You may need to address the possibility of filing for bankruptcy when filing for your California divorce.
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California bankruptcy is a legal process to help debtors (people who owe money) get relief from the debts they cannot pay and, at the same time, help creditors (people who are owed money) get paid from whatever property or assets the debtor has that he or she does not need to live. Deciding to file for a California bankruptcy is a very tough decision. You may be feeling overwhelmed and bankruptcy seems like the only option. But think about the decision carefully because it can really affect you for a long time. Also, filing for a California bankruptcy does not remove all debt, and there are certain types of debt that cannot be discharged (eliminated) in bankruptcy.
Filing for California Bankruptcy
All bankruptcies are governed by federal law. The only difference in a California bankruptcy is the exemptions available – the assets you can keep even when you file for bankruptcy.
California gives debtors a choice between the state law exemptions found in Code of Civil Procedure section 704 and a set of bankruptcy-only exemptions in Code of Civil Procedure section 703.140 that mirror the Bankruptcy Code exemptions that were in the federal law when the California law was adopted.
Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, the bankruptcy trustee cancels many (or all) of your debts. At the same time the trustee might also sell (liquidate) some of your property to repay your creditors. Chapter 7 bankruptcy, also called “straight” or “liquidation” bankruptcy, is so named because the law is contained in Chapter 7 of the federal Bankruptcy Code.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, sometimes called reorganization bankruptcy, is quite different from Chapter 7 bankruptcy (which wipes out most of your debts). In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over time. Not everyone qualifies for Chapter 13, however — and some debtors would be better off filing for Chapter 7.
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