What Is Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy allows borrowers to reorganize their finances with cooperation from a court-appointed trustee. Your trustee will liaison with creditors to create payment plans, with terms lasting 3 to 5 years.

Chapter 13 is sometimes referred to as a “wage earner’s plan,” and you will be approved for this form of bankruptcy only if you can meet the requirements for monthly payments. Under a Chapter 13 Bankruptcy plan, most debtors pay a fraction of what they initially owed.

The Law Offices of Larry D. Simons have worked with many Mission Hills and Riverside residents that have been where you are today and are now debt-free.

Individuals are eligible for Chapter 13 Bankruptcy, even if they are self-employed or operate as an unincorporated business. Unsecured debts must total less than $394,725, and secured debts less than $1,184,200. Corporations and partnerships may not file for Chapter 13 Bankruptcy.

Certain debts cannot be erased under Chapter 13 bankruptcy in California.

Examples include:

  • Child support
  • Alimony
  • Certain tax debt
  • Court fees and penalties
  • Personal injury debts incurred while driving drunk
  • Unsecured debts that were omitted from your initial filing

In extreme cases, student loan debts may be repaid under a Chapter 13 plan.

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    What Happens When You File for Chapter 13 Bankruptcy?

    As soon as you file for Chapter 13 Bankruptcy, an automatic stay is placed on your debts. This stay prevents creditors from collecting payments, garnishing your wages, repossessing your property, filing a lawsuit against you, or imposing a bank levy.

    What Does A Trustee Do?

    The trustee’s role is to liaison with your creditors and create payment plans to discharge your debts. Monthly payments are made to the bankruptcy trustee and distributed to your creditors.

    Will I Lose My House If I File for Chapter 13 Bankruptcy?

    Chapter 13 Bankruptcy does not require you to liquidate any of your personal property – your home, car, and all other possessions will not be repossessed. However, your lawyers and/or trustees may advise you that a minimum plan payment may be required in order to retain your house or other personal property.

    How Much Will I Owe?

    Every debtor’s monthly payments are unique and are based on the amount owed. Your attorney will calculate your disposable income by subtracting necessary expenses from your income (such as mortgage, alimony, child support, tax debts and car loans). Your Chapter 13 payment plans will be determined based on your remaining monthly income.

    Did you Know? Bankruptcy was provided by our country's founding fathers in the constitution.

    How Long Does It Take to Complete A Chapter 13 Plan?

    If your monthly income is lower than the California state median, your repayment plan will be between 36 months (3 years) and 60 months (5 years). If your income is greater than the median, your plan will generally be for 60 months. Payment plans are never longer than 60 months. Through the duration of your payment plan, creditors will be unable to attempt to directly collect payments from you.

    The median income requirements change periodically and are dependent on family size. As of November 1st, 2020, the median income for sole earners in California is $62,171. To see the rates for larger families, visit the U.S. Trustee's website at www.justice.gov/ust and click “Means Testing Information.”

    Will My Credit Ever Recover If I File for Bankruptcy?

    Filing for bankruptcy will affect your credit score in the short term, but it can also be the best option for your financial health in the long run. If you regularly miss payments to lenders, your credit score is already dropping each month. A Chapter 13 bankruptcy will stay on your credit report for up to 10 years, but it can give you the opportunity to wipe away debts and start with a clean record.

    Will Everyone Know I’ve Filed for Bankruptcy?

    Bankruptcy filings are a matter of public record, but they are not widely publicized. Unless you choose to tell your friends or family members, it is unlikely anyone will ever know. In a small number of cases, your monthly trustee payments could be deducted directly from your paycheck. However, in this circumstance, only the payroll department would have access to that knowledge.

    Is Chapter 13 Bankruptcy Right for You?

    Debtors often find that Chapter 13 bankruptcy has several advantages over Chapter 7. Namely, you have the chance to protect your assets. However, while you are on a Chapter 13 repayment plan, you will still have to make regular monthly payments towards your mortgage, car loan, alimony, child support, or tax debts, if they exist.

    If you are drowning in debt, filing for Chapter 13 bankruptcy can alleviate the overwhelming pressure of dealing with creditors. But bankruptcy is not the right call for every family. It is sometimes possible to settle with creditors out of court.

    Talk to a Bankruptcy Attorney Right Now

    Schedule An Appointment To Get Started.

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    The Law Offices of Larry D. Simons is your local Mission Hills and Riverside Chapter 13 bankruptcy law firm. We’ve work with neighbors just like you and have helped them get back to financial stability. How can we help you?

    Contact us right now and learn how Chapter 13 bankruptcy could help your situation.