Credit Counseling and Exemptions Impact Bankruptcy

Filing for bankruptcy is a big decision and it can be very complicated. Each state has different rules. Each district within a state has different rules. And even each judge has different preferences and rules. This is why it is so important for consumers in Sacramento to find an attorney that is experienced and knowledgeable of the local rules of the courts of the Eastern District of California.

Although most bankruptcy law is governed by federal laws, there is a lot of California-specific information that is necessary to know in order to successfully file bankruptcy in California.

When filing a Chapter 7 or Chapter 13 bankruptcy in California, the debtor must complete and file a “means test.” This test compares the debtor’s income with the median income for a household of similar size in California. The outcome of the means test can determine whether a debtor is eligible for Chapter 7 or what the minimum length of the a Chapter 13 plan must be. Even if the debtor’s income is above California’s median, it might still be possible to qualify for Chapter 7 depending on expenses and payments to secured creditors.

Another requirement of filing Chapter 7 or Chapter 13 bankruptcy is participating and completing a credit counseling course through an agency approved by the U.S. Trustee’s office. A second debtor education course must be completed prior to receiving a discharge. It is important to use an agency approved by the U.S. Trustee’s office in California. An experienced, local bankruptcy attorney will be able to direct a debtor to an appropriate agency.

Exemptions are also a very important aspect of bankruptcy that is determined by the state in which the bankruptcy case is filed. Many states offer debtors the choice between using state exemptions and the federal bankruptcy exemptions. However, California requires consumer debtors to choose between two sets of state exemptions. The effect of exemptions depends on which type of bankruptcy is filed. In a Chapter 7, exemptions protect the debtor’s property from liquidiation. In a Chapter 13, exemptions may determine how much has to be paid to unsecured creditors in the plan.

In some states, married couples filing bankruptcy can double the amount of exemptions. However, that is not the case in California. Married couples may not double their exemptions unless a specific exemption expressly allows it.

The actual amounts of the various exemptions vary greatly and are updated by the California Judicial Council or the legislature periodically. Depending on the type of property and the set of exemptions chosen by the debtor and her attorney, there are exemptions for houses, automobiles, household goods, jewelry, wages, retirement accounts, tools of trade, insurance, child support, and more. There is even an exemption known as the “wild card” which may allow for exemption of property that is otherwise not specifically exempted.

These are just a few of the myriad reasons that it is always a good idea to make sure to choose an experienced and local bankruptcy attorney. Filing bankruptcy is too big a decision to leave the specifics to an attorney who isn’t familiar with the local rules and customs. Take the time to find the right attorney for you.