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Filing Chapter 7 in California

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    Filing Chapter 7 in California

    Hello! I am new here, and I am planning in filing chapter 7 due to a business gone bad. I went ahead and consulted with an attorney, and he told me that since California is a community state debtors can come after my husband for my debt, even though the debt is only mine. The attorney also told me that my husband's house and vehicle are assets that I need to claim when filing even though they are under his name. Is this true? Can someone please shed some light. Thanks in advance!

    #2
    Were you talking to a bankruptcy attorney? I would consult 3-4 others and explain your situation. I'm not a community property expert and won't pretend to be one. Community debt can be levied against community property for certain. If you have "personal" property that was not purchased with community funds, then that personal property would be protected. You may have one thing going for you. If you have mostly business debt (non-consumer debt), then you should be able to get through a Chapter 7 relatively easily.

    When you file bankruptcy in a community property state, typically only one spouse needs to file as the other will enjoy the "hypothetical" discharge against all "community" debt. This is why I would suggest that you talk to several more attorneys who hopefully specialize in community debt. There are nuances to this where "joint" debt may be treated differently. Additionally, community property would need to be listed in the bankruptcy in order to protect the community property.

    The questions on community property and debt is something that an attorney, who looks at how the debt was created, can answer. For example, did you start the business(es) with community property (money), did you start this before being married, was marital assets (community assets)/money used to fund the business, how "separate" was the business from the community? These are all questions that you would need to address.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

    Comment


      #3
      Hello justbroke, thanks for the quick response. Yes I spoke to a bankruptcy attorney, and also most of the debt is business debt. The money used to start the business was community money, and the business was kept separate (C Corp). I receive a paycheck from the business whenever possible.

      Comment


        #4
        I would shop 3-4 more attorneys and leverage their knowledge. I would also make sure that the attorney is comfortable with a business owner and how to handle the "corporate" entity as well (let it dissolve, liquidate it, etc). While the C-Corp may be separate, how did you guarantee, or did you guarantee any debt? Did you guarantee the debt only in your name or is it guaranteed in both spousal names? These are the things that a god attorney will probably ask.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog

        Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

        Comment


          #5
          The debt was guaranteed only by me, and I am the only shareholder.

          Where is a good place to find attorneys? The one I consulted I found on Yelp.

          Comment


            #6
            I don't know the best source for bankruptcy attorney referrals. You could check your local bankruptcy court website or an attorney referral service. I would definitely make sure the attorney understands debtor-owned (debtor-held) "closely" held corporations and the impact or that on the bankruptcy (e.g. non-consumer filing, liquidating or dissolving the corporation, etc).
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog

            Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

            Comment


              #7
              Start by going to the state bar website and using the advanced attorney search to get a list of bankruptcy attorneys. Then check their websites to find out which ones do both individual and business cases. Choose some who appear to be experienced and make appointments for consultations.

              Yelp can be helpful to weed out any terrible attorneys. But, I wouldn't rely too heavily on it. My attorney doesn't do great on Yelp. There are only 4 reviews. Two were 5 stars and two were 1 star. The 1 star reviews were people who were unhappy with a telephone consultation and a telephone conversation with the secretary. The 5 star reviews were people who actually hired him. One review says he was short during a telephone consultation. I consulted in person and he spent over an hour with me. I would give him 5 stars, but if you look at him in a list of other attorneys on Yelp, he looks mediocre. He has 30 years of experience in the local court, knows the trustees and knows what he is doing. You can't tell that by reading Yelp.
              LadyInTheRed is in the black!
              Filed Chap 13 April 2010. Discharged May 2015.
              $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

              Comment


                #8
                Thanks for the advice justbroke and LadyInTheRed

                Comment


                  #9
                  Justbroke, do you highly recommend I hire an attorney with corporate experience even though my business will be dissolved in a few weeks? I have seen an attorney with corporate experience, and he charges $1300 more than an attorney with no corporate experience.

                  Comment


                    #10
                    I would make sure that I consulted with attorneys that can further insulate you from any issues with the corporation. A corporation cannot receive a discharge and how you dispose of the corporate assets is the real issue. Of course you would be able to discharge any personal liability, but the question is how do you let the corporation die a natural death (administratively dissolve) or be shut down (liquidate).

                    It really depends on what you are doing with the corporation and how complex you have entangled your life. For example, does the corporation (C-Corp) hold property, inventory, patents, or other tangibles? You have to weigh how this corp entity mingles with you (and your spouse) personally. Because you are in a community property State, have used community funds, and have this "true" corporation you may be better off paying the extra to make sure it's done cleanly.
                    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                    Status: (Auto) Discharged and Closed! 5/10
                    Visit My BKForum Blog: justbroke's Blog

                    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                    Comment


                      #11
                      Thanks for the advise and quick reply justbroke. I was hoping to save some money with attorney fees. The corp does not hold any property, and stuff like computers, tables, and merchandise are being sold (liquidating) . I do not want to keep anything or have to store it, I plan on going back to school and become an RN.

                      Comment


                        #12
                        At the very least, I would consult with a corporate attorney about how you should use the proceeds of the liquidation of the corporate assets. Keeping the proceeds of liquidation of corporate assets that should go to the corporation's creditors could be fraud which could subject you to claims by the corporation's creditors that are non-dischargeable. There is probably an order in which you should pay the corporation's creditors, with payroll, payroll taxes and income taxes at the top of the list.
                        LadyInTheRed is in the black!
                        Filed Chap 13 April 2010. Discharged May 2015.
                        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                        Comment


                          #13
                          Thanks LadyintheRed, the attorney with corporate experience told me the same thing. I asked him about paying my suppliers, whom I will be including in the bankruptcy, and he told me to continue business as usual. I am also selling the little merchandise I have left at closeout prices (yard sale prices) since most of it is very old.

                          Comment

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