CA CLS Bankruptcy common mistakes
CA CLS Bankruptcy · Understand the traps and how to avoid them.
Citing only the Bankruptcy Code section number for a proposition and never naming the parallel title of the U.S. Code or the operative subsection, so the answer is incomplete or misattributed.
Candidates memorize section numbers in isolation (e.g., '362') without anchoring them to the statute's structure (11 U.S.C. § 362(a)(1)-(8)) or to the California connection, and under time pressure they write the first number that comes to mind.
What to do instead
Build a one-page statutory map linking each core section to its title and function (automatic stay, avoidance, discharge, exemptions) and practice writing full citations with the operative subsection in every practice answer.
Treating the automatic stay as a single, uniform prohibition rather than distinguishing the acts enumerated in § 362(a) from the exceptions and relief mechanisms in §§ 362(b), (c), and (d).
The stay is taught as a headline rule ('it stops collection'), so candidates miss that police and regulatory actions, certain family-law proceedings, and setoff rights are carved out, and they forget that relief from stay is a separate procedural step.
What to do instead
Drill the stay with a two-column chart: covered acts versus enumerated exceptions, then follow each exception with the procedure for annulment, termination, or modification under § 362(d).
Applying the means test as a simple income comparison instead of walking through current monthly income, the applicable median, allowed expense deductions, and the presumption of abuse calculation.
Candidates conflate the § 707(b) presumption analysis with Chapter 13 disposable income and skip the deduction step, producing conclusions that ignore the statutory formula.
What to do instead
Work the calculation in fixed order (CMI, annualize, compare to median, deduct allowed expenses, compute disposable income) and write out each step in practice problems so the arithmetic becomes routine.
Confusing the roles of the debtor in possession, a trustee, and an examiner, and assigning avoidance powers or fiduciary duties to the wrong party.
Chapter 11's default rule that the debtor remains in possession overlaps with Chapter 7 trustee powers, and candidates transfer Chapter 7 assumptions into Chapter 11 fact patterns.
What to do instead
Maintain a party-power matrix (who operates the business, who may avoid transfers, who may propose a plan, who investigates) and test it against short hypotheticals for each chapter.
Analyzing preferences under § 547 without checking every element: transfer of an interest of the debtor in property, to or for the benefit of a creditor, on account of antecedent debt, made while insolvent, within 90 days (or one year for insiders), and enabling the creditor to receive more than in a Chapter 7.
Candidates latch onto the 90-day window as the whole test and forget insolvency is presumed and that the 'greater recovery' element is comparative.
What to do instead
Use a six-element checklist for every preference question and then run the defenses in § 547(c) (ordinary course, contemporaneous exchange, subsequent new value, security interests) as a second pass.
Treating fraudulent transfer analysis under § 548 as identical to preference analysis, ignoring actual intent, reasonably equivalent value, and the separate California Uniform Voidable Transactions Act standards.
Both are avoidance powers, so candidates collapse them; they also overlook that state-law avoidance under § 544(b) requires an actual unsecured creditor and applies a different reach-back period.
What to do instead
Compare the two side by side on intent, timing, consideration, and standing to sue, and practice identifying which theory the facts support before choosing a statute.
Stating that a discharge extinguishes all debts, without listing the § 523 exceptions (taxes, fraud, student loans, domestic support, willful injury) or the § 727 grounds for denying discharge altogether.
The discharge is taught as the goal of bankruptcy, so the exceptions read as footnotes and candidates blur nondischargeability of a debt with denial of the discharge itself.
What to do instead
Memorize two separate lists, § 523(a) debt exceptions and § 727(a) debtor misconduct grounds, and answer questions by first asking whether the issue is the debt or the debtor.
Describing the Chapter 13 plan without the statutory mechanics: good faith, the best-interests-of-creditors test, disposable income commitment, secured-claim treatment, and the three-to-five-year duration tied to the means test.
Candidates rely on a general narrative of 'a repayment plan' and omit confirmation requirements under § 1325, especially the liquidation comparison and the treatment of secured and priority claims.
What to do instead
Outline § 1325(a) as a numbered confirmation checklist and rehearse a short plan analysis for a hypothetical debtor with a car loan, tax debt, and arrears.
Ignoring California's exemption scheme and the choice between the state exemptions and the federal exemptions under § 522(b), or applying the wrong homestead amount.
California opted out of the federal exemptions, and the homestead exemption varies by county and filing date, so candidates apply a single remembered figure or assume federal exemptions are available.
What to do instead
Learn the opt-out rule, the California statutory exemption list, and how to check the current homestead amount and any automatic adjustment, then apply it to a hypothetical equity calculation.
Missing procedural deadlines and forum rules: the 60-day deadline to object to discharge under Rule 4004, the deadline to file a nondischargeability complaint under Rule 4007, and the treatment of proofs of claim and adversary proceedings.
Candidates focus on substantive doctrine and treat procedure as background, so they give a correct rule but attach the wrong deadline or the wrong procedural vehicle.
What to do instead
Create a deadline table keyed to the event that starts the clock (first meeting of creditors, order for relief, plan filing) and practice classifying each issue as a contested matter or an adversary proceeding.