Choosing a Chapter 13 Bankruptcy Attorney – Salinas, CA

What You Need to Know About Filing Chapter 13 Bankruptcy

There are several different types of bankruptcy that an individual may file, and depending on your situation there is usually one type that offers the most advantages.  In order to determine which type is right for your situation it is extremely important that you consult a competent attorney. This short guide will help familiarize you with the process of filing Chapter 13 bankruptcy.  You’ll learn what this type of bankruptcy is, eligibility requirements for filing, and how the process works.

What does “Chapter 13” imply?

A Chapter 13 is a reorganization of an individual’s finances under which we will propose a plan to the court that lasts from 3 to 5 years.  People who make too much money to qualify for Chapter 7 or want to protect assets that would otherwise be sold in a Chapter 7 may wish to instead consider filing Chapter 13 bankruptcy.

One advantage of Chapter 13 is that it may allow you to file and still keep possessions and property that would have to be sold in a Chapter 7 to pay creditors.  This may be especially important to business owners, since it may be essential that certain business assets be protected if the business is to continue to operate.  Other advantages are that we can sometimes eliminate second mortgages or home equity lines of credit on your home, you can pay back income taxes without incurring additional penalties and interest, or reduce car loans to the fair market value of the vehicle, etc.

The downside of Chapter 13 is that it involves a payment plan that will require you to make monthly payments for up to 5 years.  Also, it is generally more expensive in the long run than Chapter 7 as it is a much more involved process that must be administered for years.  Therefore, it is important to weigh all of the benefits before deciding to go down this path.

Eligibility for Filing

Not everyone is eligible for filing bankruptcy. For instance, if you are a corporation or partnership, you cannot file for Chapter 13. You must have adequate income to make the monthly payment set by the terms of your bankruptcy plan.

There are also limits set as to how much debt you are allowed to have and still qualify to file. If you have more than $1,081,400.00 in secured debt or over $360,475.00 in unsecured debt you may not be eligible to file Chapter 13 bankruptcy.  The way these debt limits are applied in certain circumstances varies, so it is important to consult a qualified attorney in order to see if you qualify for this form of relief.

How Reorganization Works

Once you have filed bankruptcy, the court will appoint a trustee to oversee the process. The trustee will put your creditors in an order of priority for repayment. Secured debts are usually paid first. Unsecured debts such as medical bills, credit cards, etc. are paid last if at all.  Certain types of unsecured debts, such as recent income taxes, back child or spousal support, have priority and will need to be paid in full.  The trustee helps ensure that the plan we propose meets all of the necessary requirements.

Part of the trustee’s job is to collect the payments and distribute them to your creditors in accordance with your plan.  She acts a bit like an escrow, receiving one payment from you and distributing those funds to those entitled to a distribution.  Long-term debts like mortgage loans are generally paid directly to your loan holder without the trustee acting as an intermediary.

Bankruptcy can be a confusing and complicated process.  It bears repeating that when dealing with a complicated legal matter like Chapter 13 bankruptcy it is important to seek help from a qualified Salinas bankruptcy attorney.

The Law Office of Stephen H. Kim is here to help answer any questions you may have with filing Chapter 13 bankruptcy.  We provide skilled representation you can trust.  Please do not try to handle this process on your own.  You could end up in an unexpectedly bad position without competent representation.  We’ve handled many consumer bankruptcy cases and can make sure your interests are protected.  Please contact us today if you are considering this form of bankruptcy, as we’re here to make the process of filing Chapter 13 bankruptcy in Salinas and Monterey as easy and painless as possible.