Filing Chapter 13 in California

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If you face mounting debt and are looking for a way to get a fresh start, consider filing for bankruptcy. Consumers can file for either Chapter 7 or Chapter 13 bankruptcy in California. Chapter 7 bankruptcy is a liquidation proceeding because the bankruptcy trustee sells all non-exempt assets belonging to the debtor to raise funds to repay the debtor’s creditors. However, if the debtor would like to keep his assets, filing for Chapter 13 bankruptcy may be the best option.

Chapter 13 of the Bankruptcy Code allows the debtor to keep his assets while he completes a repayment plan. For example, Chapter 13 bankruptcy may be a good option for debtors who have fallen behind on their mortgage or car payment, but have regular income to be able to catch up with a little assistance.

Eligibility for Chapter 13 Bankruptcy

To be eligible to file for Chapter 13 in California, the debtor must be able to show the court that the debtor has regular and consistent income for at least six months prior to filing for bankruptcy. The income can come from any source; it does not have to be income in the traditional sense earned at a job. For example, the debtor’s income can come from a family support obligation or social security benefits. Proof of the debtor’s income is essential in a Chapter 13 bankruptcy because the debtor must submit a repayment plan for approval by the bankruptcy court.

Chapter 13 Repayment Plan

The debtor’s attorney assists the debtor in preparing the repayment plan to make monthly payments to the debtor’s creditors over whatever period the bankruptcy court allows. The shortest repayment plan lasts three years, but can continue for up to five years if necessary. The length of the repayment plan is decided on a case-by-case basis. In considering the length and structure of the plan, the court considers the debtor’s monthly income and expenses to create a plan the debtor can afford. The bankruptcy court approves or denies the debtor’s repayment plan during the confirmation hearing. The debtor’s creditors are able to attend the meeting and may object to aspects of the debtor’s plan. However, if the bankruptcy court approves the debtor’s repayment plan, the debtor immediately begins making payments to the bankruptcy trustee.

During the Chapter 13 repayment plan, the debtor makes monthly payments directly to the bankruptcy trustee. The bankruptcy trustee’s role in a Chapter 13 bankruptcy is to ensure the debtor makes all monthly payments on time and in full, and to disperse the debtor’s payments to the debtor’s creditors. If the debtor makes all payments on time and completes the repayment plan, the debtor receives a bankruptcy discharge.

Getting Legal Help

If you have fallen behind on your bills and are considering filing for Chapter 13 in California, contact an experienced bankruptcy attorney. An attorney will evaluate your financial situation and help you decide whether filing for Chapter 13 bankruptcy is right for you.