When you are trying to decide which bankruptcy is a good option to save your home from foreclosure, Chapter 13 may be the best option for you. In Chapter 13 bankruptcy, you do not lose your assets, and you will have three to five years to catch up on your payments through a court-approved repayment plan. You must have a reliable source of income to be eligible to file a Chapter 13 bankruptcy.
As part of your plan, you will make a monthly budget that allows for your monthly expenses such as:
This budget is very detailed and specific and compared to the national standards used by agencies like the IRS. After you have completed this form, with your attorney's assistance you will file it with the court. The court will confirm the amount of your monthly disposable income to pay your creditors with.
The repayment plan must pass the best interest test, which means that the unsecured creditors must be paid at least as much as they would have if you filed Chapter 7 bankruptcy. The best efforts test requires you to pay your trustee all of your disposable income during the course of the bankruptcy.
Chapter 13 cannot last longer than five years, according to the law. And creditors cannot contact you as long as you are making your payments according to the plan. For debtors that make less than the median income, a three-year plan is satisfactory for satisfying the best efforts test.
If you have several assets that you would like to keep and have a reliable source of income, Chapter 13 bankruptcy is often the best option for you and your family. It may be helpful to know the steps you will be taking in the bankruptcy process to get financial relief.
Talking to an attorney will probably be the first step that you take. A bankruptcy attorney can help you through the entire process, ensuring you are filing the best chapter of bankruptcy for your needs. Your attorney will go over your financial affairs and help you fill out your forms.
You must complete an approved credit counseling course before you're allowed to file your bankruptcy paperwork with the court. You can take this course online, over the phone, or in person. You can find a list of approved counselors at www.usdoj.gov.
Filing With the Court
When you and your attorney file your official bankruptcy petition with a bankruptcy court, the legal portion of the bankruptcy will begin. You will have 15 days from the day you file to submit your payment plan and your financial details to the court. When the paperwork is filed, the automatic stay goes into effect, protecting you from collection attempts, including foreclosures, repossessions, and lawsuits.
The 341 ( Creditors) Meeting
After you file your petition with the court, you and your attorney will attend a 341 meeting approximately 30 to 45 days later. Your appointed trustee will ask you questions about your financial information and will review the payment plan that you submitted.
When the 341 meeting is complete, your Chapter 13 plan is sent to the bankruptcy judge for approval. At the confirmation hearing, the judge will make sure all court costs have been paid and determine if your plan complies with the law. The judge will also determine if the plan was made with a good faith effort to pay your creditors and will confirm that you're able to meet the requirements of the plan.
Within 30 days of filing your bankruptcy, you will start to make payments to the plan. Your trustee will distribute the payments to your creditors following your plan. This payment plan can be a three or five-year payment period.
Pre-Discharge Debtor Education Course
Before you can receive your discharge, you will have to complete a debtor education course. This course provides information on how to stay out of debt and establish better financial habits.
Once you have made all the required payments on your Chapter 13 plan, your bankruptcy will be complete. The court will discharge or eliminate any remaining eligible debts, and you are no longer legally required to pay that debt.
Chapter 13 bankruptcy is for reorganization and repayment of your debt. People often choose Chapter 13 when they are behind in their secured loans such as their home or vehicles, and they want to keep those assets. Chapter 13 bankruptcy can also be an option if someone doesn’t qualify to file a Chapter 7 liquidation bankruptcy. This may be because you either have too much income and will not pass the means test, or you risk losing some of your non-exempt assets to the trustee in your case.
The repayment plan
The court-approved repayment plan will be based on your income level and your debt. The plan will be very specific. You will establish a monthly budget that allows for:
After you and your lawyer fill out your financial information, the court will establish the amount of monthly disposable income you have to pay towards your debt. By law, the repayment period cannot last longer than five years. If you have made your payments, your eligible debt will be eliminated at the end of your bankruptcy process.
In order to file for bankruptcy, you will be required to attend two credit counseling courses. These courses can be taken online. The first course must be taken before you file your bankruptcy paperwork. You can find court-approved agencies at www.debt-foundation.org. The purpose of this course is so you understand other options that may be available to you.
Pre-Discharge Debtors Education Course
Before you can receive your discharge in bankruptcy, you must complete a debtor education course. The goal of this course is to teach you how to manage your financial affairs and establish better habits, so you do not get behind in your debt again. You can find approved courses at the U.S. Justice Department website (www.usdoj.gov).
The 341 Meeting
Also called the creditor's meeting, this meeting will take place approximately 30 to 45 days after you file your bankruptcy paperwork. You, your attorney, the trustee assigned to your case, and possibly your creditors will attend this meeting. The trustee will review your repayment plan and ask you questions regarding your income, expenses, and debt. The plan must show that you are making a good faith effort to repay your creditors before the trustee approves it.
When the 341 meeting is finished, your Chapter 13 plan is sent to the bankruptcy judge. The judge will make sure all court administrative fees have been paid and will determine if the plan is a good faith effort and if you are likely and able to make the payments.
You will start making a payment to your trustee within 30 days of filing your bankruptcy paperwork. The trustee will distribute the payments to your creditors as determined by the plan.
When you have made all the required payments within the three to five-year period determined by the court, your bankruptcy will be complete. All remaining unsecured debt will be eliminated, and you will have control over your money again.
If you have questions about bankruptcy contact a Citrus Heights bankruptcy attorney to find out if Chapter 13 bankruptcy is right for you.
When consumers face massive amounts of debt that they can't pay back, U.S. bankruptcy laws can help legally abolish certain debt obligations. This frees people up to pay back the debts that can't be discharged and gives them a new financial start.
Individuals and sole proprietorships have two options when filing for a California bankruptcy: chapter 7 bankruptcy and chapter 13 bankruptcy. These two forms of debt relief behave differently. Therefore, anyone thinking of declaring bankruptcy should consult a Sacramento bankruptcy attorney. In this article, we'll outline both the advantages and disadvantages of Chapter 13 bankruptcy.
Chapter 13 bankruptcy Explained
Chapter 13 bankruptcy is often referred to as reorganization bankruptcy, as it is designed to allow debtors to reorganize their financial affairs under the protection of the US Bankruptcy Courts. Once an individual files for Chapter 13 bankruptcy they are expected to present a repayment plan that will outline their income and how they plan on paying back their creditors.
The Chapter 13 repayment plan will typically last between 36 and 60 months and will involve the debtor making a monthly or bi-weekly payment to the bankruptcy trustee assigned to the case. The bankruptcy trustee then divides the money among creditors and issues payment. Upon completing the repayment plan, any other remaining debt that is eligible for a discharge becomes null and void.
Advantages of Chapter 13 Bankruptcy
Chapter 13 bankruptcy in California offers several advantages over different types of debt relief, with the first being the automatic stay. The automatic stay immediately halts all collection attempts including foreclosures. It is with bankruptcy's automatic stay that debtors can save their home, prevent vehicle repossession, and even avoid disconnection of utilities.
A second advantage to filing for Chapter 13 bankruptcy protection is the cram down. Cramming down debt is an aspect of Chapter 13 bankruptcy that allows debtors to modify, and often lower, their mortgage loans and vehicle loans. The cramdown works by decreasing the total amount of the loan to match the market value of the property securing it.
Furthermore, Chapter 13 bankruptcy is a supreme tool to help homeowners who are behind on their mortgage payments. Chapter 13 bankruptcy allows debtors to pay past-due mortgage payments not all at once, but over the entire life of the 3-5 year plan.
Lastly, co-signers or co-debtors that will be responsible for any debt obligations after the debtor's responsibilities to pay them are protected for the entire life of the plan. Co-signers must pay the debt but will have a considerable amount of time to do so.
Disadvantage of chapter 13 Bankruptcy
Perhaps the most substantial disadvantage of a Chapter 13 bankruptcy is that it will remain on your credit report for up to 7 years. While this won't prevent you from obtaining a loan during that same period, it can drastically increase one's cost of credit via higher interest fees.
Another disadvantage of Chapter 13 bankruptcy is the lack of access to new credit during your plan. The bankruptcy courts expressly forbids any debtor from obtaining any new debt during the chapter 13 repayment plan without prior court permission. While there may be an opportunity to take a new loan if the action is deemed necessary, it requires filing a motion with bankruptcy courts and approval by a bankruptcy judge.
An additional disadvantage of Chapter 13 bankruptcy is the need to consistently notify the bankruptcy courts and bankruptcy trustee of changes during the course of your repayment plan. While this constitutes an inconvenience more than a disadvantage in most cases, failure to continuously meet your Chapter 13 repayment obligations can result in a dismissal of your case, leading to no debt discharge.
In concluding the disadvantages of Chapter 13 bankruptcy, numerous debtors find the amount of time it takes to receive debt relief a drawback. As aforementioned, a Chapter 13 bankruptcy case can last up to five years which is a considerable amount of time.
Contact a Sacramento Bankruptcy Attorney
Chapter 13 bankruptcy in California is a powerful tool to help save your home and other property while hopefully discharging some or all of your non-priority, unsecured debt. This form of bankruptcy, however, should be approached with a high degree of certainty that can only come from consulting a Sacramento Bankruptcy attorney. A bankruptcy lawyer can assure you if Chapter 13 bankruptcy is the best for your financial situation and help ensure that you complete your bankruptcy and receive your final discharge.
Chapter 13 bankruptcy is a form of legal debt relief that can stop automobile repossession and offer you time to reorganize your debt in an effort to pay back your creditors. What many individuals don't realize when they contact a Elk Grove Bankruptcy Lawyer, is that in some cases you can use Chapter 13 bankruptcy to lower your car payment. The process takes some time and organization, but with a strong will to reduce the debt it is possible. Here are the steps involved.
Filing Chapter 13 bankruptcy in California
Chapter 13 bankruptcy in California is often referred to as the "wage earners" bankruptcy in that you can file for this form of legal debt relief even if you have a steady income and are not completely broke. You are eligible to file for Chapter 13 bankruptcy so long as you have less than $394,725 in unsecured debts and less than $1,184,200 in secured debts. The first step is to file your bankruptcy petition with the US Bankruptcy Court in your district. The petition will include all your asset, debt, and income information along with a case filing fee. You should always contact a local bankruptcy attorney for assistance with filing, as only a licensed bankruptcy lawyer is allowed to advise you on how to fill out the bankruptcy petition.
Paying your Auto Loan
Unless your Sacramento bankruptcy attorney advised you otherwise, you should continue making payments on any secured property that you wish to keep such as your automobile. If you want to keep your car and owe money through an auto loan, you must either pay the entire balance in full over time. A chapter 13 plan can help you to lower your payments.
Cramdowns in bankruptcy are an extremely efficient way of lowering car payments for consumers who owe more than the actual fair market value of the car. A cram down is only available in Chapter 13 bankruptcy and works by comparing your loan value and the market value of the car. Your loan balance will be reduced or "crammed down" to match the actual value of the car. The legal reasoning behind this is that the market value of the car is what the loan is "secured" by.
Getting Bankruptcy Help
Using Chapter 13 bankruptcy to lower your car payments isn't easy and requires a good organization of your documents, timing, and the assistance of a California bankruptcy attorney to ensure you do everything legally required. By hiring a bankruptcy lawyer, you'll ensure that you are able to keep your automobile through bankruptcy even if you aren't successful in lowering your payments.
Citrus Heights bankruptcy attorneys are often asked if a homeowner going through reorganizational bankruptcy can sell their property during a Chapter 13 bankruptcy. While there is nothing in the US Bankruptcy law preventing you from selling the property during Chapter 13, there are significant questions to ask first. If you decide that selling a home in Chapter 13 bankruptcy is the best option at your disposal there are steps that you must follow in order to obtain the approval from the Bankruptcy Judge.
Should I Sell My House in Bankruptcy?
SHOULD you sell your house during your California Bankruptcy Chapter 13 repayment period is the exact question you should be asking? We know that it is legal to do so, but selling your home before your Chapter 13 bankruptcy is finished may not be beneficial to you at all. In fact, it may undermine the entire point of declaring Chapter 13 bankruptcy in the first place.
Once you file Chapter 13 bankruptcy, you are awarded an automatic stay that immediately halts all debt collection attempts against you. This includes home foreclosure, and therefore, the case is a tool to prevent the sale of a home while giving you a chance to repay part or all of your debts. With this in mind, Citrus Heights bankruptcy attorneys consider the strong benefits of waiting on selling a home until you have received a discharge.
How to Sell Your Home in Chapter 13
In order to sell your home in Chapter 13 bankruptcy, you must obtain permission to do so from the US Bankruptcy Court where you filed for debt relief protection. In order to initiate the sale of your house during chapter 13 bankruptcy contact your bankruptcy lawyer who can help you present the bankruptcy trustee with the proper notice of intent, as well as, to ensure the terms of the sale are approved by the bankruptcy court. The purchase price must be fair based on the current market value and conditions. In addition, creditors must be notified and giving a chance to overbid for the purchase of the home.
Property Transfers in Bankruptcy
All changes in income or transfers of property during your Chapter 13 bankruptcy need to be disclosed to the bankruptcy trustee. Ensure you speak with a bankruptcy attorney in Sacramento California before you consider selling your home in Chapter 13 to ensure you are taking the best steps towards living debt free.