Los Angeles Bankruptcy FAQ
Get answers to the most common questions about bankruptcy in Los Angeles. Our experienced attorneys have helped thousands of LA residents understand their options and navigate the bankruptcy process.
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General Bankruptcy Questions
Not necessarily. In Chapter 7, you can keep your home if you're current on payments and the equity is within California's homestead exemption ($75,000-$175,000 depending on circumstances). In Chapter 13, you can keep your home and catch up on missed payments through your repayment plan. Many of our Los Angeles clients keep their homes through bankruptcy.
Chapter 7 bankruptcy stays on your credit report for 10 years, while Chapter 13 stays for 7 years. However, the impact on your credit score decreases over time, and many clients see significant improvement within 2-3 years. You can often qualify for new credit, including mortgages, within 2-4 years after bankruptcy.
Yes, having a job doesn't disqualify you from bankruptcy. For Chapter 7, your income must pass the means test (below median income for your household size in LA County). For Chapter 13, having regular income is actually required to fund your repayment plan. Many working people file bankruptcy due to medical bills, job loss, or other circumstances.
Chapter 7 typically takes 3-4 months from filing to discharge. Chapter 13 takes 3-5 years to complete the repayment plan. The initial filing provides immediate protection through the automatic stay. Most clients feel relief within days of filing as creditor harassment stops immediately.
Los Angeles Specific Questions
California offers two exemption systems: System 1 (CCP 704) and System 2 (CCP 703). Most LA residents benefit from System 1, which includes: homestead exemption up to $600,000+ for primary residence, $8,000 for vehicles, $8,000 for household goods, and $8,000 for tools of trade. System 2 offers a $31,950 wildcard exemption. We'll analyze which system protects your assets best.
LA County median income determines Chapter 7 eligibility through the means test. For 2024: 1 person - $70,450, 2 people - $87,850, 3 people - $110,300, 4 people - $133,400. If your income is below these amounts, you automatically qualify for Chapter 7. Above these amounts requires additional calculations to determine eligibility.
Some California state taxes can be discharged in bankruptcy if they meet specific criteria: the tax return was due more than 3 years ago, the return was filed more than 2 years ago, and the tax was assessed more than 240 days ago. Recent taxes, payroll taxes, and fraud penalties typically cannot be discharged. We'll review your specific tax situation.
In Chapter 7, you can keep your car if it's worth less than $5,850 (or $8,000 under System 1 exemptions) or if you're current on payments and the equity is protected. In Chapter 13, you can keep your car and catch up on missed payments. Many LA clients keep their vehicles, which is essential for work and daily life in Los Angeles.
Process & Legal Questions
You'll attend one meeting called the '341 Meeting of Creditors' about 30 days after filing. This isn't in a courtroom - it's an informal meeting with the bankruptcy trustee at the federal building downtown. Most meetings last 5-10 minutes with routine questions. Your attorney will prepare you and attend with you. Court appearances are rare unless complications arise.
Yes, retirement accounts are generally fully protected in bankruptcy under federal law. This includes 401(k), 403(b), IRA, Roth IRA, and pension plans. These accounts are exempt regardless of value. However, recent contributions or withdrawals may be scrutinized. Don't cash out retirement accounts to pay debts before consulting with us.
Non-dischargeable debts include: recent student loans, recent taxes, child support, alimony, criminal fines, debts from fraud or willful injury, and recent luxury purchases over $800. Most credit cards, medical bills, personal loans, and older taxes can be discharged. We'll review your specific debts to determine what can be eliminated.
Court filing fees are $338 for Chapter 7 and $313 for Chapter 13 (may be waived for low-income filers). Attorney fees vary based on case complexity. We offer affordable payment plans and free consultations. The cost is typically much less than continuing to struggle with debt payments. We'll provide transparent pricing during your consultation.
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