Business Bankruptcy in California: 6 Differences Among the State's Four Districts

In Sacramento the first thing a chapter 11 debtor does after filing is close its bank accounts. The Eastern District of California's Local Rule 2015-2 provides that "immediately upon filing a chapter 11 petition, the debtor-in-possession shall close all bank, deposit, and investment accounts," and new debtor in possession accounts replace them. The Central District, which governs a filing in downtown Los Angeles, organizes its expectations around something else: court-approved forms.

Business bankruptcy in California runs on one federal Code and four sets of local practice. The stay, the Subchapter V ceiling of $3,424,000, and the chapter 11 filing fee of $1,738 are identical in Eureka and in El Centro. The six differences below are the ones a business owner, or the lawyer an owner is interviewing, should expect to meet.

1. The County, Not the City Name on the Letterhead, Picks the District

Under 28 U.S.C. 84, "California is divided into four judicial districts to be known as the Northern, Eastern, Central, and Southern Districts of California." Sacramento County belongs to the Eastern District, which holds court at Bakersfield, Fresno, Redding, and Sacramento. Los Angeles County belongs to the Central District's Western Division, and the Central District also has an Eastern Division (Riverside and San Bernardino) and a Southern Division (Orange County, at Santa Ana). The Northern District sits at Eureka, Oakland, San Francisco, and San Jose; the Southern District takes Imperial and San Diego counties, with court at San Diego.

The bankruptcy courts' own buildings: the Edward R. Roybal Federal Building and U.S. Courthouse, 255 East Temple Street, for the Los Angeles Division, which "serves most of Los Angeles County"; the Robert T. Matsui United States Courthouse, 501 I Street, Suite 3-200, in Sacramento; the Robert E. Coyle courthouse at 2500 Tulare Street in Fresno (the Eastern District notes that "The Modesto office is now closed"); and the Jacob Weinberger United States Courthouse, 325 West F Street, in San Diego. Venue itself turns on 28 U.S.C. 1408 and the company's principal place of business or principal assets over the 180 days before filing, among the other statutory grounds.

2. One State Answers to Three U.S. Trustee Regions

The Justice Department divides California among three regions. Region 15 covers the Southern District, from an office at 880 Front Street in San Diego. Region 16 covers the Central District from 915 Wilshire Boulevard, Suite 1850, in Los Angeles, with field offices in Santa Ana and Riverside. Region 17 covers the Northern and Eastern Districts together with Nevada, from 450 Golden Gate Avenue in San Francisco; its Sacramento field office, under Assistant U.S. Trustee Edmund Gee, is at 501 "I" Street, Suite 7-500, in the same federal complex as the court. The Department's directory lists Peter Anderson as U.S. Trustee for both Region 16 and Region 17.

A Fresno company and a Reno company thus deal with the same regional office. A Fresno company and a Los Angeles company do not.

3. Los Angeles Writes Its Expectations Into Forms

The Central District's Local Bankruptcy Rules, effective May 8, 2025, are the most prescriptive of the four sets. Local Bankruptcy Rule 2081-1 names chapter 11 motions that may be heard on an emergency or expedited basis, "Subject to FRBP 6003": a motion to limit notice, to extend time for schedules, a utility motion under section 366. Local Bankruptcy Rule 4001-2 then addresses the motion that matters most to a business with merchant cash advances, the request to use cash collateral or obtain financing. Each such "Financing Motion" "must be accompanied by mandatory court-approved form F 4001-2.STMT.FINANCE."

A form is a list of the questions a court got tired of asking.

Subchapter V has its own Central District choreography. Under Local Bankruptcy Rule 2015-3, "not later than 14 days before the date of the first-scheduled status conference, the debtor must: (1) Meet and confer with the Subchapter V Trustee" and file a Subchapter V Status Report on local form F 2015-3.1.SUBV.STATUS.RPT. Local Bankruptcy Rule 3003-1 fixes the claims bar date in a Subchapter V case, unless the court orders otherwise, at "70 days after, and for claims by governmental units 180 days after" the latest of the order for relief, the conversion, or the Subchapter V designation. A funder that files late in Los Angeles has a problem the rule itself created for it, which is one of the few procedural facts in a debtor's favor that arrives without a motion.

The meet-and-confer requirement drifts past its stated purpose. On paper it is scheduling hygiene, a meeting so that the status report is jointly informed. In practice the Subchapter V trustee's statutory job includes helping develop a consensual plan, so the first conversation with that trustee is also the first time an outsider with standing hears the debtor's theory of how the business survives, and whether it survives at all is a matter the trustee will form a view about well before any hearing does.

The Central District also runs a mediation program under its Third Amended General Order 95-01, covering bankruptcy cases and adversary proceedings.

4. Sacramento Closes the Accounts and Refuses Notice-Only Cash Collateral

The Eastern District's rules, effective April 2026, begin with the account closure described above. For an owner whose merchant cash advances are repaid by daily debits, the rule has a concrete consequence: the account the funder's authorization points to is closed by rule, and the business operates from new accounts opened as debtor in possession.

Local Rule 4001-1(c) then provides that authority to use cash collateral or obtain post-petition financing "will not be granted if the movant uses the notice and opportunity for hearing procedure defined in 11 U.S.C. § 102(l)," and a chapter 11 movant must certify service on the twenty largest unsecured creditors or the committee. Proofs of claim in a chapter 11 case are due, under Local Rule 3003-1, "within ninety (90) days after the date first set for the meeting of creditors" unless ordered otherwise, with a separate Subchapter V deadline in Local Rule 3003-2.

Every district cares about cash collateral. The Eastern District's version insists on a hearing.

5. San Francisco Governs by Guideline

The Northern District posts "First Day Motion Guidelines (Effective June 1, 2019)," which contemplate motions to maintain existing bank accounts and cash management systems, pay critical vendors, pay prepetition payroll, and use cash collateral, all supported "with admissible evidence." It also posts Guidelines for Cash Collateral and Financing Motions and Stipulations, effective January 1, 2006. These are court guidelines, not local rules, though in a courtroom the distinction tends to be finer than a debtor would like.

6. California Regulates the Funder's Paperwork and Protects the Owner's House

California's commercial financing disclosure law, Division 9.5 of the Financial Code, requires a provider under Financial Code section 22802 to disclose specified information "at the time of extending a specific commercial financing offer" and to "obtain the recipient's signature on the disclosure before consummating the commercial financing transaction." The required items include the total dollar cost and "The total cost of the financing expressed as an annualized rate." The Department of Financial Protection and Innovation's implementing regulations, effective December 9, 2022, reach merchant cash advances and factoring as well as loans, and section 22801 exempts, among others, depository institutions and a provider making no more than one covered transaction in California in twelve months. That signed disclosure, or its absence, belongs in the file any California bankruptcy lawyer reviews before scheduling a funder's claim; what a missing disclosure does to that claim is a separate question the statute does not answer for the bankruptcy court.

For an individual owner, Code of Civil Procedure 704.730 sets the homestead at the greater of the countywide median sale price for a single-family home in the prior calendar year, capped at $600,000, or $300,000, with both figures adjusted for inflation annually since January 1, 2022. The current adjusted numbers were not confirmed for this page. The exemption protects a person's home, not an LLC's assets.

A Settlement Review Is Not a Fifth District

As for Delancey Street: the company is not a law firm. It files nothing in Sacramento, Los Angeles, or any of the four districts and gives no legal advice; it claims no California office. It will examine, confidentially and without a fee, a company's merchant cash advances and related business obligations to see whether a negotiated resolution is plausible, working with independently licensed counsel wherever legal work is involved, and it cannot promise any funder will agree. A business that needs the stay tomorrow, or needs to reject a lease, should be speaking with California bankruptcy counsel instead. The accounts, in that case, will be closed soon enough.