How to File for Bankruptcy in California

A California bankruptcy case works much the same way as it does in other states. Bankruptcy is a federal legal process that allows individuals and businesses to obtain relief from their debts.

In all states, bankruptcy is governed by federal law, specifically the U.S. Bankruptcy Code. However, California, like some other states, has its own list of bankruptcy exemptions.

A person or a business that is unable to pay their bills goes through the bankruptcy process to seek debt relief from their creditors. When a party files for bankruptcy, they ask the court to allow them to create a repayment plan to pay off their debts over time or to discharge some or all of their debt.

Bankruptcy is typically a last resort for those facing financial hardship – it can be a complex, difficult and sometimes lengthy process.

The United States Bankruptcy Code governs the bankruptcy process. Proceedings are conducted in federal bankruptcy courts, and the rules and procedures for bankruptcy are the same throughout the country.

However, some aspects of the bankruptcy process, such as exemptions available to protect certain types of property from being seized by creditors, can vary by state. California bankruptcy exemptions may be different from those in other states.

Whether the debtor is an individual, small business, large corporation or municipality, there are several types of bankruptcy to fit their specific needs. Each type has its own set of requirements, rules and procedures.

Different types of bankruptcy include:

• ‌Chapter 7:‌ Allows people and businesses to sell nonexempt assets to pay off their debts. It is typically used by those who cannot pay debts and have little to no assets.
• ‌Chapter 9:‌ Used by municipalities to protect them from their creditors while they develop and negotiate plans for debt adjustment.
• ‌Chapter 11:‌ Used by a business to restructure its debts while remaining in operation. The business creates a plan to repay its creditors over time.
• ‌Chapter 12:‌ Much like Chapter 11, but used by family farmers and fishermen to repay their creditors over time as they reorganize their debts.
• ‌Chapter 13:‌ Allows individuals to reorganize their debts and create a repayment plan for creditors.
• ‌Chapter 15:‌ Allows individuals and businesses to file for bankruptcy in the United States, while also having assets and debts in other countries.

Most Californians file for two main types of bankruptcy: Chapter 7 and Chapter 13. They are the most common types of bankruptcy filings in the U.S.

A Chapter 7 bankruptcy (known as "liquidation" bankruptcy), allows a debtor to discharge or eliminate most of their unsecured debts, such as credit card debt or unpaid health care bills. In a Chapter 7 bankruptcy, the debtor's assets may be sold to pay their debts. Certain assets, such as the debtor’s primary residence and other necessary personal property, may be protected from being sold if exempted.

A Chapter 13 bankruptcy (known as "reorganization" bankruptcy) allows the debtor to keep their assets and pay off debts over a three- to five-year period through a repayment plan. To be eligible for Chapter 13 bankruptcy, the debtor must have a regular income and their debts must fall within certain limits.

California has two sets of exemptions that can be used in a bankruptcy case, known as 703 exemptions and 704 exemptions. The state's 703 exemptions are more generous than the 704 exemptions in some cases, but not all.

For example, 703 exemptions allow the debtor to protect a larger amount of equity in real estate and a higher value of personal property, but 704 exemptions offer more protection for retirement accounts and other types of income.

When filing for bankruptcy in California, debtors have the option to choose either the 703 or 704 exemptions. They cannot take from federal exemptions and can choose only from one set of the state exemptions.

These are some examples of bankruptcy exemptions in California. (All amounts will readjust for inflation in 2025.)

Debtors planning on filing bankruptcy in the Golden State should know that these exemptions can change at any time and that exemptions can vary depending on the specifics of each case.

Not everything a debtor owns can be exempted. Chapter 7 bankruptcy filers lose property that is not covered through an exemption. In this instance, a bankruptcy trustee who handles the debtor’s case will use what isn’t covered by the state’s exemption laws to pay creditors.

In a Chapter 13 bankruptcy, debtors can keep everything they own. However, they’ll pay the value of nonexempt property equity or their disposable income in their repayment plan, whichever is greater.

To qualify for bankruptcy in California, a debtor must meet certain requirements according to federal bankruptcy law. Each type of bankruptcy has its own eligibility requirements.

To qualify for Chapter 7 in California, the debtor must pass a means test. The means test is a financial assessment that compares the debtor’s income to the median income for an average household in California.

If the debtor’s income falls below the median income, they automatically qualify for Chapter 7 bankruptcy. If their income is above the median income, they may still qualify if they can show that they do not have enough disposable income to pay their debts.

To qualify to file Chapter 13 bankruptcy in California, the debtor must have regular income. They must also have unsecured debts, such as credit card debt or medical bills, that do not exceed $465,275 and secured debts, such as a mortgage or a vehicle loan, that are not more than $1,395,875.

To file for bankruptcy in the Golden State, a debtor will:

1. Determine which type of bankruptcy is right for them.
2. Take a credit counseling course from an approved provider to help them understand options for managing debt.
3. Gather financial documents to support the bankruptcy petition, including a list of debts, assets and income.
4. Complete the bankruptcy petition and other required forms and file them with the bankruptcy court in the district where they live.
5. Attend a meeting of creditors ("341 meeting") where the bankruptcy trustee will ask questions about their case.
6. Complete required post-filing courses, such as an approved financial management course.
7. Receive discharge of their debts through the bankruptcy court.

In the state of California, bankruptcy cases are heard in U.S. Bankruptcy Court for the Central District of California, the Eastern District of California, the Northern District of California, and the Southern District of California.

Debtors can find bankruptcy court locations nearest their area by visiting the U.S. Bankruptcy Court’s website or through California's district courts.

Let's take a look at some of the most frequently asked questions regarding bankruptcy in California.

Filing for bankruptcy in California is not particularly difficult, but it does require some preparation and planning. To file for bankruptcy in California, the debtor must first determine which type of bankruptcy is right for them.

California bankruptcy exemptions available to the debtor depend on whether you file for Chapter 7 or Chapter 13 bankruptcy, and which set of state exemptions you choose to use. You may be able to keep your home, car, retirement accounts, personal property and tools of the trade, among other things.

Yes, it is possible to file bankruptcy without a bankruptcy attorney in California, but it is generally recommended to seek legal advice to ensure that the process goes smoothly and to maximize chances of a successful outcome.

Chapter 7 bankruptcy is a liquidation bankruptcy, which means that the debtor is required to sell some assets to pay off debts. The debtor may be required to pass a means test to qualify.

Chapter 13 bankruptcy is a reorganization bankruptcy, which allows the debtor to keep certain assets and create a repayment plan to make monthly payments to pay off debts.

There is no specific amount of debt that you need to have in order to file for bankruptcy in California. However, in a Chapter 13 bankruptcy, unsecured debts cannot exceed $465,275, and secured debts cannot be more than $1,395,875.

The length of time it takes to complete a bankruptcy case in California depends on the type of bankruptcy. A Chapter 7 bankruptcy usually takes about three to six months from start to finish. In a Chapter 13 bankruptcy, the creditor creates a repayment plan to pay off debts over a period of three to five years.