This idea that bankruptcy requires turning over all of your property is a myth, particularly in Chapter 13 cases. If you are considering bankruptcy and need someone to help you separate the myths from the facts, contact an experienced bankruptcy attorney.
San Diego Chapter 13 Bankruptcy Lawyers
If you have a steady income and are having trouble keeping up with your bills on a month to month basis, Chapter 13 bankruptcy may be a good option to consider. It allows you to consolidate all your debt into one payment, often at better rates, and pay back all or part of that debt over the course of three to five years. Once you file for bankruptcy, your creditors must immediately stop all debt collection, foreclosure and repossession activity. This means that you won't receive any more harassing phone calls and you won't have to worry about who is calling every time the phone rings.
Contact our office today to learn more about Chapter 13 bankruptcy and how it can help you get a fresh start. Our attorneys are available to help you during regular business hours and by appointment.
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Frequently Asked Questions about Chapter 13
Q: How does a Chapter 13 bankruptcy case work?
A: Chapter 13 of the federal Bankruptcy Code allows a consumer to repay all or a majority of his or her debts through a payment plan approved by the Bankruptcy Court. When the plan is in place, creditors generally are prohibited from collecting debts directly from the debtor. Instead of paying his or her creditors directly, the debtor pays a certain amount every month to the Chapter 13 Trustee, and the Trustee distributes the money to the creditors, as provided in the Chapter 13 plan. When the last payment is made, the debtor is no longer liable for the remainder of his or her dischargeable debts.
Q: How long does it take to complete a Chapter 13 plan?
A: A Chapter 13 plan lasts for three years unless the debtor can pay off all debts in less time. Under certain circumstances, the court may approve a plan that lasts as long as five years.
Q: How is Chapter 13 different from Chapter 7 from the point of view of the debtor?
A: The essential difference between Chapter 7 and Chapter 13 is in the handling of the debtor’s property. In a Chapter 7 case, all nonexempt property owned by the debtor is sold, and the proceeds are used to pay as many of the debtor’s debts as possible. In Chapter 13 cases, a debtor’s income is applied towards payment of as many of the debtor’s debts as possible. A Chapter 13 debtor typically retains more of his or her nonexempt property. In addition, the discharge issued in a Chapter 13 case is usually broader than a Chapter 7 discharge, and will relieve the debtor of liability for several types of debts that are not discharged by a Chapter 7 case.
Q: Why would a debtor choose Chapter 13 over Chapter 7?
A: Chapter 13 is the preferred choice for a person who wishes to repay most or all of his or her unsecured debts, and whose income is sufficient to allow him or her to do so in a reasonable amount of time. In addition, if the debtor has a considerable amount of nonexempt property, or a lot of valuable exempt property used as security for debts, this property could be lost in a Chapter 7 case, and so Chapter 13 may be the preferred option. Some other types of debtors, whose debts might not be discharged under Chapter 7 and those with one or more large debts that may be discharged only under Chapter 13, might opt for Chapter 13 over Chapter 7.
Q: What debts are paid by a Chapter 13 plan?
A: The plan may pay any and all debts of the debtor, including secured and unsecured debts, and even debts that are non-dischargeable, such as student loans and spousal and child support.
Q: How much must the debtor pay to the trustee?
A: The law says that all of a debtor’s “disposable income” received during the time of the plan must be paid to the trustee. The law defines “disposable income” as all income earned or received by the debtor that is not reasonably needed for the support of the debtor and the debtor’s dependents.
Q: Who is the trustee?
A: The trustee in a Chapter 13 case is someone who is appointed by the Bankruptcy Court to receive the regular payments from the debtor, distribute those payments to the creditors according to the Chapter 13 plan and administer the bankruptcy case until it is closed. The debtor is always required to cooperate with the Chapter 13 trustee.
Q: May a self-employed person file under Chapter 13?
A: Yes. A self-employed person meeting the eligibility requirements may file under Chapter 13 and may continue to operate the business during the resolution of the bankruptcy case and the completion of the plan.
Q: Should a married couple file a joint Chapter 13 petition?
A: If both the husband and wife owe a significant amount of money, they may wish to file jointly under Chapter 13, even if only one of them has income. Otherwise, the non-filing spouse could still be liable for the unpaid debts.
Q: May a debtor convert a Chapter 7 case to a Chapter 13 case?
A: Yes. A Chapter 7 case may be converted to a Chapter 13 case at the request of the debtor at any time before the case is closed, unless the case was converted previously from Chapter 13 to Chapter 7.
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