California Bankruptcy Laws
For the purpose of filing California bankruptcy, property is considered to be of two general classes: real
estate and personal. Within the RE class, sub-classification is based upon "homestead" status. Personal items
are sub-classified based upon the state legislatures assessment of necessity and are subject to value
limitations. If equity value exceeds the statutory limit by a significant amount, trustees routinely require
forfeiture of assets.
Property retained in California bankruptcies depend on the chapter under which relief is sought. Chapter 7
liquidation of debts requires strict compliance with statutory values. Chapter 13 takes a less direct
approach requiring, as a condition for plan confirmation, that the court determine creditors receive more
favorable treatment under the plan than would be available if the debtor filed Chapter 7. Most valid liens are
unaffected by filing. Creditors remain free to foreclose liens (with court approval) in the event of non-payment
whether in Ch. 7 or under the terms of a Ch. 13 plan. In addition to purchase money security interests, other
liens may be created automatically by operation of law to insure payment of child support, taxes, and emergency
hospital treatments. These statutory interests also remain largely unaffected.
California Bankruptcy Laws - Real Property
State law determines a debtor's title, right and interest in real estate. Primary residences receive special
protection out of necessity, while secondary homes, invest property, and non-possessory interests are subject to
forfeiture. For more information, see homestead : Constitutional Authority,
Declaration, and Definition.
California Bankruptcy Laws - Personal Assets
All assets owned must be reported to a trustee appointed by California bankruptcy courts. The definition of property ownership is construed broadly
to include not only physical assets, but also intangible, contingent and mixed. Contractual rights and options,
potential causes of action against others, and legal entitlements may represent a bona fide value and must be
reported. Only specific assets may be retained under California bankruptcy statutes, including:
Creditors are subject to state law provisions incorporated into California bankruptcy cases. If a California
bankruptcy court lifts
the automatic stay and permits a specific creditor to seize and liquidate property subject to a lien, creditors
must obey all state law limitations on collection practices. For more information, see
legal assistance for debtors.
Also, all statutory provisions depend on conformity with the prohibition against
fraudulent conversions creating exempt property.
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