What is California Chapter 13?
Bankruptcy is a last resort for California residents. It can stop creditors from hounding you, wage garnishments and lawsuits. Although it’s the fastest way to drive down your credit score, bankruptcy can also help you get past financial issues quickly and begin rebuilding.
If you’re trying to grapple with overwhelming debt on your own, your credit score takes a beating over the course of months or even years. Filing bankruptcy in California can help you deal with the debt and get you back on the road to recovery within months instead of years.
Depending on your situation, Chapter 13 bankruptcy may be the right option for you. Specific provisions typically allow you to keep all of your assets as long as you have regular income that lets you repay creditors.
Benefits of Chapter 13:
- Catch up on any missed mortgage and car payments.
- Wipe out tax debt if it qualifies for discharge due to its age. Back taxes can also be included in the payment plan.
- Make up missed alimony or child support payments as part of the scheduled payment plan.
- Keep more non-exempt than if you filed Chapter 7.
In situations where there is a codebtor, creditors will not come after them as long as you make the bankruptcy plan payments.
Questions You should Ask Yourself
- Do you use credit cards to pay for groceries, utilities and other necessities?
- Are you thinking of pulling from your retirement or 401(k) to stop threatening debt collector calls?
- Have you lost track of how much you owe?
- Are you coming up short (or missing) the required minimum monthly payments on credit cards and personal loans?
If you answered yes to any of these questions, filing for California bankruptcy in may be your best option.
What is the difference between Chapter 13 and Chapter 7?
Whether it is Chapter 13 or Chapter 7, the goal of bankruptcy is relieving the burden of debt. However, the processes and eligibility requirements for each are very different. By filing Chapter 13, you’re placed on a repayment plan that lasts 3-5 years. Any debt left after that time is often discharged. Chapter 7 involves a court trustee liquidating nonexempt assets and can be completed within 6 months.
How Do I Qualify for Chapter 13 in California?
To be eligible for this type of bankruptcy, you must have less than approximately $394,725 in unsecured debt, such as personal loans and credit card bills. If you have secured debts, which includes car loans and mortgages, the total must be less than $1,185,000. These numbers are adjusted periodically, so you should check bankruptcy attorney for the current amounts.
Among the stipulations for filing Chapter 13, is that you have not had a bankruptcy petition dismissed in the last six months. You must also undergo credit counseling withing 180 of filing.
Since Chapter 13 uses a repayment plan, you must demonstrate that you have the means to pay down the debts by submitting proof of income within 14 days of filing. Income can be in the form of earned wages, Social Security payments, pension, proceeds from a property sale, etc.
You must also be current in tax filings, as you must submit proof of the previous four years’ tax returns.
Do I have to Include All Debt in when I file Chapter 13 bankruptcy??
Yes. The bankruptcy court reviews income statements and debt. A court-appointed trustee meets with creditors and may negotiate for a reduced balance. At that point a repayment plan is developed. You don not need to have direct contact with creditors, and the trust distributes the payments accordingly.
How do I know when my Chapter 13 bankruptcy Case is Over?
When your Chapter 13 repayment plan is complete, you’ll receive a discharge order. This wipes out the remaining balance of qualified debt. Alimony, child support and other debts are not covered in bankruptcy.
When Happens when my Chapter 13 Bankruptcy is Paid Off
You can generally not finish your Chapter 13 payment plan early, unless you pay the creditors in full. However, if you suffer a financial setback, you can request an early discharge due to hardship. This could be as a result of the reduction or loss of household income or a medical situation.