You have a lot of happy memories of your home. It may be where your child took their first steps, where you celebrated holidays together and hosted family picnics. Your house may be the only home your children have ever known. But, like many people, you may find yourself struggling to make your mortgage payments. Perhaps you suffered a job loss or health setback that led to financial difficulties. Whatever the reason, you know that if things go on the way they have been, you could lose your family’s home.
If worries about debt and foreclosure are keeping you awake at night, a Chapter 13 bankruptcy might be the answer. Chapter 13 may be a good option for working people who earn regular wages who have a house they want to save from foreclosure, as well as people who have debt that cannot be discharged in a Chapter 7.
Chapter 13 bankruptcy is different from Chapter 7 in a couple of important respects. Unlike Chapter 7, which completely wipes out most types of debt in about four months, Chapter 13 is a longer process, taking from three to five years. During that time, you pay your creditors according to a plan that has been approved by the bankruptcy court. Remaining debt may be discharged at the successful completion of the plan. You will have to pay 100% of some debts, but depending upon your resources, you may end up paying only pennies on the dollar of unsecured debt that you owe. Chapter 13 bankruptcy is for people who earn regular wages.
In order to qualify for a Chapter 13 bankruptcy, your debt cannot be more than a certain amount. As of this writing, you must have less than $394,725 in unsecured debt (like credit card debt and medical bills) and less than $1,184,200 in secured debt (like a mortgage or vehicle loans).
Chapter 13 is also called “wage earner’s” bankruptcy because you have to have income from which to pay back your creditors. You can even be self-employed, as long as you have regular monthly income on which to base a repayment plan.
As with a Chapter 7 bankruptcy, as soon as you file your Chapter 13 bankruptcy petition, the “automatic stay” immediately takes effect. The automatic stay means that your creditors cannot contact or harass you about your debt. In Chapter 13, this includes stopping any foreclosure on real estate, repossession of vehicles, or lawsuits against you for a debt you owe. The IRS must also stop efforts to collect back taxes, and your wages cannot be garnished to pay off a debt or judgment against you.
You may be interested in a Chapter 13 bankruptcy because you want to save your house from foreclosure. If you have fallen behind on mortgage payments and even if the foreclosure process has begun, Chapter 13 can offer you the chance to get caught up on payments and remain in your house. You may be able to make up back payments according to your repayment plan and continue to make mortgage payments going forward, allowing you to keep the home that gives your family a sense of stability and security. The Chapter 13 bankruptcy petition must be filed before the foreclosure sale takes place in order to save your home.
You begin by scheduling a telephone or video consultation with a Bankruptcy Forward attorney. The attorney will gather financial information, make sure you qualify for a Chapter 13 bankruptcy, and that it is the best option for you.
Your attorney will gather financial information from you and prepare your bankruptcy petition, which you can sign electronically without coming into the office. Once the petition is filed, the automatic stay will kick in, preventing your creditors from harassing you. As part of the bankruptcy petition filing, your attorney will prepare a repayment plan and you will need to begin making payments to the bankruptcy trustee within 30 days after your bankruptcy petition is filed.
You will have to attend two hearings. The first is the Meeting of Creditors, in which you have a brief conference with your attorney and the bankruptcy trustee. (Despite the name, creditors rarely attend this meeting.) The second hearing is the confirmation hearing before the bankruptcy judge in your case. As the name suggests, this hearing is to confirm your repayment plan. Once your plan is confirmed, you must continue to make the scheduled payments for the three to five years of the plan. If you successfully complete the plan, you will receive a discharge of all debts provided for in the plan.
Three to five years is a long time, and your situation can change. If you find yourself unable to continue making plan payments, you may be able to modify your plan or convert your bankruptcy to a Chapter 7.
Please contact Bankruptcy Forward today to put your Chapter 13 bankruptcy in motion. Your attorney will guide you through the process so that you can break free from debt and move forward with your life.
With offices in Seal Beach and Rancho Cucamonga, Bankruptcy Forward represents clients in Los Angeles, Orange, Riverside, San Bernardino, Ventura, and Santa Barbara Counties in California. The firm handles Chapter 7 and Chapter 13 bankruptcy cases in the Central District of California at the three bankruptcy courts in Los Angeles, Riverside and Santa Ana.