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What is Chapter 13 Bankruptcy?
Designed for individuals with regular income who desire to pay their debts but are currently unable to do so, its purpose is to enable financially distressed individual debtors, under court supervision and protection to propose and carry out a repayment plan under which creditors are paid over an extended period of time.
Under this, debtors are permitted to repay creditors, in full or in part, in installments over a three to five-year period, during which time creditors are prohibited from starting or continuing collection efforts.
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Eligibility
Any individual in Los Angeles, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief under the bankruptcy as long as the individual’s unsecured debts are less than $383,175 and secured debts are less than $1,149,525.
Discharge in Prior Case
You are eligible to receive a discharge Even if you previously received a Chapter 7 discharge, as long as the prior Chapter 7 case in which you received a discharge was filed at least four years before the filing of your new case.
You can also receive a discharge in your current case if you previously filed for bankruptcy, so long as the prior case in which you received a discharge was filed at least two years before the filing of your new case.
Credit Counseling Requirement
For cases filed after October 17, 2005, you must obtain a certificate from an approved agency before you can file your case. This can be done over the internet and will likely cost approximately $35-$45. Your attorney will provide you with information on how to obtain this counseling.
An individual cannot file a case unless, during the 180-day period before filing, he or she has received an individual or group briefing from an approved nonprofit budget and agency.
Chapter 13 Trustee
Upon the filing of all the required documents with the Court (petition, schedules, four years’ worth of tax returns before filing your bankruptcy, statement of financial affairs, and plan), an impartial trustee is appointed by the court.
A primary role of the trustee is to serve as a disbursing agent, collecting payments from debtors and making distributions to creditors.
Automatic Stay
The filing of the petition under Chapter 13 “automatically stays” most actions against the debtor of the debtor’s property. Creditors receive notice of the filing of the bankruptcy petition from the clerk or trustee. The automatic stay immediately stops any lawsuit filed against the debtor and virtually all actions against the property by a creditor, collection agency, or government entity.
Especially if a debtor is at risk of being foreclosed on, losing such basic resources as welfare or unemployment benefits, or a driver’s license or a job (because of a raft of wage garnishments), the automatic stay provides for immediate protection.
Repayment Plan
In Chapter 13, along with other documents, you file a “Plan” of repayment with your creditors. The main provisions of the Chapter 13 plan are as follows:
You are paying all your projected disposable income into the plan for a minimum of 36 months, and a maximum of 60 months. The length of the term depends on numerous factors.
Financial Management Course
For cases filed after 10/17/2005, you are required to complete a financial management course before receiving your discharge. You must have completed this course (usually about two hours) and submitted the certificate of completion.
Frequently Asked Questions
How Does Chapter 13 Work?
A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
How Does Chapter 13 Bankruptcy Affect Your Credit?
Your filing generally drops off your credit report three years earlier than if you had filed a Chapter 7. It’s gone two years after the discharge in a five-year plan.
Although a Chapter 13 bankruptcy stays on your record for years, missed debt payments, defaults, repossessions, and lawsuits will also hurt your credit and may be more complicated to explain to a future lender than bankruptcy.
Is Filing For Bankruptcy Worth It?
Yes, filing for bankruptcy is worth it. When a consumer files for Chapter 13 bankruptcy, you are eligible to file another Los Angeles Chapter 13 bankruptcy case, if you need to, far more quickly than if you had filed a chapter 7. Additionally, you can file a Chapter 13 bankruptcy right after the Chapter 7 bankruptcy case if you have to deal with some non-dischargeable debts through a repayment plan, such as mortgage arrears.
Chapter 13 bankruptcy attorneys fees for the case can be paid after filing. Although most attorneys charge a fee prior to filing, it may be 1/3 of the cost. Additionally, the court filing fee of $310 needs to be paid.
How Long Does It Take To Convert A Chapter 13 Filing To A Chapter 7 Filing?
Chapter 13 plans can be changed during the case. If income falls or is temporarily interrupted, the plan can be changed to accommodate the change by filing a motion to modify your payment plan. If your income falls significantly you could always convert your case to a chapter 7 if you qualify.
What Is The Difference Between Chapter 11 And Chapter 13 Bankruptcy?
Chapter 11 bankruptcy is most often used by businesses, but it can help certain individuals and small business owners as well. It allows consumers to restructure their debts and pay them back over time. It allows consumers to restructure their debts and pay them back over time. Chapter 11 bankruptcy may be useful for someone who does not qualify for Chapter 13, though it is more complex.
