Bankruptcy Chapter 13 Attorneys, Sacramento California
If you’re worried about the possibility of losing your home to foreclosure, losing your vehicle to repossession, or other consequences of overwhelming debt, Chapter 13 bankruptcy may be an appropriate legal strategy to resolve your financial issues. In addition to immediately freezing collection actions such as wage garnishment, Chapter 13 bankruptcy can also eliminate liability for many of your debts, empowering you to protect your property while getting the clean financial slate you need to regain control of your life.
If you believe that filing for Chapter 13 bankruptcy in California may be appropriate for your circumstances, you are urged to contact the experienced Sacramento Chapter 13 attorneys of The Bankruptcy Group today for a free and confidential consultation. Our skilled legal team has many years of experience helping Californians declare Chapter 13 and gain relief from crushing debt. To find out whether Chapter 13 is right for you, contact The Bankruptcy Group at (800) 920-5351 for your free legal consultation.
What is Chapter 13 Bankruptcy?
There are several different forms of bankruptcy available to eligible Californians. Most people file under Chapter 7 or Chapter 13, both of which are named for their chapters in the U.S. Bankruptcy Code. Bankruptcy under Chapter 13 of the U.S. Bankruptcy Code, which is sometimes referred to as “reorganization” or a “wage earner’s plan,” provides a powerful but very different set of tools from “liquidation” or “straight” bankruptcy under Chapter 7.
Like Chapter 7 bankruptcy, Chapter 13 includes a feature called the “automatic stay,” a court order (injunction) which provides immediate protection against collection attempts. In other words, the automatic stay can make anxiety-inducing phone calls and letters from creditors, their attorneys, and debt collectors stop. The automatic stay takes effect immediately upon filing, hence the term “automatic.”
With some exceptions, the automatic stay lasts throughout the entirety of the bankruptcy case, which brings up a very important point: the Chapter 13 timeline, which is one of the core differences between this type of bankruptcy and Chapter 7. While the initial relief provided by the automatic stay is immediate, the discharge (elimination) of your debt will take anywhere from three to five years, or 36 to 60 months, under Chapter 13 regulations. By comparison, Chapter 7 cases take several months to resolve.
Despite its duration, under the right circumstances Chapter 13 bankruptcy can be an immensely valuable tool that gives you the opportunity to catch up on overdue payments, such as:
- Car Payments
- Domestic Support Obligations
- Mortgage Payments
In exchange for making these and other payments through a three- to five-year repayment or “reorganization” plan (which gives reorganization bankruptcy its nickname), you will be allowed to keep all of your property, even if the property is not covered by the California bankruptcy exemptions. Furthermore, it may be possible to reduce various payments you owe, such as car payments. However, in order for you to keep your property, it is very important that you resume making your regular payments on secured debt, and keep current under the repayment plan that you propose.
To reiterate, the reorganization plan will last anywhere from three to five years, depending on your financial circumstances. If these circumstances change during the course of your case – for instance, if you sustain a disabling injury that affects your ability to earn income – it may be possible to modify a Chapter 13 plan, or, where appropriate, convert the case to a Chapter 7 bankruptcy.
Once you have completed your payments in accordance with your reorganization plan, many of your debts will be discharged, and you will continue to retain your property. Liability for debts from which you will be released, or “dischargeable” debts, include the following in Chapter 13 bankruptcy cases:
- Credit Card Debt
- Medical Debt
- Personal Loans
- Utility Bills
The Chapter 13 discharge is broader than the Chapter 7 discharge, and allows for the elimination of several debts which debtors cannot be released from under Chapter 7. For example, only Chapter 13 can discharge debts arising from property damage and divorce settlements. Such debts are non-dischargeable under Chapter 7.
The National Data Center (NDC) is a valuable resource for debtors filing Chapter 13 bankruptcy in California. NDC Chapter 13 services include case tracking and other features. You will need to create a debtor login to track your Chapter 13 case through NDC. Our Chapter 13 attorneys in Sacramento can help you learn how to use NDC and other resources to get the most out of your case.
Chapter 13 Bankruptcy Payments
Chapter 13 is extremely useful in protecting property that you do not want to lose. Another way to think about Chapter 13 is that it is a “reorganization” rather than a “liquidation” like Chapter 7. So, what does that mean for filers on a practical level?
To answer that question, one must understand exemptions in bankruptcy. In short, an exemption protects the associated property up to certain thresholds. For example, depending on which of California’s two exemption systems you choose to utilize, bankruptcy exemptions may cover up to $7,625 for heirlooms, jewelry, and works of art.
In Chapter 7, any property that is not completely, 100% covered by the relevant exemption will be subject to sale by the trustee in liquidation to satisfy the debts owed to creditors. This is not true in Chapter 13. Provided you can propose an acceptable reorganization plan and dutifully make your payments, you can keep your secured assets, like your home or car, regardless of the exemptions. If doing so becomes necessary, it may be possible to reduce your payments or extend the length of your plan.
Creditors and debts are not treated equally in Chapter 13 bankruptcy. The reorganization plan organizes your debts into three categories:
- Priority Claims – These debts must be paid in full unless the creditor consents to an alternative plan. Examples of priority claims include:
- Alimony and child support.
- Certain types of taxes.
- Pay you owe your employees, if you are a business owner.
- Secured Claims – Secured claims refer to debts that are secured by collateral. Car notes and home mortgages are a few common examples. In order for the filer to keep the collateral – for example, his or her vehicle or house – the reorganization plan must ensure that the creditor receives, at minimum, the collateral’s value. In some situations, the debt must be paid in full.
- Unsecured Claims – Secured claims refer to debts that are not secured by collateral. Medical bills and credit card bills are a few common examples of unsecured debts. Unsecured debts do not need to be paid off in full, provided the reorganization plan:
- Puts the filer’s disposable income toward payments.
- Ensures that unsecured creditors receive, at minimum, the amount they would have if the debtor had filed under Chapter 7, resulting in liquidation.
Because of the payment requirements involved in Chapter 13, you must be able to show that you have sufficient disposable income to realistically cover a three- to five-year plan. This determination is known as “means testing.” If you have limited income and assets, you may be required to file under Chapter 7.
What is a Chapter 13 Trustee?
Bankruptcy cases involve multiple parties: you (the debtor), your attorney, your creditors, the bankruptcy court that is handling your case, and, critically, an individual known as the “trustee.”
The trustee takes on a slightly different role depending on what type of case he or she has been appointed to by the court. In Chapter 7 cases, the trustee has two primary functions:
- Making sure there are no errors, discrepancies, or omissions in your bankruptcy paperwork.
- Selling your assets, unless they are protected by bankruptcy exemptions.
However, Chapter 13 does not involve a sale or liquidation of assets; so what does the trustee do in Chapter 13? In addition to reviewing your financial paperwork for accuracy and truthfulness, just as he or she would in a Chapter 7 case, the role of the bankruptcy trustee in Chapter 13 cases also involves:
- Managing your reorganization plan. You will make your payments to the trustee, who is in charge of distributing the payments to creditors as the plan instructs.
- Overseeing a hearing known as the “meeting of creditors,” “341 hearing,” or “341 meeting,” named for Section 341 of the U.S. Bankruptcy Code. The purpose of this hearing is to review and confirm all of your financial information.
- Making sure creditors do not improperly claim payments which you do not owe.
How to File Chapter 13 Bankruptcy in California
Reorganization bankruptcy is a nuanced, intricate process which should be overseen by an experienced Chapter 13 lawyer in Sacramento. While the following description is an oversimplification, it will help to give you an idea of the California Chapter 13 process:
- Before doing anything else, the debtor should confirm with an attorney that Chapter 13 is in fact the most appropriate option. Even if Chapter 13 is suitable, it may be advantageous to postpone filing by several weeks or months, depending on your situation.
- Before he or she is permitted to file, the debtor must:
- Go through means testing, which assesses disposable income, in order to confirm eligibility for Chapter 13.
- Determine, with help from an attorney, which set of exemptions are appropriate.
- Successfully complete pre-bankruptcy credit counseling through a California credit counseling agency approved by the Department of Justice (DOJ).
- The debtor should gather as much financial paperwork as possible, including but not limited to tax returns, pay stubs, bank statements, credit reports, and other documentation. This information will be necessary to complete the bankruptcy paperwork.
- With assistance from a Sacramento Chapter 13 lawyer, the debtor will then file for bankruptcy in the appropriate court. Filing triggers the automatic stay, which temporarily freezes collection actions until the case is over.
- The court will appoint a trustee, whose role is explained above, to handle your case. The trustee will schedule a meeting of creditors within 21 to 50 days after the Chapter 13 petition has been filed. Prior to this meeting, the debtor must propose a repayment or reorganization plan (within 14 days of filing the bankruptcy petition). The plan must be approved by the court, and the filer must make payments in accordance with the plan.
- The filer must start making payments within 30 days of filing, even if the plan has yet to be approved at this time.
- Before the case is discharged, the filer must successfully complete a debtor education course, which, like the credit counseling course, must come from a DOJ-approved credit counseling agency in California.
- When the case is discharged, the filer will be released from liability for various debts.
What is the Cost of a Chapter 13 Bankruptcy Attorney?
Too often, debtors hesitate to hire a Chapter 13 attorney because they are worried about how much it will cost. However, the cost of handling your own bankruptcy case – or of simply eschewing consumer bankruptcy altogether – is likely to be far greater than the cost of your case, which can ultimately enable you to get your debts under control. We urge debtors to consider the following words of caution from the U.S. court system, which also notes that “seeking the advice of a qualified attorney is strongly recommended” due to the repercussions of bankruptcy:
“Filing personal bankruptcy under… Chapter 13 takes careful preparation and understanding of legal issues. Misunderstandings of the law or making mistakes in the process can affect your rights.”
When your case is complete, you will be released from most of your obligations, giving you the clean slate you need to start building good credit. Freed from many of your liabilities, you will be in a much better position to make timely payments and control your finances going forward.
Bankruptcy Attorney Fees Chapter 13
At The Bankruptcy Group, we know that costs are a concern for clients who are thinking about declaring bankruptcy in Sacramento. We work to provide transparent and affordable pricing in order to help accommodate the filers we represent. Additionally, your initial consultation is absolutely free of charge. The purpose of your consultation is to get an idea of your financial circumstances and discuss whether Chapter 13 is the right bankruptcy option for you.
The experienced attorneys of The Bankruptcy Group are here to provide trusted guidance for your debt concerns. We always discuss with potential clients the nature of their debts and goals. Only after thoroughly understanding these items will we recommend non-bankruptcy or bankruptcy debt solutions like Chapter 13.
When you work with our firm, you can expect responsive, personal service to put your fears and anxiety to rest. To schedule a free and confidential initial consultation with one of our California Chapter 13 attorneys, call our law offices at (800) 920-5351 today.