Filing for bankruptcy can be a challenging decision to make. But if your debts are overwhelming and you could do with a fresh start in life, you can consult a bankruptcy lawyer for your options and help with the bankruptcy process. If you have a steady income that allows you to make monthly repayments on your debts, a lawyer will advise you to file Chapter 13. It is the bankruptcy option that helps you establish a debt repayment plan of between three and five years. Within that period, you will have cleared most of your debts and can start life afresh.
Chapter 13 offers several benefits to people seeking debt relief through bankruptcy. We can help you evaluate those benefits and your situation at Sacramento Bankruptcy Lawyer. We could also help you understand some unique ways you can obtain relief by filing Chapter 13 in Roseville. For example, you can eliminate some of your debts, like mortgages, and not have to worry about them in the future. Also, if you face foreclosure, filing Chapter 13 can stop your creditor from continuing the process. That gives you time to obtain debt relief. Talk to us to learn more about what this bankruptcy option offers and the process involved.
When to Consider Filing for Bankruptcy
If you are overwhelmed by debt, it is natural to consider ways of obtaining relief to regain your financial freedom. Several options are available, including negotiating with your creditors for flexible repayments and debt consolidation. But if you have exhausted all other options and are still drowning in debt, consider filing for bankruptcy. Declaring bankruptcy should be the last resort after all other debt-relief options have failed and you are still deep in debt. The truth is, no one wants to file for bankruptcy. It is an unfortunate reality that some people have to face.
With bankruptcy, you can eliminate or reduce your debt considerably without losing assets you have worked hard to attain, including your home and vehicle. The process also gives you a chance to start on a clean slate as far as your finances are concerned. If you have already exhausted all our debt-relief options and your creditors are taking action against you, including garnishing your wages, consider filing.
But there will be a cost to pay. For example, filing will impact your credit score. It means that you will face difficulties in the future when seeking credit. Bankruptcy will also not eliminate all your debts. You will still be expected to repay most of your creditors.
That is why it is advisable to only file for bankruptcy when necessary. If your bills are becoming unmanageable and the financial walls are closing on you, speak to a skilled bankruptcy lawyer for advice and guidance.
Here are some of the valid reasons to declare bankruptcy:
- A job loss that makes it impossible for you to keep up with your debt repayments.
- Overwhelming medical bills that consume almost all your income, leaving you with little or nothing to pay your bills.
- A divorce process that drains you financially, leaving you with little or no income to pay your debts.
A job loss, medical bill, or divorce should not be an outright reason to file for bankruptcy. You can manage a few months after divorce or job loss as you figure out other ways to manage your debts. But if, after trying everything else, you experience the following, you could consider filing for bankruptcy:
- Your creditors sue you for debt repayment.
- You are about to lose your home to foreclosure.
- You are using a credit card to pay for necessities.
- You are obtaining credit to pay another.
- You are about to borrow money from a 401k account for bills.
The experience varies from one person to another. You could have a different experience, for example, with creditors grabbing your assets, garnishing your wages, attaching your vehicle, harassing you with collection demands, or grabbing money from your bank account. If you cannot agree with your creditors at that point, filing for bankruptcy could be an excellent idea.
Filing Chapter 13 Bankruptcy
The bankruptcy process is sometimes complicated. You will need the help and guidance of a competent bankruptcy lawyer to navigate the court process and make the right decisions.
To start the process, you must prepare and file all the required documents with a bankruptcy court. Here are some of the documents you will need to file in this process:
- A list of your debt and creditors.
- A summary of everything you own (assets).
- Your current budget.
You will also need to come up with a repayment plan that showcases how and when you plan to pay your debt. You must file this plan together with the other required documents.
Once you file your petition, the court will officially open your bankruptcy case. The filing process will also enact the repayment plan. It means you must follow the plan to clear your debts even as your case progresses.
After receiving your petition, the judge will review all the documents to grant or deny it. If the court accepts your petition, the judge will hold a creditors meeting, which you must attend. The hearing could take place after 35 or 45 days of filing. The judge will appoint a bankruptcy trustee for your case. In this meeting, creditors are allowed to ask questions regarding their payments. The trustee can also ask you questions to better understand your situation. Once the trustee takes over your case, it will be optional for you to attend other creditors' meetings. Your attorney can represent you in all further proceedings.
With your trustee and attorney, you will develop a list of all your debts in order of priority. You will continue making payments to your trustee at least every month, who will, in turn, pay your creditors according to the developed list of debts. After the creditors' meeting is over and the payment schedule is underway, you can seek the court’s approval to authorize the repayment plan. If, at any point, your creditor feels that the plan you are using is not suitable for them, they can file an objection in court. The judge will allow you and your creditor (objecting party) to present arguments in court.
The judge will review all the arguments and evidence from both parties to decide. If the judge confirms the repayment plan, you will continue making payments to your creditors for the period established. But if the judge orders you to make some changes to your plan, you will do so with the assistance of your attorney. Once you complete your debt repayments within the three- or five-year period, you can petition the court to discharge your bankruptcy case.
How The Chapter 13 Bankruptcy Plan Looks Like
The repayment plan you design when filing for Chapter 13 details every payment you will make to your creditor over the repayment period. You set the repayment period according to the amount you owe and the income you receive monthly. If you can pay more every month towards your debt, you will only need to make payments for a short period. But the repayment period must be between three and five years. It can go up to five years. Your trustee will recommend a three-year plan if your monthly income exceeds the state median. Here are some of the categories you will have in your Chapter 13 repayment plan:
Priority Debts
These are debts you must pay regardless of your financial situation. A bankruptcy court cannot discharge them. You must make a 100% payment towards the listed priority debts in your plan. Most of these debts are unsecured, like past-due child support, recent income tax debts, past-due spousal support, and any other domestic support obligation you incurred after divorce. Other priority debts include administrative expenses.
Mortgage Arrears
You must also make a 100% payment towards your mortgage arrears, according to what you have listed in your payment schedule. An exception could apply in the case of an unsecured junior home loan.
Auto Loans
If you have a car loan, you must make 100% payment toward it according to your repayment plan if it has no more than three months left than your repayment schedule.
Administrative Claims
You must make a 100% payment of administrative claims as listed on your plan. Examples of administrative claims include the attorney fee you did not pay before filing for bankruptcy.
General Unsecured Debts
You will pay part or the total amount of these debts per your plan. Examples of general unsecured debts include credit card debts, personal loans, medical bills, car repossession balances, and payday loans. The amount you will allocate to these debts will depend on your disposable income and the value of your non-exempt assets. If, after paying the other priority debts, you do not have money left for the unsecured debts, you will not pay them throughout your repayment period.
The Benefits of Filing Chapter 13
Chapter 13 has several benefits you must consider before filing your petition in court. You can discuss some of these benefits with your bankruptcy lawyer to make an informed decision. Here are the most popular benefits to consider:
It Can Save Your Home
Your home is one of the most significant investments in your life. It takes a lot of time, effort, and money to find a suitable home for you and your loved ones. But you risk losing that home if you cannot make timely payments on your mortgage. Filing Chapter 13 is one way to save your home if you are drowning in debt and cannot keep up with mortgage payments.
Immediately after you file your Chapter 13 petition in court, the court will stop any effort by your mortgage lender to repossess your home. Once the automatic stay is in effect, your lender cannot continue foreclosing your home. An automatic stay is an injunction or ban by the court to prevent creditors from demanding payments and enforcing liens on you.
The court will also give you three years to repay your mortgage payments. You must pay any outstanding and ongoing payments on your home to prevent losing it in the future.
It Can Discharge a Junior Mortgage
One of the most significant advantages of filing for bankruptcy is the possibility of discharging some of your debts. Debt discharge means you will no longer be liable for the discharged debts. It reduces your debts, making them more manageable.
Chapter 13 can discharge some of your debts, including a second loan from your home, by equating that debt to an unsecured credit. But you must petition the bankruptcy court to value your property. The idea is to demonstrate that your property’s value is not more than the money you owe in a mortgage. If the judge agrees, they will treat the junior mortgage as an unsecured debt and ultimately discharge it. Once you finish paying the remaining mortgage, your creditor will remove your debt from the property.
It Can Save Your Vehicle
Chapter 13 allows you to adjust your vehicle loan to comfortably pay your debt under the designed plan. Since the repayment period lasts three to five years, you will likely enjoy reduced monthly payments because you pay the debt over a more extended period. Interest on your auto loan can also decrease over time. The chances of losing your vehicle are minimal if you can keep up with your payments according to the plan.
You Can Clear Back Taxes
Tax payments are mandatory, even for people who have declared bankruptcy. You must clear all your tax arrears after filing Chapter 13. Tax debts are considered non-dischargeable. The bankruptcy court cannot eliminate them, even in dire financial situations. But the good news is that Chapter 13 prioritizes non-dischargeable debts to make it easier for you to eliminate the most daunting debts with a repayment plan quickly. If your back taxes have been overwhelming, you can prioritize them in your payment plan. That enables you to submit partial payments over the repayment period until you are no longer in debt.
You Continue Running Your Business
You continue running your business after filing Chapter 13. Sometimes, the bankruptcy trustee can require you to shut down your business, depending on the bankruptcy chapter you are filing. For example, filing Chapter 7 could result in lost business or assets. It means a possible loss of your livelihood. Chapter 13 allows you to continue running your business to make enough money to keep up with your debt payments according to your plan.
You Can Prevent Rising Debts
Chapter 13 makes it feasible for you to reduce specific secured debts. For example, if you have a secured claim on your vehicle or other personal assets like electronics and furniture, you can reduce those to a reasonable market value after filing for bankruptcy. The remaining part of those claims are considered general unsecured debts, which the judge can discharge if they cannot fit within your repayment plan.
It Prevents Judgment Liens
You can avoid facing a judgment lien by filing for Chapter 13. A judgment lien occurs when a creditor files a civil suit against you in civil court, which allows them to attack the debt on your asset. If your creditor wins the case, they can possess that property until you pay off your debt. Once you file for bankruptcy and the stay order takes effect, your creditors cannot take any action against you, including filing a civil suit against you. You also have a chance to prove that you are entitled to exemptions.
What a Bankruptcy Lawyer Can Do For You
The process of filing Chapter 13 is more complex than it sounds. A skilled bankruptcy lawyer can help you understand your situation, your options, and how to navigate the court process. You also need someone by your side to protect your rights and ensure that your best interests are served. Thus, hiring a lawyer from the start of the process is an excellent idea. Then, you can weigh your options before filing the required documents. Your lawyer will also ensure the necessary documents are ready for filing. They will ensure you meet all court deadlines to avoid delays that could impact your situation’s outcome.
Find a Competent Bankruptcy Lawyer Near Me
Are you deep in debt in Roseville, and are you considering filing Chapter 13 bankruptcy?
Understanding what Chapter 13 means for your situation, the benefits, and the filing process is crucial. A skilled bankruptcy attorney can help you establish whether Chapter 13 suits you, your other options, and how to start the bankruptcy process. They can streamline all legal procedures to minimize costly mistakes that could compromise your case’s outcome.
At Sacramento Bankruptcy Lawyer, we have extensive experience dealing with bankruptcy laws and understand what your unique situation requires. We can guide you through all legal processes, protect your rights, and defend you in court for the best possible outcome for your case. Call us at 916-800-7690 to further discuss Chapter 13 and our services.
