An individual or business that files a bankruptcy is called the “debtor.”  Any individual or business can declare bankruptcy once he/she or it has determined that it has become too difficult or impossible to pay off one’s creditors. Bankruptcy can give you a chance to start over financially with virtually no debt.  

An estate is created when you file Chapter 7. The estate is comprised of all of your assets (i.e., everything you own, including, but not limited to, your house(s), car(s), furniture, consumer electronics, bank accounts, 401k, IRA accounts, etc.).  In bankruptcy, individual debtors are given the opportunity under the Bankruptcy Code and under California law to “exempt” – that is, to protect – most, if not all, of their assets.  If an asset is exempted, it essentially is removed from the bankruptcy estate; as exempted property, it remains the property of the debtor. If, however, property is not exempted, or if there is property with equity in excess of the allowed amount of the exemption, then that property becomes property of the  bankruptcy estate, and is subject to administration by the trustee as part of bankruptcy estate.  

Most people will NOT lose any property in Chapter 7.  However, some debtors who would like to file Chapter 7, and who may qualify for Chapter 7 based on their income, have some property that is unprotected.  Some debtors have too much equity in their homes, or they may have an expensive car that is paid off, and which still has much more equity than can be protected. Such debtors likely would lose such property in a Chapter 7, because it is the job of the Chapter 7 trustee to marshal (i.e, to gather up) a debtor’s unprotected assets, and to sell those assets for the benefit of creditors.  That is, the proceeds from the sale of  assets that have unprotected equity will be divided proportionally among creditors to pay as much of their claims as is possible.  

Reorganization bankruptcies can be filed under the following guidelines:

  • Chapter 11 – businesses and individuals with many assets
  • Chapter 12 – farmers, fisherman
  • Chapter 13 – individuals with steady income

Contact us today to learn more about your options under the current bankruptcy laws. We’re here to help.


I’m sure you have many questions. For a FREE CONSULTATION, Call The Law Offices of
Richard Mark Garber at 818-762-8120 and I will be more than glad to offer you my advice.