What is Chapter 13 Bankruptcy?
Chapter 13 is a type of consumer bankruptcy that allows a person to reorganize his or her debts. In Chapter 13, the person who files proposes a repayment to the court and, if it’s accepted, makes payments to a bankruptcy trustee for three to five years. The bankruptcy trustee makes payments to your creditors. At the conclusion of your repayment plan, many, if not all, of your remaining debts will be discharged.
Why Do People File for Chapter 13 instead of Chapter 7?
In a Chapter 7 bankruptcy, a debtor can obtain a discharge of his or her debts without having to enter into a payment plan. As a result, many people wonder why you would file for Chapter 13 instead of Chapter 7. It all depends whether the filer wants to keep his or her assets. In a Chapter 7, all of a debtor’s nonexempt assets are sold off in order to pay off creditors. In a Chapter 13, however, a debtor can keep his or her assets and is protected from any collection activity as long as payments are made to the trustee.
Can I Use Chapter 13 Bankruptcy to Save My House?
In some cases, you can use Chapter 13 bankruptcy to save your house. If you are behind on your mortgage and facing foreclosure, you can take your arrearage (the amount you are behind on your mortgage) and include it in your bankruptcy plan, giving you three to five years to pay it off. It’s important to understand, however, that you need to be able to keep up on your mortgage payments moving forward, so it’s important to determine whether you can realistically afford them.
If you are having trouble keeping up with your financial obligations in spite of making regular income, Chapter 13 bankruptcy may be able to help you. To discuss your financial situation with a bankruptcy lawyer in Los Angeles at no cost to you, call our office today at 323.940.1700 or contact us online.