People in California facing significant, unrepayable debt may turn to personal bankruptcy to find relief. There are two types of personal bankruptcy available: Chapter 7 and Chapter 13. If a person files for Chapter 7 bankruptcy, a trustee liquidates his or her assets, uses the proceeds to pay off some amount of the outstanding debt and discharges the remainder. However, Chapter 7 isn't the best option for everyone seeking debt relief, especially if they have certain key assets to maintain or they have a relatively high income.
California residents who have declared Chapter 13 bankruptcy might wonder how their payments will be calculated. There are a few kinds of bankruptcy a person might file for, but the most common types are Chapter 7 or 13. With Chapter 7, many eligible debts can be discharged.
California residents facing bankruptcy may be interested in learning about the bankruptcy means test. This test helps to determine whether an individual who is in debt meets the qualifications to file for Chapter 7 bankruptcy. In times past, it was easier for an individual filing for bankruptcy to meet the criteria because the courts had broader discretion in determining if a person was eligible for bankruptcy.
As of late 2018, Americans had a total of $3.93 trillion in consumer debt when not accounting for mortgages. California residents and other Americans are expected to add another 5 percent in credit card balances throughout the rest of the year. Therefore, it is believed that consumer debts will eventually hit $4 trillion in the near future. While it only took five years to go from $3 trillion in debt to $4 trillion, it may not be cause for alarm.
The concept of allowing a debtor to get relief from unmanageable economic distress with a fresh start has a long history in the U.S., dating back to bankruptcy's incorporation within the Constitution. Although bankruptcy operates under federal jurisdiction, California has its own state-specific rules. A lot of the state rules concern which items are included and the maximum value for property that is exempt from attachment by creditors.