For many consumers, the bankruptcy process is something of a mystery. The process of dealing with financial stress and making the decision to file can be so daunting that little thought is given to what will take place once the process has begun. The following information is given in the hopes of educating California residents as to what to expect once their personal bankruptcy has begun.
Once the paperwork has been filed, the individual becomes a Debtor. A bankruptcy estate is then created, and all of the Debtor’s property, both real and personal, is included within that estate. This does not necessarily mean that this property will be lost, but it does mean that no items of value can be left out of the process as it moves forward. The Debtor will sign a petition to the court, and will submit schedules that outline his or her income, debts, assets and other financial information. All of this is sworn to be true, and lying within any of this paperwork is grounds for perjury.
As for the assets contained within the bankruptcy estate, there are certain holdings that are exempt from the bankruptcy process. In general, when the Debtor holds ownership interest in property that is less than or equal to that property’s claimed value, he or she will be able to retain the asset. This is conditional on there being no objection to the exemption, such as an objection raised by a Creditor.
When considering which assets can be claimed as exempt from the process of personal bankruptcy, it is important to work with one’s attorney to gain a full understanding of the process and likely outcomes. Each individual will have a unique and specific set of circumstances, and there are few hard and fast answers to questions regarding exemptions. By understanding how the process is likely to move forward, California residents can make informed decisions as they prepare to file.
Source: Michigan State University, "Should you file bankruptcy? Part 2", William Hendrian, June 14, 2014