Chapter 13 Bankruptcy

Chapter 13 bankruptcy is the second most common bankruptcy filing in the US, accounting for 37% of all bankruptcy filings in 2019. It is often called as the wage earner’s bankruptcy as it includes a payment plan for your existing debts.

Under Chapter 13 bankruptcy, you’re provided with a repayment plan of 36 to 60 months. You have to make monthly payments to your trustee, which is then distributed among qualified lenders. What makes Chapter 13 a good option for debt relief is that you can make missed income tax payments, alimony support, child support, student loan, and mortgage payments.

Chapter 13 offers some relief in comparison to Chapter 7 in terms of allowing you to keep your personal assets through the bankruptcy and may be able to discharge some unsecured debt.  

In the case of an impending  home foreclosure, you may be able to pay your mortgage arrearage through the Chapter 13 plan and keep your home.  

Chapter 13 bankruptcy is not for everyone.  You will have to qualify in order to be eligible to file.  The following is a list of some of the main qualifications: 

• Consistent income providing disposable income after all main expenses are accounted 
•  As of April 1, 2019, if your secured debts (mortgages and liens) add up to more than $1,257,850, or your unsecured debts add up to more than $419,275, Chapter 13 may not be available to you
• You are not eligible for Chapter 13 filing if you filed for Chapter 7 in the past four years or Chapter 13 in the past two years

Chapter 13 allows debtors to keep their property, as opposed to a Chapter 7.  In theory, it allows for payments terms that work for you because it is based on your disposable income.  

Here are just some of the numerous benefits of filing a Chapter 13 bankruptcy: 

• You  get flexible payment terms and repayment amounts. Your creditors cannot      demand complete payment beyond this repayment period
• You can stop a foreclosure and repay mortgage arrears in a Chapter 13 plan which means, you get to keep your house
• Stop harassing creditor phone calls immediately
• You keep assets that you otherwise would not be able to keep in a Chapter 7 bankruptcy
• You can restructure IRS debt and stop interest and penalty charges within the Chapter 13 plan

  Some of the drawbacks of filing a Chapter 7 bankruptcy that you should know prior to filing:   

• Payments of all disposable income for the next 36 to 60 months
• You’ll lose any of your disposable income to debt repayment, leaving you ill-prepared for other emergencies
• You will need court approval before any major financial decision such as refinancing a home or vehicle, buying a home or vehicle, selling a home or vehicle
• Chapter 13 stays on your credit record for up to 10 years.
• You must continue to pay child support, alimony, and student debt.

Chapter 13 requires a period of time where you will be making payments, usually about three to five years. A Chapter 13 plan is a payment plan that the court will grant you to reorganize your debt. This gives you the proper time to pay off your credits. A means test is done to determine what creditors can be paid back including credit cards and personal loans.

There is a time commitment associated with this bankruptcy type. Those who decide to file for Chapter 13 will find that they can be bankrupt for a period of time, so this should be considered ahead of time. First, analyze your debt to consider if you’re eligible. Value all of your property. Next, think about your income and your monthly living expenses to determine an amount that you could possibly pay monthly toward your debt. Next, visit with our bankruptcy lawyer to fill out bankruptcy forms. You must take a pre-filing course or a credit counseling course. This certificate is needed before you can file your bankruptcy paperwork in California. You must give verified bank statements, paycheck stubs, and tax returns with your bankruptcy paperwork.

If you’re going through financial troubles, call to schedule a free consultation with a California bankruptcy lawyer today. The compassionate legal professionals at the Law Offices of Ginger S. Marcos, APC will evaluate your case to determine which type of bankruptcy would benefit you most. We serve Anaheim, Fullerton, Garden Grove, Buena Park and all of the surrounding SoCal communities. Visit our web page at marcoslawfirm.com or give us a call at 949-417-6202 and let us give you the legal advocacy you need.