One of the reasons people fail to secure proper debt relief solutions is due to fear of losing their property or assets. Much of this fear stems from myths about bankruptcy and a lack of understanding how the bankruptcy process works. Unfortunately, this often leads people to sit by and not take action; ultimately putting them at greater risk of the negative outcomes of debt. In many cases, filing for bankruptcy could offer greater protection of your assets and property than doing nothing to resolve your debts.
Keep Your Property
There are two main types of loans: secured and unsecured. In a secured loan, such as a car or mortgage, the property items are used as collateral on the loan. Therefore, if the borrower defaults on a secured loan, the lender has the right to seize or repossess this property.
When you file for Chapter 13 bankruptcy, it provides protection from creditors seizing the property. The reason is that a Chapter 13 case includes a repayment plan designed to roll your missed payments into one monthly payment. These payments go towards satisfying the portion of your debt that you will repay in your repayment plan divided among creditors. As long as you keep up your Chapter 13 payments as outlined in the plan, creditors cannot touch your property.
If you are facing repossession, foreclosure, or are concerned about your assets being liquidated in a Chapter 7 bankruptcy; contact a Sacramento bankruptcy lawyer to review your financial profile and guide you in the best path to debt relief for you.
Bankruptcy is sometimes frowned upon, especially if you do not know the flexible provisions under the Bankruptcy Code. Chapter 13 deals with the adjustment of debts. This provision lets the petitioner apply for protection from bankruptcy by seeking a repayment plan to repay the debts.
This repayment plan is usually structured to allow the petitioner to repay the debts over the next three to five years. This is an ideal option for individuals and businesses that cannot repay their debts immediately but can do so soon.
Who can file for Bankruptcy under Chapter 13?
Petitioning for bankruptcy under the provisions of Chapter 13 allows the petitioner to keep his or her home and is, therefore, a popular choice. However, to avail of this benefit and many others, you need to first talk to a lawyer specialized in bankruptcy laws to figure out whether you qualify for it. To be eligible, you need to fulfill specific eligibility criteria.
To begin with, you must have filed your tax returns in the previous four years. Next, you must demonstrate your ability to repay your debt within 3 to 5 years. As of 2020, your unsecured debts need to be under $394,725, and your secured debts must not exceed $1,184,200. These figures are taken directly from the Consumer Price Index and may, therefore, vary in the future.
Also, you would have to dedicate all your disposable income to the repayment of debts. Nevertheless, it can be used to prevent foreclosure of your home, and you may even be able to modify your 2nd mortgage through a procedure referred to as lien stripping.
To sum it up, Bankruptcy under Chapter 13 lets you renegotiate your secured debts, such as mortgages, and buys you enough time to repay your creditors. Also, it prevents the foreclosure of your primary residence and can be a well-planned move for those having multiple secured debts.
However, it is always recommended that you decide after discussing your finances with a Citrus Heights bankruptcy attorney specializing in bankruptcy laws.
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:
- Child support
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 would like more information about Chapter 13 Bankruptcy, contact a Citrus Heights bankruptcy attorney.
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.
If you have questions about personal bankruptcies, contact a Roseville bankruptcy attorney.
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.