Chapter 13 Bankruptcy Information

Chapter 13 bankruptcy is a repayment plan that ranges from 36 months to 60 months. Your payment amount is calculated generally based on your income minus your necessary monthly expenses for your household size (means test analysis). Your payment plan can propose to pay anywhere form 0% to 100% back to your unsecured creditors (unsecured creditors being your credit cards, personal loans, medical bills, repossessions and foreclosure debt). Priority debts must be paid generally in full in your Chapter 13 plan. Priority debts include state and federal taxes owed, and back child support and alimony. Generally any unsecured debt that is not paid back during the term of the plan is discharged at the end of the plan (some exceptions). When a debt in bankruptcy is discharged then you are no longer personally responsible for paying back this debt and the creditors cannot seek to collect the money.

How Does the Process Work?

1. Filing of A Case- In a Chapter 13 bankruptcy a case is filed with the court that includes a proposed repayment plan. This payment plan will propose to pay back a certain percentage to your creditors. All of your creditors will be served with the proposed plan and will be notified of your bankruptcy filing and 341 hearing. The creditors have a right to object to the plan but the reasons that they can object are limited.
   
2. 341 Hearing - A 341 hearing will be set once your case is filed. At this 341 hearing the debtor must appear and bring proof of identification and social security. At the hearing the debtor will be examined by the trustee. The trustee is an individuals that is appointed by the court to review cases, and administer assets for the benefit of creditors. If the trustee has any objections to the proposed plan he will discuss them with the debtor and his attorney.
   
3. Confirmation Hearing- A confirmation hearing will be set by the court where your case will be reviewed by a judge for confirmation. If your case is confirmed it means that the proposed plan has been approved by the court.Once a case is confirmed then the creditors must accept the proposed plan and what they are to receive. After your plan is approved you are responsible for continuing to make your monthly payments until the plan is complete. If you default on your plan payments then your case can be dismissed.
   

What Are Some of The Benefits of A Chapter 13 Plan?

• If you carry a high amount of credit card debt, a Chapter 13 plan allows you to consolidate your debt into a plan where you make one monthly payment that is distributed by the trustee to your creditors. This can help you manage your payments since only one monthly payment is made toward all of your creditors. The trustee is responsible for distributing to each creditor who has filed a claim in your case, their percentage.
  
• You do not pay any interest and penalties to your unsecured creditors in your Chapter 13 plan. The interest charged by the credit card companies is not paid during the plan and is not taken into consideration in calculating your monthly payment.The monthly payment amount that is proposed in your Chapter 13 plan is not based on the monthly minimum payments required or interest charged by the credit card companies. The proposed payment is generally based on a means test analysis that takes into consideration your income minus standard expense deductions for your household size.
  
• You are protected from any collection action and lawsuits to collect on the debt. Once your Chapter 13 plan is confirmed the creditors are only entitled to receive the percentage amount that was proposed in your plan. The creditors cannot seek to collect by calling you about the debt, sending you harassing letters or filing a lawsuit to collect on the debt. Creditors who engage in these actions during a bankruptcy case are subject to court sanctions.
  
• You can remove your second mortgage in a Chapter 13 plan. If your house is underwater and the value of the home is at or below your first mortgage then you can propose to have your second mortgage treated as unsecured debt.
  
• You can cram down your vehicle. If your car was purchased more than 910 days ago and the car is worth less than what you owe on the vehicle, then you can propose to pay back only the current marketl value of the vehicle

Chapter 13 bankruptcy offers people who have a consistent and stable income an opportunity to reorganize their debt and generally get out of debt faster.

Southern California Law Advocates: Riverside Attorneys