A person who files for Chapter 7 bankruptcy will need to liquidate all nonexempt assets and use the money raised to pay creditors. Typically, a liquidation bankruptcy case in California is completed in about four to six months. Those who wish to file a Chapter 7 case may need to pass a means test, which compares their income to the median in the state. In some cases, individuals will need to wait to file their cases.
The bankruptcy code provides two debt relief options to California residents who are struggling to cope with unmanageable financial situations. Chapter 7 bankruptcies are often referred to as liquidation bankruptcies while Chapter 13 petitions are commonly called reorganization plans, and debtors choose between these options based on the amount of money they earn and the kind of assets they hold.
An increasing number of young people in California and across the country are facing growing credit card debt and bills that are difficult to repay. Many millennials became adults during the financial crisis of 2008 and the immediate aftermath, and they became known for avoiding credit cards and other forms of personal debt. At the same time, many already struggle with significant amounts of student loan debt, especially as the cost of university has skyrocketed in the United States. However, millennials have also experienced growing incomes and professional salaries that are often accompanied by solicitations from credit card companies.
When a debtor in California files for bankruptcy, they generally assume that all their debts will be discharged or forgiven. However, this isn't true in all cases. A North Carolina court has provided some guidance for creditors seeking exemptions for instances when debtors aren't entirely honest.
People in California who are struggling to pay their bills might wonder if they should file for bankruptcy. First, they should make sure that their debts can be discharged in bankruptcy. While many types of debts are dischargeable, exceptions include child support debt, most student loans and income tax debt.
Households in California with high credit card debt are part of a trend across the country. Many Americans are charging their way to high debt, and carrying balances from month to month. Statistics show an average individual credit card debt of more than $5,000 in 2019. Paying the bill in full each month eliminates interest charges, but less than half of the country's credit card users are doing that routinely.
Missing loan payments can trigger debt collectors to contact people in California. These entities that pursue money for unpaid creditors have the right to contact people by mail, email, telephone and text message. Although debtors have obligations to pay their loans, consumer laws grant them some rights when interacting with collection agents.
Technically, there are no restrictions on the number of times a person can file for bankruptcy. However, after a discharge in a Chapter 7 or Chapter 13 case, the bankruptcy petitioner may have to wait for a period of time before he or she can file for bankruptcy again. The time periods that apply to California filers vary based on the types of bankruptcy involved.
Debt collectors in California and around the country have been known to take legal action against consumers over debts that were taken out by identity thieves or other malicious individuals. These lawsuits are generally dismissed with prejudice once the true provenance of the debt has been established, but that does little for consumers who have had to spend significant amounts of time and money defending themselves.
Consumer debt has grown to an all-time high in California and in other states. The national consumer revolving debt is now around $1,037 trillion. Consumers can easily let credit card debt accumulate on their accounts if they are not paying close attention.