your bankruptcy estate regardless of who filed for the motion, thereby exempting much more wealth than would be possible in a common-law state.

Filing for bankruptcy separately, however, would mean that only the party initiating such a motion would get a discharge. The risk, therefore, is that the other non-filing spouse would lose the benefit of this arrangement in case you are to separate or if one dies.

Another limitation of this arrangement is that it would not protect the separate property of the non-filing spouse if they were also liable for the debt.

Though such laws regarding community property as in California serve to benefit both spouses without having to apply for bankruptcy jointly, the clause is subject to various limitations that have to be considered beforehand.

It would thus be advisable for a couple filing for bankruptcy due to divorce to look up other alternatives that would protect their individual property without affecting the interest of the other. Better still, it would be advisable that both parties understand the limits of such an undertaking under the California laws beforehand to avoid future inconveniences.

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California Bankruptcy Law Residency Requirements

Qualification for exemption under California Laws

When it comes to filing for bankruptcy, it is crucial to understand the basic requirements that are assessed by the state involved to design effective measures to protect one’s interests. Exemption laws in the US serve to protect one from losing their property to creditors due to debts accrued. These laws also determine how much you would have to pay the creditors after filing for bankruptcy through one of the two chapters, 7 and 13.

The qualifications for exemption in Bankruptcy laws, however, are subject to the state in which they are invoked.

In California, one of the critical factors assessed by the state when determining eligibility to exemptions is the residency of the applicant. The state has thus set in place a set of requirements one is expected to meet to benefit from the California exemption laws.

One such residency requirement set by the California authorities is the 730-day rule. Under this requirement, one is needed to have been a resident in the state for the past two years before filing for bankruptcy to qualify for exemptions. Thus, people who haven’t been residents for as long as the specified period may not be eligible under the California law.

So, how do you benefit from the exemption laws in such a case?

Applicants who have not been residents of the state for the past 730 days before filing for the bankruptcy exemption will have a few more options to explore in an attempt to protect their most treasured properties from their creditors.

The California bankruptcy laws allow such an applicant to use exemptions of the state where they have resided in for the past six months prior. In this aspect, your property in California would be exempted from the actions of creditors using the second state’s laws.

On the other hand, one would be allowed to use the California exemption laws in another state if they had been residents of California in the two years prior.

It is also worth noting that the California law does not permit the use of federal laws when invoking bankruptcy exemptions. Thus, one wishing to file for bankruptcy under California laws would benefit greatly from understanding the eligibility requirements as set upon by the state.

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Understanding California Homestead Laws

How do the California Homestead Exemptions Work?

The state government of California, just like most others in the United States, has set in place different measures protecting its citizens from property seizure by creditors when they file for bankruptcy. These serve to ensure that the debtor does not end up in poverty, further disadvantaging such an individual as well as their immediate families and their dependents.

One such measure set in place by the Californian authorities is the Homestead Law.

The Homestead law, as interpreted by the California Judicial Council, establishes limits to actions of creditors against the individual and the equity accrued in their homestead. In this manner, the procedure by declaration allows homeowners as well as small property owners to declare their assets as being their homestead, effectively shielding them from having to sell them to pay off accrued debts.

The Homestead law, in effect, is an extension of the exemption procedures set by the state government to shield the citizens from property loss when they encounter economic challenges.

Homeowners wishing to invoke the homestead law in bankruptcy proceedings are provided with two types of exemptions to choose from, declared homestead and automatic exemptions.

A declared homestead exemption is granted through an application by the owner via the county recorders’ office, who thereafter make the decision to either approve it or otherwise based on preliminary assessments.

An automatic homestead exemption, on the other hand, occurs automatically without requiring the homeowner to specifically file their case with the county recorder.

What then, one may ask, is the difference between the two given that they are meant to serve the same purpose?

The difference between these two lies in their application under the California Judicial Laws. Whilst an automatic exemption serves to protect the homeowner’s equity from the involuntary sale, the declaration of an applied exemption would effectively protect the property and equity from both voluntary and involuntary sale by the actions of a creditor.

The Homestead Law, however, has its limitations in application. The law, for instance, would not protect your assets from a forced sale or auction through a mortgage lender. Similarly, it can only be applied subject to the maximum allowable amounts as set by law. Furthermore, it will not protect your assets in instances of delinquent alimony, child support and mechanic liens.

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Bankrupt California Hospital Secures $20 Million to Avoid Closure

Seton Medical Center Sees about 27,000 Every Year

Seton Medical Center is set to receive $20 million in funding after the San Mateo County (Calif.) Board of Supervisors voted to keep the hospital open.

The hospital, located in Daly City, filed for Chapter 11 bankruptcy protection in August 2018. The board will allocate the funds to the company that will acquire the facility hospital from Verity Health, the hospital’s operator.

Verity Health closed its Los Angeles-based St. Vincent Medical Center in January after failing to secure enough funding to keep the facility open.

The board disclosed that two companies are currently bidding to purchase the hospital that was on the verge of closure. The board said the company that will acquire the hospital, which treats nearly 27,000 annually, must keep the facility open.

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California Debt Discharge Laws

What Happens to Discharged Debt in California Bankruptcy?

After hearing of a bankruptcy case, it is common practice for law courts in California to spell out terms to guide the discharge of debts by the party filing the case. This crucial step is usually meant to relieve you from the obligation of paying off debts. Issued through a bankruptcy discharge order, it prohibits the creditor from ever taking collection action on the debt against you again.

A debt discharge order is one of the least understood aspects of the bankruptcy laws in California. What with money-hungry bankruptcy attorneys luring debtors with creative terms such as “making your debt disappear”, “erasing your debts” and the likes?

It is not a surprise that many unsuspecting debtors fall for such antics, only to find themselves in trouble with friends, family and relatives or even the IRS later on due to unresolved debt issues. While the terms contained in a debt discharge order may seem to redeem one of the debts ultimately, this, in reality, is rarely the case.

But, what then does a debt discharge order in bankruptcy mean?

The issuing of this order, however, doesn’t mean that the debt has been erased or disappeared. The debt still exists, and one is expected to take steps to clear it following the discharge. The reprieve of the order, however, is that the creditor would have no further legal grounds to take action against you for that debt.

Which thus begs the question, how would the creditor acquire the debt from you? Would they sorely have to rely on voluntary payback since they no longer have a legal ground for collection?

The truth is, a creditor would still have a few means of recovering the debt eventually. One of the most common approaches would be to seek recovery from co-debtors. While the discharge order would exonerate you as an individual from the debt, co-debtors according to California Bankruptcy laws are 100% liable for the debt. Thus a creditor would seek legal action against them in an attempt to recover your debt.

Collecting property used as collateral is also another option at the creditor’s disposal.  Additionally, the IRS may decide to tax the charged-off debt against the debtor in the creditor’s place, though not as taxable income.

While the debt discharge order can provide a creditor with numerous reprieves in dealing with the creditors, it is advisable first to understand the basics of such a request to avoid unforeseen problems in the future.