Chapter 7 & 13 Bankruptcy in Los Angeles
Seasoned lawyers help debtors understand their bankruptcy and debt relief options
There are two main ways to file personal bankruptcy under the U.S. Bankruptcy code — Chapter 7 and Chapter 13. Both are bankruptcies, but they are extremely different and achieve different things. Chapter 7 is used by people with very little property except for basic necessities and little or no money left after paying expenses. Chapter 13 is used when a debtor has a regular income — enough to pay expenses and significant equity in a property that he/she wants to keep. Our attorneys will help you figure out which chapter is right for you by asking you a few simple questions, which you can also ask yourself.
Advantages of a Chapter 7 bankruptcy
In a Chapter 7 bankruptcy, most unsecured debts can be discharged, creditors can’t contact you while the automatic stay is in effect, or after the debts are discharged, and the process moves quickly so that you may receive your discharge in a few months.
Chapter 7 bankruptcy allows debtors to get a fresh start when their debt is too high, their income is too low and they cannot reasonably repay debts. The debtor’s non-exempt property is liquidated, or sold, and the proceeds are paid to creditors. Much of the debt remaining after liquidation is discharged, giving the debtor an opportunity to start over. A discharge releases the debtor from liability for these debts and prevents creditors from pursuing collection actions. In addition, the debtor may keep exempt property, such as some equity in the principal residence and a motor vehicle.
To qualify for Chapter 7 relief, individual debtors must either have a current monthly income less than the California state median or meet a means test limiting the amount of disposable income debtors can have in proportion to debt. Debtors who do not qualify may still seek Chapter 13 bankruptcy
Advantages of a Chapter 13 bankruptcy
The advantage of a Chapter 13 bankruptcy is that debtors can keep most of their property while spreading out the time to pay past-due accounts. Borrowers have three to five years to catch up on all past-due accounts according to a schedule agreed to by the debtor and the bankruptcy trustee.
Besides making regular mortgage payments, a Chapter 13 debtor makes one monthly “plan payment” to the bankruptcy trustee and has no other contact with applicable creditors.
Chapter 13 bankruptcy is available for consumer debtors who have unsecured debts that are less than $360,475 and secured debts that are less than $1,081,400. Because it requires debtors to have a regular income, it is called the wage earners’ plan. A debtor who has too little income, too much debt or continues to miss payments under a reorganization plan does not qualify for Chapter 13.
For Chapter 13 cases, our bankruptcy attorneys help debtors develop and file a repayment plan. If the debtor’s current monthly income is less than the state median, the plan extends three years unless the court approves a longer period. If the debtor’s current monthly income is greater than the median, the plan generally extends over five years. Five years is the maximum allowable repayment period.
Differences to remember between Chapter 13 and 7
The key difference between Chapter 13 and Chapter 7 that is important for homeowners to remember is that Chapter 7 may get you relief from a second lien if the value of your property is less than you owe on your first lien and has thereby become unsecured. It will not, however, help you avoid foreclosure longer than a month or two under an automatic stay. On the other hand, Chapter 13 will allow you to avoid foreclosure permanently as long as you can repay your arrears through the plan. If your servicer won’t give you a modification, a Chapter 13 bankruptcy is a kind of modification that makes an end-run around the servicer using the benefits of bankruptcy and the federal court.
Another key difference between Chapter 13 and Chapter 7 is that a Chapter 13 bankruptcy will require you to pay your outstanding credit card debt, which will become a part of your plan payment. With a Chapter 7 bankruptcy, non-exempt assets are liquidated to pay creditors, and most remaining consumer debts are discharged. You are not protected against foreclosure for very long in a Chapter 7 bankruptcy, but you will be able to stop creditor harassment, garnishment and repossession while you begin rebuilding your credit
Our attorneys at Advocate Legal will help you determine which form of bankruptcy is right for you depending on your goals, such as avoiding foreclosure, and whether you qualify. We are committed to explaining your options in detail so that you understand your rights and responsibilities and the effects of each option. When bankruptcy is not the best strategy in your case, we help you understand and explore your other debt-relief or litigation options.
Seek relief from debt with the help of compassionate lawyers in Los Angeles County
When unpaid bills, impending foreclosure and creditor harassment become overwhelming, we at Advocate Legal are dedicated to helping you achieve the relief you need. To learn more about our services and your bankruptcy options, contact us online or at [ln::phone] today.