If you're considering bankruptcy, the first big decision is which chapter fits your situation. Here's a plain-English breakdown of the two most common options for individuals in California.
Chapter 7 and Chapter 13 are both forms of personal bankruptcy under federal law, but they work in very different ways. Chapter 7 is sometimes called "liquidation" bankruptcy — though for most individual filers, no actual liquidation happens, because California's exemptions protect the property they own. Chapter 13 is "reorganization" bankruptcy — you keep your property and repay some or all of your debts through a court-supervised plan over three to five years.
Choosing between them depends on your income, your assets, what kind of debts you owe, and your goals — for example, whether you're trying to save your home from foreclosure.
Typically completed in 3 to 5 months. Eliminates qualifying unsecured debts — credit cards, medical bills, personal loans — entirely. No repayment plan. Best for filers whose income is below California's median and who don't have significant non-exempt assets.
A 3-to-5-year repayment plan based on your income and debts. Lets you catch up on a mortgage or car loan while keeping the property. Available to filers whose income is too high for Chapter 7, or who need to stop a foreclosure or repossession.
To qualify for Chapter 7, your household income generally must fall below California's median income for a household of your size, or you must pass a "means test" that accounts for allowed expenses. If your income is too high, you may still qualify for Chapter 7 after deducting certain expenses — or Chapter 13 becomes the path forward.
There's no income limit for Chapter 13, but there is a debt limit, and your proposed repayment plan must be feasible based on your actual income and expenses. We run these numbers for you, free of charge, before you decide anything.
Chapter 7 commonly discharges credit cards, medical bills, personal loans, and old utility bills. Chapter 13 discharges remaining qualifying unsecured debt at the end of the plan, after you've made your scheduled payments. Certain debts — including most student loans, recent tax debt, and child or spousal support — generally survive either chapter.
If you're facing foreclosure and want to keep your home, Chapter 13 is usually the answer — it lets you catch up on missed payments over time while the automatic stay halts foreclosure proceedings.
If your household income is above California's median for your family size, Chapter 13 may be required — or a more detailed means test calculation may still open the door to Chapter 7.
California's exemptions are generous, but if you own property that exceeds exemption limits, Chapter 13 may let you keep it by repaying creditors the difference over time.
If your income qualifies and you don't have property at risk, Chapter 7 offers the fastest route to a clean slate — often complete within a few months.
That's exactly what your free consultation is for. We'll review your income, debts, and assets and give you an honest, specific answer.
310.820.3800This article is provided for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship between you and Westwood Law Center. Legal advice must be tailored to the specific facts of your situation — nothing in this article should be relied upon as a substitute for consultation with a licensed attorney. The information here may not reflect the most current legal developments. If you have a legal issue, contact our office for a free consultation.
How the automatic stay works and what happens to your house in Chapter 7 and Chapter 13.
California exemptions explained — what you keep is usually far more than you fear.