Chapter 13 Bankruptcy

When you have a lot of assets and do not want to give them all up through liquidation, filing for bankruptcy can be a frightening procedure. When you file for Chapter 7 bankruptcy, part of your assets is sold or liquidated to pay off some of your debts. However, if you have a satisfactory repayment plan and follow that, you can keep your assets in a Chapter 13 bankruptcy, including your house, car, jewelry, etc.

In Auburn, California, Bottomline Lawyers is a well-respected legal counsel. To find out more about Chapter 13 bankruptcy and if it is the best option for you, contact our law office to obtain legal services.

Why Do I Need a Bankruptcy Lawyer in Auburn, California? 

Navigating the Chapter 13 process is challenging and complex. The rules and regulations governing your payment plan must be followed, and your creditors will make you suffer throughout the entire process to increase your payments. You must look for the best Chapter 13 lawyer you can find because not all lawyers are familiar with the intricacies of Chapter 13.

With Bottomline Lawyers’ help, many people have gotten out of debt and live debt-free lives.

• Your lawyer will ensure that you receive a reasonable plan that satisfies all criteria and results in a discharge. 
• We will advise you to safeguard your most valuable possessions in the best way and fight back against creditors who violate your rights. 

With Chapter 13, you would not need to come up with an upfront payment because most of your Auburn bankruptcy attorney’s costs will be covered by your plan, allowing you to benefit from our law firm at Bottomline Lawyers’ bankruptcy attorney. Contact us today for legal advice! 

What is Chapter 13 Bankruptcy? 

Chapter 13 bankruptcy, also called “wage earners” bankruptcy, allows debtors with a steady income to restructure their financial situation. In Chapter 13 bankruptcy, you will collaborate with your creditors and the bankruptcy trustee to develop a payment schedule lasting between three and five years. Your remaining unsecured obligations will be discharged after the plan. For their unsecured debts, most filers only pay cents on the dollar.

Both unsecured and secured debts are addressed in Chapter 13 bankruptcy. You can give up the asset or continue to make payments on your secured debts, such as your mortgage and auto loans. Your unsecured debts, including credit card and medical debts that have not been paid in full, will be discharged after your plan has been completed.

Reasons to File for Chapter 13 Bankruptcy 

Most people who file for Chapter 13 bankruptcy do so because they earn too much money to qualify under the Chapter 7 means test. They also do not want to lose their home or car after falling behind on their payments, or they want to avoid wage garnishment and other forms of harassment from creditors while paying back support arrears or current tax debt over five years.

Compared to Chapter 7 liquidation, Chapter 13 has a lot of benefits for individuals.

1. The ability to prevent the foreclosure of one’s house is perhaps Chapter 13’s most significant benefit. People can stop foreclosure actions and potentially catch up on past-due mortgage payments by filing under this chapter. They must still pay all mortgage obligations due throughout the Chapter 13 plan on schedule. 
2. The ability to reschedule and spread out secured debts throughout a Chapter 13 plan is another benefit of this bankruptcy option. This benefit excludes mortgages on primary residences that could result in decreased compensation. 
3. Third parties who share responsibility for “consumer debts” with the debtor are likewise covered by a particular provision of Chapter 13. Co-signers may be protected by this clause. 
4. Last but not least, Chapter 13 functions like a consolidation loan, where the borrower makes plan payments to a trustee under the chapter, who subsequently disburses funds to creditors. While a person is protected under Chapter 13, there will not be any direct communication with creditors.

Disadvantages of Filing Chapter 13 Bankruptcy 

Chapter 13 bankruptcy affects your credit just like other types of bankruptcy do. 

• In particular, Chapter 13 can linger on your credit report for up to 7 years, which may make it challenging to receive credit cards and loans for a while. However, most who seek bankruptcy protection can repair their credit within a few years, even after the end of their repayment plan.
• Another concern is the repayment plan itself. Some borrowers find it difficult to follow it owing to unforeseen events like job loss, divorce, or health problems. It might be possible to ask for a hardship discharge or a Chapter 13 plan modification in specific circumstances. Throughout the entire Chapter 13 process, Bottomline Lawyers’ bankruptcy attorney is present to support its clients.
• A Chapter 7 bankruptcy can be the best choice if you want a new beginning and meet the requirements. You might be able to bargain with your creditors to minimize and settle your debts as an alternative to a repayment plan and Chapter 13 bankruptcy.

You could feel overburdened and afraid when faced with these legal difficulties. But do not worry about it! Our Auburn bankruptcy attorneys at Bottomline Lawyers in California are on your side. We have a dedicated and skilled legal group always looking out for your best interests.

Are You Qualified to File for Chapter 13 Bankruptcy?

Finding out if you qualify, how much you will pay, and potential difficulties with your plan are the next stages.

• Debt Limits – You are only allowed to have a certain debt amount. You cannot file a Chapter 7 bankruptcy if your overall debt load is too great, but you can file an individual Chapter 11 bankruptcy protection in its place.
• Income Requirements – You must demonstrate your ability to pay your monthly household obligations and the monthly plan payment when you file for Chapter 13 bankruptcy. If your income is nonexistent or too low, the bankruptcy court will not “confirm” or approve your proposed Chapter 13 plan.
• Individual Status –  A Chapter 13 debt discharge is only available to individuals and sole proprietors. Small firms and corporations are not eligible. But for small business owners who file separately, the plan will also cover personally guaranteed business loans. Furthermore, from a practical perspective, a business owner’s improved financial situation may help a small business inadvertently, so Chapter 13 filing may be worthwhile.

Chapter 13 Bankruptcy Filing Process

Learn the steps on how to file for bankruptcy under Chapter 13.

1. Verify – Chapter 7 and Chapter 13 bankruptcy are the two options most people choose. Both offer distinctive qualities that aid filers in resolving certain bankruptcy cases. You can make up missed mortgage or auto loan payments in a Chapter 13 bankruptcy, which can save your home from being foreclosed upon or your automobile from being repossessed. There is no comparable alternative for Chapter 7 bankruptcy.

1. Examine – You could not be qualified if your debt load is too great. There are restrictions on how much debt you can have under Chapter 13. The three- to five-year repayment plan also requires complete repayment of various debts, including current tax debt, mortgage arrears, and domestic support obligations. You might be unable to create a workable plan if you cannot generate the necessary income.

1. Know the worth of your property – Know how much property you own and how much you can safeguard through bankruptcy exemptions before you declare. You are allowed to keep all of your possessions, but you must pay some creditors a sum equal to the market value of your nonexempt goods. The amount you will pay in the Chapter 13 bankruptcy plan will take the value of your nonexempt property into account.

1. Determine your revenue – Your income must be sufficient to pay for your monthly living expenses, the obligations the plan must settle, and the cost of any nonexempt property you choose to preserve. The court will not permit you to proceed if you do not have sufficient income.

1. Accomplish bankruptcy forms – Once you have decided you are eligible, you must create your repayment plan and answer the necessary bankruptcy paperwork.

1. The pre-filing course is a requirement – A credit counseling course must be completed by those who plan to file for bankruptcy before the case starts. You will get a certificate once it is finished, which you should include with your bankruptcy filing.

1. Submit your forms and payment – It is time to file your forms, certificate, and plan with the bankruptcy court once everything has been reviewed and is prepared to start the procedure. In addition, you must pay the filing fee for bankruptcy.

1. Documents demonstrating your income and other assets should be provided to the trustee – The trustee will compare the information you submit in your formal documents to tax returns, bank statements, pay stubs, and other documents you will present after you file. These items are referred to as 521 documents, which is the section of the bankruptcy code where the financial document requirement is found.

1. Take part in two hearings – All filers are required to attend a 341 meeting of creditors within a few weeks after filing. You will meet with the Chapter 13 bankruptcy trustee designated to handle your case at this meeting.

The trustee will inspect your identification, official documents, repayment plan, and supporting 521 records at the meeting. While creditors are permitted to attend and ask questions, this rarely happens.

Immediately following this meeting, you or your legal representative will be required to attend a confirmation hearing when the bankruptcy court will choose whether to “confirm” or approve your plan. 

An opposition can be filed with the court in advance by a creditor to object. The judge will determine whether to confirm the plan after evaluating any written objections and considering any justifications made at the hearing.

1. Pay your debts – Within 30 days, you must start paying following your repayment plan. Court cases are dismissed if payments are not made on time.

1. Take a post-filing course – The second compulsory session, “debtor education,” must be taken before you can finish your repayment plan. Before the court erases any unpaid sums that qualify for a debt “discharge,” you must submit this certificate.

1. Obtain a discharge from bankruptcy – You will receive your bankruptcy discharge once you have finished your plan. Even though some unsecured debts, such as sums of student loans, will not be discharged instantly, the discharge releases you from the duty to pay any unpaid balance on eligible unsecured obligations. 

Congratulations are in order when you pay the agreed-upon sum and satisfy all other conditions. You will finish up soon!

Though it happens frequently, you might need to go back to court in certain circumstances. You might be able to ask the court to lower the amount of your Chapter 13 repayment plan, for instance, if your income declines. The court may also revoke your discharge in unusual circumstances.

How Does Chapter 13 Work? 

Here is an overview of your Chapter 13 bankruptcy process from beginning to end. Once you have gone over the nine steps, you will be prepared to take on Chapter 13’s eligibility and specifics, which are the two aspects that can be the most difficult.

1. Completing a required credit counseling course
2. Complete a credit counseling program through a provider approved by the Department of Justice’s US Trustee Program within 180 days of filing a Chapter 13 petition. During the session, you can determine if you earn enough money to pay off your debts.

Most providers charge $25 to $35 for the training and offer counseling for free or at a reduced cost if you cannot pay. But Chapter 13 filers hardly ever meet the requirements for the discount.

• Your Chapter 13 bankruptcy paperwork must be filed – Your bankruptcy case begins with its filing. The automatic stay barring collection efforts will be communicated to you, the trustee chosen to handle your case, and your creditors in a letter sent shortly after by the court clerk. Dates and times of the 341 meeting of creditors, which all filers are required to attend, and creditor deadlines, will be included in the notice.

When you file your bankruptcy application and certificate of credit counseling, be prepared to pay a filing fee. To locate bankruptcy courts in your area, utilize the Federal Court Finder.

•  Participate in the 341 creditors’ meeting – You must provide the trustee with “521 documents,” including tax returns, pay stubs, bank statements, and maybe more, at least five days before the hearing. During the hearing, the trustee will verify your identity and inquire about your bankruptcy case. Creditors are permitted but rarely attend.

• Start making payments toward your Chapter 13 plan – Although the court will not have “confirmed” or “approved” your planned Chapter 13 plan, your monthly Chapter 13 payments will start the month after you file. Your Chapter 13 bankruptcy case will typically conclude in five years if the timing is right.

Your contributions will be refunded by the trustee if the bankruptcy court rejects your plan. Do not anticipate receiving your car payments back though. Your account will be credited by the lender.

• Finish the Confirmation Process for Chapter 13 – The Chapter 13 repayment plan you submit will be subject to objections from your creditors and the bankruptcy trustee. If that occurs, your lawyer will probably attempt to adjust things so that everyone is happy.

The judge must be able to affirmatively respond to the following queries before approving your plan, after taking into account any arguments made at the plan confirmation hearing:

• Is the strategy workable? Does the filer, for instance, earn enough money to cover the monthly payment?
• Was the strategy put forth by the debtor in good faith? Or is the debtor attempting to rig the bankruptcy proceedings?
• Does the plan follow bankruptcy regulations? Is the filer making the appropriate statutory payments to creditors?

Before dismissing a Chapter 13 case, most judges give filers multiple chances to improve a flawed plan.

• Finish the Chapter 13 Confirmed Plan – You must make all payments, be current on child support and alimony responsibilities, and finish a second course called the debtor’s education course before the court grants a debt discharge, wiping off the remaining total of your eligible debts.

Most filers are free of debt following the bankruptcy discharge, except for mortgages and student loans.

Which Debts are not Discharged on a Chapter 13 Bankruptcy?

In bankruptcy, certain debts cannot be discharged. Debts for personal harm sustained while driving under the influence, child support, spousal support, or both are not dischargeable. Student loan debt is also not dischargeable in bankruptcy, save in rare cases.

Is Chapter 13 Repayment Plan Affordable? 

Are you able to make a Chapter 13 payment? That is a critical question because many people cannot. Even if you can afford it or pay far less than what you owe, your Chapter 13 payment plan will push you to the edge of your financial ability.

Determine the duration of your plan first, then determine the total amount of debt you have to pay off. Since the criteria are complicated, you should expect only a rough estimate. Before filing, you and your attorney will obtain a definite amount using software.

Chapter 13 Plan Duration

Typically, filers contribute to a five-year plan. A three-year plan is an option for those who qualify for Chapter 7, but they frequently choose the lengthier option. This is because the lengthier plan’s lower monthly payment enhances the possibility that the court will confirm or accept it.

How Much Will Chapter 13 Cost You?

The Chapter 13 payment guidelines are listed below. In 2022, reviewing bankruptcy filing guidelines and case studies is advised.

You must add up your obligations and divide the sum by the number of months in your repayment plan period, either 36 or 60, to obtain a monthly payment.

• Priority Debt – Child support, alimony arrears, and current tax liabilities are examples of “priority claims” that must be fully paid under your Chapter 13 plan.
• Secured Debt – The term “secured” refers to debt supported by collateral, such as your home or vehicle. To keep the property, you must make all required payments and catch up on arrears on secured debt.
• Unsecured Debt – These are the debts that you still owe. After paying off secured debt, priority debt, and permitted living costs, the plan must allocate your disposable income—the sum left over—toward unsecured debt, such as credit card balances and medical bills.
• Trustee Fee –  The Chapter 13 trustee will receive an additional 10% from you.

Your final action? The “best endeavors” or “best interests of creditors” test come to mind. You must pay according to this guideline to keep any assets you cannot shield through bankruptcy exemptions.

You must create an inventory of your possessions, research the bankruptcy exemptions provided by your state, and calculate the amount of “nonexempt property” (property not covered by a bankruptcy exemption) you own to arrive at this figure. Assess your nonexempt property’s entire value concerning your available cash. The larger sum will be paid through your plan.

The rule ensures that Chapter 13 creditors get at least as much money—if not more—as they would have if the debtor had filed for Chapter 7 bankruptcy.

What If You Are Unable to Pay Your Chapter 13 Plan? 

It will not always mean the end of your Chapter 13 case if your income declines during your repayment period, which happens more frequently than one would assume. 

If you are unable to finish your current Chapter 13 plan, the following options are available:

• Adjust your payment. Your ability to pay off non-priority unsecured debts, including credit card balances, medical expenses, and personal loans, with your disposable income may be reduced by the court. But if you want to lower your debt under the “best endeavors” provision, you are out of options unless you are willing to sell assets and provide the money to your creditors.
• Request a hardship discharge under Chapter 13. A hardship discharge may be available if you lose your job from a plant closing in a town with only one factory or from a grave illness. What’s the issue here? Because you must pay the best efforts rule’s minimum payment, a hardship discharge is frequently not accessible until you are well into your plan.
• You may switch to Chapter 7 bankruptcy. The disadvantage of any nonexempt property you have not paid to keep yet is probably going to be lost. Your nonexempt property’s market value must be received by unsecured creditors as a minimum payment. If not, the Chapter 7 trustee will sell the nonexempt assets and settle the unsecured debts.
• Get your Chapter 13 bankruptcy dismissed. All unpaid debt balances and the interest creditors did not charge you while your Chapter 13 case was pending will still be due.

Contact our Knowledgeable Chapter 13 Bankruptcy Attorney in Auburn, California, Today!

Chapter 13 bankruptcy can be a viable choice if you are experiencing financial trouble yet make a consistent salary. With thousands of Chapter 13 bankruptcy cases under our belts, we have years of experience. We will assist you in navigating the complexities of the Chapter 13 process and obtaining your discharge so that you can move forward with a clean financial slate. 

At Bottomline Lawyers, we assure you that you will not have to go through this arduous process yourself. The bankruptcy procedure will be frightening if you are not advised and represented by reputable and knowledgeable bankruptcy lawyers. We promise to address your wants and worries in a multidisciplinary manner. You can rest easy knowing that your case is in capable hands. To find out if bankruptcy is appropriate for you, call today for your free bankruptcy consultation.