If excessive debt is bearing down on you despite a comfortable income, Chapter 13 bankruptcy may be appropriate. By reorganizing your debt into a practical repayment plan, all collection efforts against you will halt and all property will be secured.

Oaktree Law attorneys specialize in bankruptcy law for homeowners. Let an experienced Oaktree Law Chapter 13 bankruptcy attorney in Orange County guide you through the complexities of Chapter 13 to lessen the burden of debt and protect all that you’ve worked to achieve.

Contact us or call 800-535-1627 to speak with an Oaktree Law Chapter 13 bankruptcy attorney in Los Angeles and learn more about your eligibility for Chapter 13 bankruptcy.

The Advantages of Chapter 13 Bankruptcy

Also known as the wage earner’s plan, chapter 13 offers debt consolidation for homeowners that earn a steady income but are facing a large debt burden. Chapter 13 bankruptcy is suitable for people trying to avoid foreclosure or who have multiple properties. Your Chapter 13 bankruptcy attorney in Los Angeles will file: your petition, a certificate of credit counseling, a 3-5 year payment plan to creditors, and all other related paperwork. Many benefits will begin immediately:

• All foreclosure procedures stop
• An automatic stay is issued against collection efforts
• Any co-signers are shielded
• Exempt and non-exempt property is protected
• Time is allowed to develop a manageable payment schedule
• Upon completion, significant debt may be discharged

Living on a fixed income can be challenging. Any bankruptcy has consequences. But if you simply need time and are able to make current mortgage payments along with your repayment plan, all property can remain in your family’s possession.

Frequently Asked Questions

WHAT IS CHAPTER 13 BANKRUPTCY?A Chapter 13 bankruptcy is also called a debt reorganization bankruptcy or a wage earner’s plan. It enables individuals or married couples with regular income to develop a plan to repay all or part of their debts. Under this Chapter, debtors propose a repayment plan to make installment payments to creditors over three to five years. The payments are made to the assigned trustee in the case and the trustee will distribute the funds to your creditors. Under certain circumstances, you do not have to pay the full amount of certain debts such as medical bills, credit cards, past due utility bills, and judgments. The minimum your creditors are entitled to depends on a review of the type of claim the creditor has and the value of your property, as well as other factors, including the property exemptions allowed by law.

WHO IS ELIGIBLE TO FILE FOR CHAPTER 13? In order to file for a Chapter 13 you must:

• Before filing, complete the credit counseling class.
• Have sufficient regular income to meet monthly living expenses allowed by the Chapter 13 Trustee and IRS to make a plan payment.
• Have less than $1,081,400 in secured debt and $360,475 in unsecured debt.
• Not be a corporation, partnership, stockbroker, or commodity broker. Note that individuals with ownership interests in these entities can still file for bankruptcy. For example, debtors who are self-employed.
• The debtor may not have received a discharge in a Chapter 7, 11 or 12 in the previous four years, or another Chapter 13 in the previous two years.

HOW DOES THE PLAN OF REORGANIZATION WORK? After a Means Test is performed to evaluate the Debtor’s prospects for qualifying for a Chapter 13 bankruptcy, the plan must meet two other tests:

• Best interest of creditors test:  The plan must give unsecured creditors at least as much on their claim as they would have received if the debtor filed Chapter 7; and
• Best efforts test:  All projected disposable income (the amount left after payment of allowed expenses) must be paid into the plan for the “applicable commitment period” which could be 3 to 5 years (or maybe more).

WHEN DO I START TO MAKE PAYMENTS, AND HOW OFTEN THROUGH THE PLAN? The Debtor must make the first payment on the plan within 30 days of the filing of the plan and each month thereafter. Payments begin before the first meeting of creditors (the §341 meeting) and continue even while objections to confirmation are pending.  Payments must be made in certified funds, such as money orders or cashier’s checks, or by voluntary wage deduction. If you stop making plan payments, the Trustee will ask that your case be dismissed.

WHEN ARE MY DISCHARGEABLE DEBTS DISCHARGED IN CHAPTER 13? In a Chapter 13, the discharge is not entered until all your plan payments are made and the terms of the Plan completed in full.

CAN I SAVE MY HOME IF I FILE FOR CHAPTER 13 BANKRUPTCY? Yes. Consumers who file a Chapter 13 bankruptcy are able to save their home from foreclosure as long as they can make the required plan payments. The foreclosure proceeding will stop upon filing a Chapter 13 bankruptcy. Manageable monthly payments will be distributed to your mortgage lender through the plan filed in the case.

CAN A CHAPTER 13 BANKRUPTCY LIEN STRIP A SECOND MORTGAGE OR HELOC?  If you have a home with a second mortgage or home equity line of credit (HELOC), and the fair market value of the home is less than first mortgage, you may be able to “strip” off that second mortgage or HELOC.  This is because that second loan is no longer secured in light of the fact that the fair market value is less than the first mortgage.  The first mortgage has a senior lien and priority over the second mortgage and HELOC that have only a junior lien. Chapter 13 may permit you to strip the HELOC and it will be re-categorized as an unsecured creditor. Therefore, after the completion of the Chapter 13 repayment plan, the HELOC will be discharged along with your other unsecured creditors.

WILL I LOSE MY HOME IF I FILE CHAPTER 13? Not if your Chapter 13 Plan includes house payments and any back payments. A Chapter 13 bankruptcy attorney in Orange County can help you determine whether you’ll be able to organize your payments to include your house, but many people file Chapter 13 to keep their homes.

WHAT HAPPENS IF I LOSE MY JOB OR CANNOT MAKE MY PAYMENTS DURING THE PLAN? There are times that the Debtor may be unable to pay the monthly Plan payments.  This failure must be as a result of serious, short term changes in the Debtor’s income or some unusual, but necessary, expense.  A moratorium can be filed with the Court and served on all the creditors.  There may be hearing, and the Trustee will need to approve the moratorium.  Again, the entire length of the Plan cannot exceed 60 months, including any moratoriums.

CAN I GET CREDIT DURING A CHAPTER 13 BANKRUPTCY CASE? Yes. But you will be required to obtain court approval to do so. The credit you wish to obtain will have to be for a just cause, affordable and reasonable given your current financial situation.

CAN I EVER GET CREDIT AFTER RECEIVING A CHAPTER 13 BANKRUPTCY DISCHARGE? Yes. You may have to wait a few years before you are eligible to apply for certain types of loans, but filing Chapter 13 bankruptcy will not destroy your ability to obtain new credit for the rest of your life. Sometimes a Chapter 13 bankruptcy will help your credit worthiness by improving your debt-to-income ratio. Your debt-to-income ratio is improved by eliminating your debts that make you appear to be a higher risk in your current pre-bankruptcy financial state.

Experts in Bankruptcy – Southern California Lawyers

Contact us or call 800-535-1627 to talk with a Chapter 13 bankruptcy attorney in Los Angeles. In the right circumstances, Chapter 13 bankruptcy offers many advantages. Let us help you develop a plan.