Is Chapter 13 Bankruptcy Right for You?

07/05/2013

If you have decided that a Chapter 7 Bankruptcy Filing is not appropriate to your situation, you may consider filing for Chapter 13 Bankruptcy. It is titled “Readjustment of Debts for Individuals with Regular Income.” Debtors who fall into this category are most often individuals who do not qualify for Chapter 7 Bankruptcy proceedings because they:

 

·         failed the means test

·         received a discharge under Chapter 7 in the previous 8 years, or

·         those who have assets that are considered non-exempt, and which they prefer to keep.

 

In order to proceed you will need to have ready a proposed repayment plan. You will need to outline your monthly expenses, and the expected amount of monies that will be available every month, that can then be paid against your outstanding debts.

 

A lawyer will help you decided who will be paid and how much each individual creditor will receive. Certain claims will be given priority over other creditors. These will include taxes and domestic support payments. Debts that are considered to be unsecured are usually credit cards debt, with some restrictions, and medical bills. These are usually only partially repaid. Your lawyer will advise you on how little you will need to pay on unsecured debt.

 

In order to be considered for Chapter 13 an individual must receive regular income, and have less than $360,475 of debt that is deemed to be unsecured. Their secured debts must be under $1,081,400.

 

In a Chapter 13 bankruptcy proceeding the debtor will enter into a repayment agreement, whereby they will pay to the creditor a portion of their debt. Once the plan has been deemed completed, the debtor will be discharged from all remaining liabilities. Exceptions to this plan will be student loans, money earned through fraudulent means, and support obligations for domestic purposes.

 

With a Chapter 13 bankruptcy filing, those deemed to be “priority creditors” will be paid in full, unless other arrangements have been agreed upon. Chapter 13 bankruptcies can be used as a way to pay arrears on a mortgage, while still retaining home ownership. The same holds true for vehicles that are in arrears. These payments will be made, along with the regular monthly payments the debtor has agreed to.

 

Repayment Plans

 

In a Chapter 13 Bankruptcy filing the debtor must have a repayment plan that will pass 3 separate tests. They are:

 

·         the repayment plan must be made in “good faith.”

·         any creditor deemed to be unsecured must receive an amount equal to what they would have received under a Chapter 7 Bankruptcy filing.

·         any disposable income of the debtor will be paid to the plan for a minimum period of 3 years. 5 years may be used in some circumstances in the debtor needs a longer period in order to meet the second requirement.

 

Chapter 13 and Monthly Payments

 

Several factors need to be considered when assessing the amount of a monthly payment. Unsecured creditors will receive monies that are greater than or equal to what would have been received if the debtor had chosen a Chapter 7 bankruptcy liquidation.

 

Automatic Stay

 

As soon as your paperwork has been filed, by your lawyer with the bankruptcy court, you will immediately receive what is known as an automatic stay. This means that creditors will no longer be allowed to have any contact with you by phone, mail, or any other means, and they will not be allowed to make any claim against your property from that time forward.

 

This stops foreclosure proceeding on your property, but you must begin payments the day your Chapter 13 Bankruptcy plan is received by the court.

 

Normally these payments will come directly from your wages and your attorney will make the necessary arrangements for this to proceed. It’s important to understand that the USA Bankruptcy Laws specifically say that employers cannot discriminate or fire an employee due to a Chapter 13 Bankruptcy filing.

 

Further, they will appoint a trustee who will then convene a meeting of all creditors. This meeting will require your attendance. Referred to as a 341 Meeting of Creditors, it usually sees no creditors show for the meeting. If the creditors listed have any objections they will be resolved through means of negotiation between yourself, or through your lawyer meeting with the creditor. If no compromise is reached, a judge will resolve the issue.

 

Trustee in Bankruptcy

 

When the court receives your Chapter 13 Bankruptcy filing, they will at that time assume control of the debts outlined in your filing, and all properties that are not exempted by California law. As an example; if the debtor has $20,000 worth of non-exempt assets, they will be required to pay creditors $20,000 over the period of the proposed plan.

 

Once your paperwork is filed, you will attend the hearing that will take place before a bankruptcy judge. The judge will then deny or confirm your plan of repayment. Once confirmed, and if you follow it for the allotted period of time, then at the end of that period you will receive a discharge of any debts owing.

To get help with your bankruptcy issue from a competent attorney, call Legal Solutions 2 U today at (855) 77 LAW 2 U (855-775-2928).