What is Chapter 13?
A Chapter 13 Bankruptcy is a type of bankruptcy under which any debts owed by the debtors can only be discharged after some portion of these debts have been paid off by the debtors. This Bankruptcy form is also known as a wage earner’s plan or reorganization bankruptcy and it is mainly used by debtors who were found not eligible for a chapter 7 bankruptcy. Chapter 13 Bankruptcy gives room for debtors to enter into a repayment plan in which they enter into an agreement to pay off all or part of their debts within a period of three to five years thereby allowing them to keep all of their properties.
Once the bankruptcy has been filed for, any attempts by the creditors to forcefully try to recover what is owed them by the debtor is quashed by the court. For a debtor whose monthly income is less than the state’s median income, the period of the repayment plan is set for three years while for those having income greater than the state’s median income, the repayment period is set at five years, and no more.
Chapter 13 bankruptcy: Who can file?
Under the chapter 13 bankruptcy, debtors are allowed to remain in possession of all of their properties while they enter into a repayment plan of a period of three to five years so as to enable them pay off all or a portion of their debts with their income. Therefore, the strict requirements of the Chapter 13 must be adhered to. Only individuals or married couples are eligible to file under the chapter 13. Businesses and companies are not eligible to file for a chapter 13 bankruptcy claim.
Also, if your total debts are too high, you are not eligible to file for a chapter 13. In essence, your total unsecured debt should not exceed $383,175, and your total debts (unsecured) are to be less than $1,149,525 before you can be eligible to file. The Chapter 13 is a better alternative than chapter 7 for individuals whose assets are worth more than the available exemptions put in place by the state or debtors that owe such debts that are not dischargeable under a chapter 7.
Advantages of filing for a Chapter 13 Bankruptcy Claim
Your Chapter 13 Attorney in Los Angeles and San Fernando Valley California
will make you understand that filing for a chapter 13 bankruptcy claim has some advantages. These advantages include;
• Under the Chapter 13, you are allowed to pay just what you can afford that is over the period of three to five years with your disposable income i.e., income remaining after expenses. In a situation where you are unable to pay back 100% of what you owe before the end of your repayment plan period, your debts are discharged and you become free.
• Another benefit of this plan is that you get to save your homes from foreclosure. Arrearages is a term used to imply past due payments on your mortgages. If you file for a chapter before the foreclosure sale date, the foreclosure will be stalled and then you can repay the mortgages within the period of your repayment plan. Once you have entered into a repayment plan, none of your creditors is allowed to collect any of your properties therefore your cars or properties is saved from repossession
• Also, filing for the chapter 13 bankruptcy enables you to keep all of your properties, both exempt and non-exempt. Under the chapter 7, your non-exempt properties are sold and the proceeds are distributed to your creditors. But under the Chapter 13, nothing like that happens. Instead, you are granted a longer period of time to try to clear of your debts with your disposable income.
• After filing for bankruptcy under chapter 13, the late fees on all your debts are halted and they stop accruing. When the time frame of your repayment plan period passes, the collection stops and your debts and the late fees are wiped off.
Disadvantages of a Chapter 13
The truth is there are no many disadvantages that can emanate from filing for a chapter 13 according to Chapter 13 Attorney in Los Angeles and San Fernando Valley California
. Even the few are not very grim. A little peek into the few;
• The period of time involved in a chapter 13 bankruptcy is usually longer than that of a chapter 7. While the chapter 7 takes roughly six months to be completed, the chapter 13 bankruptcy takes a longer period of 3 to 6 years.
• Within the period of time scheduled for your repayment plan, you are expected to begin repaying some of your debts with your disposable income, that is, any income left after household expenses have been made which frankly means that you would find it hard to do any savings.
• Bankruptcy under chapter 13 will make you lose your credit rating. A chapter 13 bankruptcy case can remain on your credit rating for almost 10 years, which could ruin your credit reputation, and make you less attractive to creditors.
Chapter 13 Bankruptcy: Processes Involved
To begin filing for Chapter 13 bankruptcy claim, the debtor must first of all address a petition to the bankruptcy court that is situated around his or her area of residence. After this, the debtor proposes a repayment plan period of between 3 to 5 years within which he is expected to repay his debt in full or partly with his or her remaining income after household expenses must have been taken care of. This income is known as disposable income.
Once you have filed for chapter 13 Bankruptcy, the automatic stay comes into play and this protects you as a debtor from creditors that would wish to come after your properties and then the court appoints a trustee to oversee your bankruptcy claim. You will have to provide certain documents before your case can be approved. After its approval, you can start with the payments under your repayment plan.
On a periodical basis probably twice in a year, you’d be sent a statement by the trustee showing how claims and amounts that were filed by each creditors, and how much has been paid out to each creditor. Before you make your last payment, your Chapter 13 Attorney in Los Angeles and San Fernando Valley California
will advise you to undergone a course in personal financial management as the certificate will need to be filed before you can make your last payment. After the end of your repayment plan period, the court grants you a discharge, and whatever debts you owe after the end of the repayment period is forgiven.
We are a debt relief agency with the sole purpose of helping people file for bankruptcy relief under the Bankruptcy Code. Call a Los Angeles-area lawyer dedicated to helping people wrap up debts and get a fresh start. E-mail the Leventhal Law Group, P.C. or call 818-347-5800.