Do you have a creditors calling but you just do not have finances to pay them? A Chapter 13 bankruptcy helps individuals and businesses repay their creditors, but are not in a current state of financially being able to. A chapter 13 provides the opportunity to pay off arrears for mortgages and payments on car loans over 36-60 months time, thus allowing you to keep your property. Chapter 13 is a debt repayment plan. The repayment can often be somewhere between zero and one hundred percent of your unsecured debt.
What is Chapter 13 and how does it Work?
Chapter 13 allows debtors to keep their property by using a court approved interest free payment plan. In Chapter 13 cases the repayment plan must begin within thirty days after the bankruptcy case has been started. Per the law, all creditors must strictly adhere to the repayment plan created in the chapter 13 bankruptcy, and creditors are prohibited from collecting any claims from the debtor.
Why Chapter 13 over Chapter 7?
A chapter 13 enables you to retain certain assets, such as your home, which may be liquidated by a chapter 7 Trustee. A chapter 13 is an alternative to Chapter 7 when you are in over your head with disposable income. A benefit to Chapter 13 allows you to yield lower monthly payment from what you were previously paying, and after 36 months you are done, and items included in the Chapter 13 are paid off.
Assuming you need to file a bankruptcy, the only way to determine which Chapter to file under is to first compare your options under the other available Chapters and be sure you have consulted with an experienced bankruptcy attorney to properly analyze your options.
Who may file Chapter 13 bankruptcy?
Persons who have a regular income and owe less than $336,900 in unsecured debt and $1,010,650 in secured debts at the time the petition is filed may file for Chapter 13 bankruptcy as long as other criteria is also met. For a listing and explanation of all criteria that must be met, please consult an experienced attorney to provide you with the necessary information and assist you with filing your bankruptcy.
The most important criteria for a person to be able to file for Chapter 13 bankruptcy is that the individual must have a regular income. There are a few other criteria that must be met for filing a Chapter 13 Bankruptcy; your attorney will be the best person to introduce you to these!
What are the benefits of Chapter 13?
Chapter 13 protects individuals from the collection efforts of creditors; permits individuals to keep their real estate and personal property; and provides individuals the opportunity to repay their debts through reduced payments.
You may be able to discharge debts in a Chapter 13 that would be non-dischargeable under other chapters, for example, marital dissolution equalization payments.
You may be able to get rid of junior liens on your real property. If the fair market value of your property is less than the total amount owed to the 1st mortgage, then you can eliminate the security interest to any junior lien holders and treat them as general unsecured creditors in your plan (thereby being able to possibly pay them less than 100%).
Certain tax repayments can be made easier by virtue of elimination of interest payments.
How Long Does It Take To File Bankruptcy?
If your monthly income is less than the state median, the debtor is responsible for repaying their debts for a period of three years. An exception to the three years would be if the court extended the time due to cause. The court has full discretion as to whether you will have more than three years to repay the debt.
If your monthly income exceeds the state median, the debtor is still responsible for repaying their debts, but the payment plan is typically scheduled for a five year period. In either situation, once a repayment plan has been established, creditors are prohibited from attempting to collect.
How Does One File for Chapter 13 Bankruptcy?
The best recommendation to filing a chapter 13 bankruptcy is to hire an experienced and knowledgeable attorney. Your attorney will have the tools, knowledge, and expertise in drafting your bankruptcy petition, schedules, statement of financial affairs, and the Chapter 13 plan. One way to assist your attorney is to provide them with the necessary information to file your bankruptcy. Some of the information your attorney will need includes:
- A complete list of all creditors
- The amounts and nature of all creditors claims
- A list of all debtor’s property
- Amount of debtor’s income, source of debtor’s income
- Pay stubs for past 6 months, and,
- A list of all monthly living expenses including, housing, clothing, utilities, taxes, and food.
Once your attorney has all the necessary information he or she will begin drafting the necessary documents. Once your bankruptcy has been filed, the debtor must begin thinking about their repayment plan.
When Do Repayments Begin?
The debtor must begin making payments under their Chapter 13 plan 30 days after the filing for bankruptcy. Some may believe you have until your plan has been approved by the courts, but that is not true. Even if the plan has yet to been approved by the courts, the debtor must begin making payments to the trustee within 30 days from filing.
Where Do I Begin?
If you are considering bankruptcy contact an experienced and knowledgeable attorney. The Law Offices of Bowman and Associates have attorney’s ready to assist you each step of the way. The Law Offices of Bowman and Associates have over 90 years experience practicing law and we will provide you with excellent service. The Law Offices of Bowman and Associates serves all of Northern California and we have offices in Folsom and Sacramento. Call today to schedule your free one hour consultation with one of our Attorney’s specialized in Bankruptcy.