What is Chapter 13?
Chapter 13 bankruptcy is a repayment plan where you consolidate your debts and make a single payment on your debt over a three to five year period. The payments are made to a Chapter 13 Trustee.
Your payments are based on the greater of:
1) disposable monthly income (money you have left over after all necessary expenses are paid); or
2) liquidation value of your non-exempt assets.
How much do I need to repay?
Despite popular belief, in general Chapter 13 does not requires 100% repayment on all debt. In fact, a great majority of our cases repay a small percentage of total debt. Your lawyer can help you figure out if you qualify for Chapter 13, and help you to pay the least amount required. The payment plan looks at what you can afford over the three to five year period. After making payments within the plan, your remaining unsecured debts (such as credit cards and medicals) are discharged, and you continue to pay your mortgage, and other secured debts that survive the bankruptcy.
Which is better? Chapter 7 or Chapter 13?
Chapter 13 offers two major benefits over Chapter 7 bankruptcy. 1) Any late payments or “arrearages” can be made up over the repayment periods. 2) Second mortgage or home equity lines of credit (HELOC) may be “stripped,” potentially eliminating your second mortgage or HELOC. This Chapter can be useful to people who are facing foreclosure, have property they want to keep or for those who need bankruptcy protection, but do not qualify under Chapter 7 bankruptcy.
One very important thing to remember about Chapter 13 is that you must be working or have a consistent source of income for your repayment plan to be approved by the court. Your San Francisco bankruptcy lawyer at JC Law Group PC will help guide you through the process of filing a Chapter 13.
Please contact us for a consultation.
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