Understanding the process of filing a Chapter 13 and the consequences it may have on you is the first step toward stabilizing your financial situation. Since having all the necessary information in one place will save you a lot of time, look no further! First-class bankruptcy lawyers in La Mesa have everything you need to know right here. Learn how to make the best of Chapter 13 and start anew.
It’s also useful to know what to consult your bankruptcy attorney about and the easiest way to select the best bankruptcy lawyer for you. In addition, make sure to find out what handling Chapter 7 entails to realize what’s the best option for you.
Is Chapter 13 a good idea?
Naturally, you want to get rid of the debt you’ve incurred as soon as possible. For this reason, you’ve already decided to file a Chapter 7, have some of your property repossessed, and receive a discharge. But Chapter 7 isn’t always the best course of action, and in many aspects, it pales in comparison with Chapter 13 bankruptcy. Here are some of the crucial benefits of Chapter 13:
Keeping your assets
Your property (e.g. your house or car) will not be sold to repay the creditors. The creditors exercise no control over your assets under Chapter 13, and you get to hold on to all of them. As an alternative, a debt reorganization plan will be formulated, allowing you to pay off the debt out of your disposable income.
Mortgage and vehicle arrears
If your house is set for foreclosure and you can’t pay back the mortgage company before the sale, filing Chapter 13 will bail you out. It will put a stop to the foreclosure sale and provide a plan to repay the mortgage arrears to the lenders. The same goes for your car. Even if the vehicle has already been repossessed, it will be returned to you and you will be given time to meet the payment.
Less harmful to your credit score
Chapter 13 will typically appear in your credit report for 7 years, but it’s not as harmful as some other circumstances. Future lenders are much more likely to grant you a loan under Chapter 13. Other situations such as defaults, repossessions, and lawsuits are far more detrimental to your credit score.
Of course, there are still downsides to filing Chapter 13 that need to be taken into account:
Slow debt relief
It takes three to five years to discharge your debt under Chapter 13. It’s a long period of time, and it can be particularly challenging because you will probably have to cut back on some luxuries.
Restricted finances
You will be required to make payments with your disposable income. This means that only the money you use for food, shelter, and healthcare will be exempt. A certain amount of money will be charged based on your remaining funds, hindering your ability to make long-term plans to spend money.
No full coverage
There are some debts you won’t be able to wipe out, even under Chapter 13. These include unpaid taxes, alimony, child support, and student loan debt.
These pros and cons will save you a lot of time and help you decide if Chapter 13 is the best course of action for you.
How does a Chapter 13 bankruptcy work?
If you’re interested in learning how exactly Chapter 13 works, here’s what you need to know:
- The filing process
First, you will need to hand in your bankruptcy forms to the court clerk, along with the certificate that proves that you’ve received credit counseling education. Then, your income and debt data will be submitted for review. What ensues is another debtor education course which is also mandatory.
- Payments
You must make the initial payment within the first month of the bankruptcy filing. Depending on your plan, the installments will take place each following month until you pay back enough money to have the rest of your debt cleared.
To be eligible for Chapter 13, your unsecured debt must not exceed $394,725 which includes outlays such as credit card bills and personal loans. There is a limit for secured debt as well, and that is $1,184,200. Your income will also be a major factor and will determine whether or not you have enough disposable income to cover the repayment plan. Only individuals can declare Chapter 13, so businesses are out of the picture.
The creditors and the bankruptcy trustee are entitled to object to the provisions of your plan. If you are able to make the changes in order to meet their demands, your plan will be confirmed at the confirmation hearing.
Expert bankruptcy lawyers in La Mesa will turn your life around
Filing Chapter 13 is a major decision you should spend a lot of time considering. Preparing by yourself beforehand and knowing what to expect is important, but going through the bankruptcy proceedings all alone is ill-advised. To be completely confident that your bankruptcy will go as planned, Chang & Diamond lawyers will be by your side at all times.
With stable finances once again at your disposal, a shopping spree in Westfield Mission Valley will no longer take a toll on your budget.
Chang & Diamond know no failure. Reach out to us now!