A San Francisco bankruptcy lawyer discusses California Bankruptcy Law
Although there is no specific California bankruptcy law, as the bankruptcy code is federal law, the bankruptcy code does provide for certain matters to be dealt with on a state level. There are two main areas of the bankruptcy code where California bankruptcy law is applicable. Those areas deal with claiming exempt property and looking at potentially fraudulent transfers. Each will be discussed in turn.
When a bankruptcy petition is filled out the debtor must complete several different forms, known as bankruptcy schedules. The schedules break up the debtor’s assets and liabilities into different categories, as well as list all sources of income and expenditures incurred by the debtor. There is a specific schedule that allows for the exemption of assets, meaning those assets will remain in the possession of the debtor and not be disturbed during the bankruptcy proceeding.
While the federal bankruptcy code lists what qualifies as an exempt asset and sets maximum amounts that can be claimed, the federal list is not exclusive. 11 U.S.C. §522(b) of the bankruptcy code allows for states to create its own exemption list. California bankruptcy law has taken advantage of the federal bankruptcy code that permits states to adopt its own exemptions. California bankruptcy law has developed its own list of exemptions, which can be found at Cal. Code Civ. Pro. Sections 703 and 704 (depending on which list the debtor wants to apply).
In addition to a more inclusive exemption list, California bankruptcy law also applies to fraudulent transfers within the scope of bankruptcy. Federal law allows for bankruptcy trustees overseeing a debtor’s bankruptcy case to avoid transactions that are believed to have been carried out with a fraudulent purpose. However, Congressional discussions behind the avoidance provision indicate that pre-bankruptcy planning is encouraged and therefore a finding of actual fraud is rather difficult.
California bankruptcy law, however, has its own criteria for determining whether a transfer was fraudulent and subject to avoidance by a bankruptcy trustee. The Uniform Fraudulent Transfers Act (UFTA), found at California Civil Code §3439.04, is applicable to the bankruptcy code by way of 11 U.S.C. §544(b). That federal provision provides that any state laws dealing with questionable transfers are applicable to a bankruptcy proceeding. While California bankruptcy law still allows for transfers to be made prior to filing for bankruptcy, the UFTA is an entirely different inquiry above the federal requirement that transfers not be made with intent to defraud creditors.
So, as you can see, although bankruptcy is solely federal law, the bankruptcy code does provide for state laws to also be used when going through a bankruptcy proceeding.
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