Chapter 13 Bankruptcy Overview
Are you feeling overwhelmed by accumulating debts? Are you falling further and further behind in your payments on your home? Do you owe back payments on your car loan or your mortgage and don’t see any possible solution to making-up those payments? Could you pay back all your debts if you just had more time? Then you need to speak to an experienced bankruptcy lawyer at the DCDM Law Group. We specialize in bankruptcy and debt relief for our clients. One possible answer for you, to get out of debt and still keep your possessions, is to file for bankruptcy.
Chapter 13 protection is often called a reorganization bankruptcy. When you file , you and your bankruptcy lawyer become involved in a negotiation process with your creditors, where your creditors accept a series of payments as payment in full for the money that you owe them.
The most common reason that people choose Chapter 13, is to save their home. Although both 7 and 13 will stop foreclosure activities on your home, 13 allows you to create a repayment plan so that you’re able to catch-up on whatever money or payments you owe the mortgage company. That repayment plan, developed by you, your bankruptcy attorney, and the mortgage holder, can last from three to five years. In contrast, with a Chapter 7 filing, you need to be able to pay off your mortgage holder within a few months. If you’re not able to repay the money within those few months, the banks usually proceed with the foreclosure process.
California Chapter 13 Bankruptcy Process – Eligibility
Before you are able to file for Chapter 13, the courts need to decide if you are eligible for filing. You will need to prove to the court that you have the income to meet your payment obligations. If your income is too low or irregular, the courts may determine that you’re unable to repay your debts under Chapter 13. Another possible cause for denial of eligibility to file is having too much debt. If your secured debts – those that are for property that the creditor can repossess – exceed approximately $1 million, you will not be able to file for Chapter 13. Also, if your unsecured debt – that is debt such as medical bills, for utilities, and for credit cards – exceeds approximately $350,000, you will be ruled as ineligible.
Provided that you have sufficient income so that you’re able to pay back some of your debts, and if you do not fall under one of those above criteria, then the courts are likely to determine that you are qualified for Chapter 13.
Chapter 13 Bankruptcy – How it Works
The first step for Chapter 13 involves credit counseling, from a credit counseling agency that is approved by the United State Trustee’s office. Most of these agencies charge a fee for their service, but if you are unable to pay, or are only able to pay at a reduced rate, they have to work to accommodate you. You will also need to pay a filing fee, which is $274.00. Your Chapter 13 bankruptcy attorney will work with you to fill-out and file the nearly 70 ages of forms on your behalf.
Next, you will work with your bankruptcy attorney to create a Chapter 13 repayment plan. The plan details, very specifically, how you are going to repay your debts. Your bankruptcy lawyer will help you determine what to include in your repayment plan and work to create a budget that balances your debt and your income.
The way Chapter 13 works, you will need to pay certain debts in full. These debts – called priority debts – include alimony, child support, employee wages, and certain taxes. These priority debts will need to be paid at the start of your repayment process; they are the highest priority and must be immediately tended to.
As for your other debts, your repayment plan will need to address your secured debts, which are debts for tangible items, such as your home or your car. Finally, the repayment plan will need to show how your remaining disposable income, after taking care of the priority and secured debt, will be spent to pay down your unsecured debt for items like credit cards, medical bills, and the like. In many Chapter 13 cases, the entirety of the unsecured debts are discharged, in the same way that happens in a Chapter 7 proceeding.
How Long Does Chapter 13 Last?
We’ll review your financial situation, including your income and outstanding debts, and determine if your repayment plan under Chapter 13 will last for five years or three years. If you are able to pay off all of your debt before that three year or five year mark, you’ll be able to emerge from bankruptcy early.
Reneging On Chapter 13 Payment Plans
What happens if you lose your job, have a health emergency, or are otherwise unable to keep-up with your Chapter 13 repayment plan? Well, in these turbulent times it’s not always possible to know what the future holds. The bankruptcy courts understand this and have made special provisions if, due to circumstances that are beyond your control, you are unable to follow through on your repayment plan.
Your assigned bankruptcy trustee will review your circumstances and may choose to modify your plan by taking into account your changed situation, or the bankruptcy court may allow you to discharge your debts in full, because of hardship. Another option would be to convert to Chapter 7 and then have a court-appointed trustee arrange to sell-off your disposable assets in order to repay some of the debt you owe.
If you find yourself unable to meet your repayment plan, talk with your attorney directly. They are your best bet for reassessing the situation and determining the new plan for dealing with your debt.
Emerging from Chapter 13 Bankruptcy
Before you are allowed to receive a discharge from your bankruptcy you will need to show that you’ve repaid all of your debts under your repayment plan. Additionally, you will have to prove to the court that you are up to date on any alimony or child support payments. Finally, you will need to complete a court-approved budget counseling course offered by an agency identified by the United States Trustee. Once all of these conditions have been met the court can rule you discharged from your Chapter 13.
In order to successfully navigate your the bankruptcy process you’ll need the assistance of experienced attorneys. Having a locally accessible office lets you easily work your way through this process. We’ll be here to guide you through all of the paperwork, the filings. We also help you setup your repayment plan and help you to determine a workable budget going forward.
You’re not alone and we’re here to help. Call one us today for more information about your options and whether Chapter 13 is the right solution for you.
Chapter 7 Bankruptcy – Another Option