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LawHelpCalifornia Bankruptcy Links to information on what to do if you can't pay your debts, rebuilding good credit and more. Select your county or enter your zip code for information specific to the area that you live in.

LawHelpCalifornia Debt Collection, Garnishment, Repossession Links to information on collecting your judgment, what to do if you can't pay your debts, rebuilding good credit and more. A State Bar of California pamphlet. Also available in Spanish and Chinese. Bankruptcy FAQs Find answers to frequently asked questions about bankruptcy. Skip to main content Skip to topics menu Skip to topics menu.

Cancel Print. Advanced Search. Watch a series of videos about the bankruptcy process. To decide if you should file for bankruptcy, you need to know: What alternatives you have to filing for bankruptcy; What type of bankruptcy is the best option for you; and What debts will be discharged eliminated in bankruptcy.

Alternatives to bankruptcy Try to figure out if you can avoid bankruptcy on your own. Can you reduce your expenses, increase your income, negotiate lower interest rates, or sell some property?

Think about whether you can make adjustments to your situation to start paying off your debts on your own. Get help from a credit counseling agency. They can help you make a budget, negotiate a repayment plan with a reduced or even zero interest rate, and help you stop aggressive collection practices that are overwhelming you. There are a lot of agencies claiming to help consumers that are actually taking advantage of people. What to watch out for if you get credit counseling help.

Talk to a bankruptcy lawyer. He or she will be able to tell you what your options are and whether bankruptcy is the best option for you. Types of bankruptcy There are four common kinds of bankruptcy cases, named by the chapter of the federal Bankruptcy Code that describes them.

Chapter 7 is the most common form of bankruptcy for individuals. It is a liquidation bankruptcy, which means that the court sells all your assets for cash and then pays your creditors. You can keep assets that are exempt from sale either under federal law or the law of your home state. Chapter 7 bankruptcy can wipe out most of your debts. You must make less than a certain amount of money. Talk to a lawyer to see if you qualify for this type of bankruptcy. To ensure that a greater percentage of debts is repaid to creditors, the following standards set out when an automatic discharge will occur.

If you do not qualify for an automatic discharge, the LIT will ask the court to hear your application for discharge. The court will then schedule a date for the discharge hearing. The first step is to contact the LIT who handled your bankruptcy.

The LIT will inform you of the reasons why you did not receive your discharge. For example, you may need to fulfill certain conditions.

The LIT may agree to process the discharge for a fee. Alternatively, you can ask a lawyer to apply for your discharge. If you cannot afford the LIT or lawyer fee, you may wish to contact legal aid services in your province. In addition, some provinces offer a do-it-yourself discharge kit. Prior to your discharge hearing, the LIT prepares a report.

At the hearing, which you attend, this report is used to inform the court of the circumstances surrounding your bankruptcy. This report describes your financial situation and analyzes. A person who declares bankruptcy is assigned the lowest possible credit rating credit score. The information in your credit report that affects your credit score is usually removed after a certain period of time. The amount of time depends on the type of information and where you live. Generally, it will be removed after six or seven years for a first bankruptcy, and after 14 years for subsequent bankruptcies.

Whether you can obtain credit after your discharge from bankruptcy will depend on your ability to convince lenders of your financial maturity and ability to repay the debt. There are no guarantees—no one is required to give you credit.

Bankruptcies generally do not affect the rights of secured creditors. If a creditor has a valid security against your property e. If you can afford monthly payments, financial arrangements can be made with the secured creditor. Your debts are your own; however, if you and your spouse have a joint co-signed debt, then a creditor can pursue your spouse for repayment. Only the portion of assets that you own is included in your bankruptcy. So, if you own assets jointly with your spouse, your portion may have to be sold and distributed to your creditors.

It is important to make the LIT aware of joint assets so that each case can be reviewed individually. Anyone who co-signed a loan for you will still be responsible for making the loan payments after you go bankrupt. If everyone is paid in full including the fees referred to above and interest on the debts you can apply to have your bankruptcy cancelled annulled. If your bankruptcy is being handled by an insolvency practitioner then the administration and the general fees will still be charged, but they will charge their own schedule of fees rather than the asset realisation and distribution fees that the official receiver would charge.

You should ask them how much it will cost to administer your case. You must keep paying rent and any new debts after the bankruptcy. You might not need to pay bills that are unpaid at the date of your bankruptcy order.

You may have to pay a deposit for future supplies of gas, electricity or other utilities. Or your utility accounts may be transferred to a spouse or partner. If these items are valuable they can be taken by the trustee and replaced with a cheaper alternative. The restriction will be removed once the trustee has been paid for their interest in the property.

You can still sell the property, but the trustee will get your share of the money from the sale. The Form J restriction will be removed once the trustee has been paid this money. The trustee cannot usually sell the property without your agreement for a year from the date of the bankruptcy order if you have a partner or children living with you. You can stop a sale taking place later if a family member or friend buys the beneficial interest in your home.

The buyer should contact the trustee. The restriction at Land Registry will be removed. A charging order fixes the amount the trustee will get from the property when it is sold.

If you co-habited with your partner and have now separated, the property that they or your children live in is not a family home. If you are behind with your rent your landlord can still apply to evict you even if the rent arrears are included in the bankruptcy. Your bank account will be frozen. Any money in your account will be an asset and claimed by the trustee. The trustee can ask to release some money:.

The bank is allowed to use money from one of your accounts to pay your debts on another account you hold with them. The exception is if the bank has a charge on your home security for payment of a loan like a mortgage. Most pension schemes are not included in your bankruptcy for bankruptcy orders made after 29 May and they cannot be claimed by the trustee.

Approved or registered pension schemes are usually:. If your pension scheme is not an approved or registered scheme you might be able to exclude it from your bankruptcy by:. This will involve you paying some of your debt with your income. If you are able to take money from your pension following changes to the law in April , but have chosen not to do so, the trustee may look at the value of your available pension fund.

If this would give you access to enough money to make a different arrangement to pay your creditors, the trustee can ask the court to cancel annul the bankruptcy. If you die while bankrupt the trustee will claim any death benefit, usually a lump sum payable from the pension, where a person has not already been nominated to receive the benefit. If a person has been nominated within the pension scheme to receive the death benefit, it will still be paid to them. If you were made bankrupt before May your pension funds transferred to the trustee.

The pension is no longer available to you, but you may receive money from the fund once the trustee has paid the creditors who claimed in your bankruptcy. If your vehicle is exempt but valuable it can be replaced with a cheaper alternative. The official receiver will use the money from the sale to either pay for the new vehicle directly or give you the money to buy one.

You must provide proof of purchase for your new vehicle within 1 month. If your vehicle is not exempt you may be able to keep it if a third party can pay to transfer it to them for you and you provide a:. A vehicle under a finance agreement cannot be exempt from your bankruptcy. The trustee will review your financial agreement to see if there is a benefit in claiming the vehicle for the estate.

If the trustee decides they will not be claiming the vehicle, they will give notice to you and the finance company. The finance company may decide to take back the vehicle when you become bankrupt. It may let another person take over your agreement if your payments are up to date. The registration number will be valued. The official receiver may take an offer from a third party to buy the number to let you keep it.

It is for you and the person who bought the vehicle to prove the vehicle was not a gift. Your bankruptcy will stay on your credit file for 6 years after the bankruptcy order is made. You should check if the entry has been removed after 6 years.

Any business assets will be claimed by the trustee. Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. To find out if a registration, licence or permission for your work will still be valid, contact the person who issued it. Any transfer value may belong to the trustee. Your interest in the policy benefits will transfer to the trustee. They may sell or surrender the policy to collect money for your creditors.

If you want to keep the policy, you may be able to work out a solution with the trustee. If you can afford it, the trustee will ask you to make regular payments towards your debts from your income through an income payment agreement IPA.

If you do not meet these payments, the trustee can then apply to extend your bankruptcy. This is money you have left after paying your living expenses. Normally you will have to pay all of this surplus income as your IPA payment. Payments normally last for 3 years longer than the period of bankruptcy itself. The court will not make an IPO if it leaves you without enough money to meet everyday needs.