Chapter 13 bankruptcy Fontana

If one makes too much money to qualify for a chapter 7 bankruptcy in California, or they do not want to surrender their property back to secured creditors, they will likely seek a chapter 13 bankruptcy.  In chapter 13, one will propose a repayment plan to repay certain creditors based on their rank and the individuals’ income.  While making monthly payments to the Trustee, he/she will review the plan and either allow it or object to it.  Once a proposed plan is approved by the Trustee and court, the Trustee will begin the flow of money back to the creditors that are provided to receive payment through the proposed plan.  There are several types of repayment plans and these should be discussed with a qualified bankruptcy attorney.

Chapter 13 also has specific debt limits, which are updated from time to time. As of 2019, the Chapter 13 debt limits were:

  • Unsecured debts: maximum of $394,725
  • Secured debts: maximum of $1,184,200

In a Chapter 13 proceeding, the debtor begins making payments to a trustee appointed by the bankruptcy court. The debtor must also present the court with a proposed repayment plan lasting either three or five years. The plan must be approved by the debtor’s creditors. It can also be approved by the bankruptcy court, over the objections of creditors, so long as the plan meets the requirements under Chapter 13.

Under a Chapter 13 repayment plan, a debtor can:

  • Consolidate debts
  • Cure arrearages on mortgages or other long-term debts
  • Avoid “underwater” loans
  • Pay back taxes over time
  • Partially repay unsecured debt

If the debtor makes all payments required under the repayment plan and meets other requirements, the bankruptcy court can discharge outstanding debts, including some debts that cannot be discharged in a Chapter 7 bankruptcy. Chapter 13 bankruptcy also has the benefit of allowing a debtor to keep most or all of their property and assets – which would be sold off in a Chapter 7 liquidation – even though the debtor’s creditors are likely to receive less than the outstanding balances owed by the debtor.

The primary difference between Chapter 13 and Chapter 7 bankruptcy is that Chapter 13 is a reorganization of the debtor’s finances to pay down liabilities over time, according to a repayment plan, rather than a liquidation of the debtor’s assets. An individual can seek Chapter 13 bankruptcy when they have sufficient income to make payments to their creditors under a repayment plan. Chapter 13 has the benefit of being less damaging to the debtor’s credit, and allows a debtor to keep assets and properties that would otherwise be sold off in a Chapter 7 bankruptcy. However, Chapter 13 requires repayment to creditors according to a repayment plan for several years, but Chapter 7 discharges debts immediately upon liquidation of the debtor’s bankruptcy estate.

Chapter 13 bankruptcy is often a better choice for individuals – whose income is sufficient to make regular monthly payments on outstanding debt ­– without the need to liquidate significant assets.

People often choose to file for Chapter 13 bankruptcy in circumstances such as:

  • Falling behind on mortgage, car loan, or student loan payments
  • Hoping to establish manageable payments to pay off non-dischargeable debt
  • Looking to keep ownership of business assets without having to use the more expensive and complicated Chapter 11 bankruptcy process
  • Wanting to avoid the greater credit score hit from a Chapter 7 bankruptcy

When deciding between a Chapter 7 or Chapter 13 filing, you should ask yourself many questions, including:

  • How quickly do I want my debts erased?
  • Can I afford a repayment plan?
  • Can I live without my property?

If you are wondering whether Chapter 13 bankruptcy is the right solution for you, you should contact our knowledgeable bankruptcy attorneys in the Inland Empire to discuss your situation in greater detail.

Chapter 13 bankruptcy is a way to reorganize debt and pay creditors in a manner that is manageable by the debtor. Chapter 13 is different from Chapter 7, which liquidates unsecured debts and no payments are made. Chapter 13 bankruptcy provides the debtor an opportunity to make payments under more favorable conditions, such as lower to no interest rates. It is a restructuring process that allows an individual to make payments on delinquent accounts while keeping their property.

A Chapter 13 bankruptcy will allow an individual to avoid a foreclosure on a property or repossession of a vehicle.  The debtor is allowed to request adjustments to payment terms in order to pay off their debt. Repayment terms will usually possess a maximum of 3-5 years. Typically, this is the best option when a file has a sufficient amount of income in order to make payments on delinquent accounts. Some debts in Chapter 7 Bankruptcy that were not discharged may be paid back through Chapter 13. Examples of these non-dischargeable items include back due child support and delinquent income taxes. The amount of debit required to be paid is unique to each individual’s situation. The amount of secured debt to be paid through the repayment plan and the amount of delinquent payments on secured debt affect the amount that will be required to be repaid when filing Chapter 13 bankruptcy.

Types of Debt

There are some unsecured and secured debit limitations that prevent a person for eligibility to file for Chapter 13 bankruptcy. If a person exceeds those limits or has had a previous discharge under Chapter 7 or Chapter 13, they may not be eligible to file for Chapter 13 bankruptcy. It is best to contact an experienced attorney to assist you with determining your eligibility.

When you file for Chapter 13  you will be required to list all of your debt. Often, people find it difficult to provide a listing of their debt and repayment plan or discharge of their debt. Chapter 13 bankruptcy has three ways to manage debt repayment. The first type is secured debt, such as your home or car, which you will pay yourself, separate from bankruptcy. The second is to use the Chapter 13 payment plan to repay your debt for items like car, furniture, mortgage arrears and IRS taxes or delinquent child support. The last type is debt that will be erased when you receive a discharge. Examples of this type include unsecured debits such as credit cards, payday loans, personal loans, medical bills judgments and repossession deficiencies.

Finding Help

The first step to filing Chapter 13 Bankruptcy is to contact one of our qualified attorneys to determine if this is the best solution for you. The attorney will help you create a budge and assist you in working with secured creditors. Together, you and the attorney will develop a Chapter 13 plan and fill out all the necessary forms. The Chapter 13 plan provides details of all the payments and transactions that will occur along with the duration of payments. The Chapter 13 plan must be approved by the court. Payments must begin within thirty to forty-five days after the case has begun. Unlike Chapter 7, where a trustee is appointed to pay the creditor, in Chapter 13 the debtor is responsible for paying the creditor. Once all payments have been made you will receive a discharge and the Chapter 13 plan will be terminated.

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