North Hollywood Chapter 13 Bankruptcy Lawyer

Who Can File Chapter 13?

Chapter 13 bankruptcy, also known as a “wage earner’s plan,” is a bankruptcy option that allows individuals with regular income to develop a repayment plan to repay all or some of their debts in installments over 3-5 years. The duration of the repayment plan will depend on the debtor’s median income.

Anyone with a steady income may pursue Chapter 13 if their unsecured and secured debts meet the following limits, according to 11 U.S.C. § 109(e): 

• unsecured debts – less than $394,725;
• secured debts – less than $1,184,299.

The debtor must be ready to prove to the court that they have a “steady income” by showing they can afford to meet their monthly household obligations and pay into a repayment plan. 

Note that a person cannot file under Chapter 13 if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to their willful failure to appear before the court or comply with orders of the court. 

Why File Chapter 13?

One of the most important benefits of filing under Chapter 13 is saving the home from foreclosure. While Chapter 7 involves liquidation of most assets, including the home, Chapter 13 allows debtors to save their homes from foreclosure by stopping foreclosure proceedings in the form of an “automatic stay” upon filing.

Chapter 13 also allows individuals to reschedule secured debts (other than a mortgage for their primary home) and extend them over the course of the repayment plan, helping to lower the payment amounts. Chapter 13 also significantly protects debtors from their creditors, as it doesn’t require debtors to have direct contact with their and instead has debtors make payments to their assigned trustee who then distributes payments to the creditors. 

The Chapter 13 Process

To begin the filing process, the debtor should present a certificate proving that they have received mandatory credit counseling education from an approved agency. This shows that the debtor has sufficient income to repay their creditors in a repayment plan. The following should also be filed with the bankruptcy court:

• schedules of assets and liabilities;
• a schedule of current income and expenditures;
• a schedule of executory contracts and unexpired leases;
• a statement of financial affairs;
• any debt repayment plan developed through credit counseling;
• evidence of payment from employers, if any, received 60 days before filing;
• a statement of monthly net income and any anticipated increase in income or expenses after filing;
• a record of any interest the debtor has in federal or state qualified education or tuition accounts.

The debtor must also provide their case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case.

The core of the Chapter 13 process, however, lies in the repayment plan and confirmation hearing. The plan should be filed with the court, and the creditors and trustee may agree or object to your plan. The court may then approve the plan at the confirmation hearing if it meets the following requirements:

• the plan is feasible (the debtor can make the payments);
• the debtor proposed the plan in good faith; and
• the plan complies with bankruptcy law.

Some examples of debts to repay in a Chapter 13 plan include:

• priority debt, such as child support, alimony, and most tax obligations;
• secured debt, particularly if the debtor intends to keep their car or home;
• unsecured debt, such as credit card balances and medical bills (these do not necessarily have to be fully repaid);
• the value of any nonexempt property if they can afford to keep the property.

The filer will have all their debts wiped out once they make all their payments over the course of the 3-5 years.