Many California residents struggle with debt for some years before it becomes too burdensome or simply impossible to continue on any longer. The reluctance to seek help is often the result of a perceived stigma of acquiring debt that is unmanageable, yet unforeseen circumstances, such as an emergency medical necessity, are in many cases the underlying cause. There are many reasons why bankruptcy is beneficial to permit a debtor to have a fresh start. An important first step is to determine if the debts are such that can be relieved through bankruptcy and which form may be appropriate.

Financial experts caution initially that certain types of debt are not dischargeable through bankruptcy. Child support, alimony, most taxes, and student loans under most circumstances fall into this category. If unsecured debt is from another source like credit card debt or medical bills, bankruptcy may provide a solution to the problem. The two main options for individuals are Chapter 7, which is commonly categorized as a liquidation, and Chapter 13, often referred to as reorganization.

There are specific tests to determine qualification for either type. Generally, Chapter 7 is for lower income debtors who earn less than their monthly bills. All of the debt may be liquidated and the individual may have to surrender certain assets, although certain legal exemptions apply for basic necessities. Chapter 13 is most often for individuals who acquired a large debt but continue to earn a relatively stable income. Under 13, a reorganization of the debt is created, payments are scheduled over a multiple year period, and the debtor retains his or her assets.

There are many issues to consider when contemplating bankruptcy, including the effect it will have on credit ratings. A bankruptcy lawyer can provide counsel and advice on one’s rights and responsibilities.