In a California bankruptcy, stocks typically aren’t given any additional consideration. Put another way; most stocks are handled similarly to other assets. Which bankruptcy you file and perhaps which California bankruptcy exemptions you select will determine what that means for the bankruptcy filer. Before filing for bankruptcy, you should consult an experienced bankruptcy attorney in Fullerton, CA. Call Winterbotham Parham Teeple, a PC at 800.400.9000 today.

Exemptions from Bankruptcy in California and Stock Ownership

Unlike in some other states, federal exemptions are not an option for California bankruptcy petitioners. However, California is unique in providing the 703 and 704 bankruptcy exemptions. A single person or married couple filing for bankruptcy may choose the exemptions that best apply to their circumstances.

With some additional personal property exemptions, one set is primarily focused on defending the debtor’s home. The other offers a wider range of possible protected property types.

Both specifically exclude stocks. However, a “wildcard” exemption is part of the set designed to protect more personal property. The wildcard exemption can cover any property that the debtor wants to keep protected.

What Normally Occurs to Stocks Under Chapter 7?

Any stocks that cannot be protected by a bankruptcy exemption in a Chapter 7 bankruptcy case may be liquidated by the bankruptcy trustee for the benefit of creditors. Depending on the stock’s value, the set of exemptions you select, and the other property you have to protect, you may have to protect all of your stock, a portion of your stock, or none at all.

How Are Stocks Affected by Chapter 13?

You have some control over what happens to your stock in a Chapter 13 bankruptcy case. You are not required to give up non-exempt property in Chapter 13. So long as your bankruptcy plan payments are at least equal to the total amount of non-exempt property you’re keeping, you may keep stock that is not exempt from protection if you so choose.

Steps for Stockholders Who Are Thinking About Filing for Bankruptcy

To begin, refrain from transferring stock to a friend or family member to avoid holding it as an asset when you file for bankruptcy. This is a fraudulent transfer. The bankruptcy trustee has the authority to “unwind” fraudulent transfers, which means returning the property to the person you transferred it to. The worst part is that you will no longer be able to protect ANY of the stock. Selling the stock before filing for bankruptcy is a bad idea, too, because the proceeds will be considered an asset by the bankruptcy trustee.

Expert Bankruptcy Attorneys in Fullerton, CA

Before taking any action in a bankruptcy filing, the best option is to contact an experienced bankruptcy attorney in Fullerton, CA, by dialing 800.400.9000 and speaking to an attorney at Winterbotham Parham Teeple, a PC.