When Congress passed the new bankruptcy laws the end objective was to reduce the number of personal filings across the country and push more consumers who did in fact file into Chapter 13 payment plans instead of a Chapter 7 discharge. This was widely considered a huge victory for unsecured creditors, particularly credit card companies. Now, because of the legislation, in order to completely wipe out your debt you must first prove that you lack the income to pay off the debt, at least partly. The courts do this in a couple of ways. First, they make all California filers attend a mandatory credit counseling session before filing bankruptcy. During this session, a credit counselor scrutinizes your income and expenses to determine whether your situation can be better remedied through a non-profit debt management plan or if bankruptcy is indeed your best course of action. Assuming you receive the credit counseling certificate and proceed with declaring, your debt lawyer will determine whether you qualify for Chapter 7 or Chapter 13. They do this by comparing your income over the past 6 months against the median income of the same sized household in California. If your income is above the median in the state, you will be forced to pass the means test in order to qualify for Chapter 7. Below you’ll find the California median income figures from 2006:

2-person families: 60,032
3-person families: 64,766
4-person families: 74,801
5-person families: 64,132
6-person families: 61,348
7-or-more-person families: 68,030

In general, people are so desperate to avoid Chapter 13 because not only does it have catastrophic credit consequences but you also have the pay the debt back or least a good part of it. At least with Chapter 7 you can wipe the slate clean, even if it comes at the expense of your long-term credit.

For this reason, an increasing number of people have found options like debt settlement to be much more suitable for their credit problems.

If you are interested in speaking with someone about what debt solutions are available for you, submit a form today and PayingPaul.Com will match you with a pre-qualified debt company for help!

You can also see browse these resources to learn more about the California credit & debt issues that affect you:

California Consumer Credit Counseling Services
California Bankruptcy Laws
California Debt Collection

Bankruptcy Stats In CA

2004: 118,948
2005: 162,532
2006: 37,107

Of all 50 states, California saw the biggest decrease in the number people filing bankruptcy from 2005 to 2006 due to the new law. In all number of consumers who declared bankruptcy in 2006 was 125,425 less than the previous year, which amounts to a 77.1% decrease. Ultimately, it’s safe to say the goal of reform--to limit the number of people filing bankruptcy—was reached.

As a result more consumers in California are turning to options like debt settlement and credit counseling for help. To get matched with one of these services, simply fill out a form and PayingPaul.Com will match you with a pre-qualified provider.