Chapter 13 Bankruptcy in California
Filing for Chapter 13 bankruptcy in California could provide you with the leverage needed to successfully implement critical financial changes required to save your property and assets. Unlike other types of bankruptcy, Chapter 13 allows you to restructure your debts to satisfy your creditors over a period of 5 years or less. This restructuring plan must be approved by a federally-regulated bankruptcy court before it can be put into action, so understanding how the Chapter 13 bankruptcy process works is critical to utilizing the protection of bankruptcy to its fullest potential.
Unlike Chapter 7 bankruptcies, Chapter 13 filings generally do not require the liquidation of property or assets. This is exceptionally useful for people who wish to repay their debts but need a restructuring of payment amounts, interest, fees and other terms. Consequently the most important requirement to file for this type of bankruptcy is a stable source of disposable income. Without this there is no money to pay creditors and thus no restructuring is possible.
The Chapter 13 plan that your bankruptcy attorney submits on your behalf must contain provisions to pay all creditors at least as much as they would otherwise be entitled to if you had filed Chapter 7 liquidation. Additionally, your creditors must not object to this plan and it must pay your accounts off in full within 5 years or less. Except in very specific circumstances all of your disposable income must be utilized as part of the court-approved plan.
Chapter 13 bankruptcy stops all wage garnishments and most tax liens if the plan makes provisions to pay tax debts in full. Additionally, all collection efforts must stop for the entire duration of the plan, except in the case where default occurs. In this case a decision about how to proceed will be determined by the court and the bankruptcy trustee.
Giving serious consideration to your financial situation concerning bankruptcy is critical because in some cases your creditors can actually force you into a Chapter 13 bankruptcy. This is especially true if you are a business owner. In fact, things can get even worse: if your creditors attempt to force you into Chapter 13 but you don’t have the required disposable income, the case can then be changed to Chapter 7 liquidation in which assets and property can be lost. For this reason you should always consult with a professional bankruptcy attorney if your financial situation is teetering on the edge of bankruptcy.
Recent changes to bankruptcy legislation have affected the way Chapter 13 filings and proceedings occur and also added a number of previously unnecessary requirements. Many of these changes were brought about by lobbyists who worked on behalf of lenders to make it more difficult for people to file for bankruptcy protection. As a result you should always request a free initial consultation from an attorney that specializes in Chapter 13 bankruptcy in order to determine how these changes affect you.