Is Chapter 13 Bankruptcy Right for Me?

Chapter 13 bankruptcy is not necessarily right for everyone. The process is designed for people with some means to partially repay what they owe. This type of bankruptcy will not necessarily be appropriate for someone with little to no current income, for example.

There are four common questions we ask our prospective clients when they are considering Chapter 13 bankruptcy:

• Are you behind on your mortgage, or have you received a notice of default or foreclosure?
• Are you behind on your income taxes and need help avoiding a possible wage garnishment?
• Do you need help protecting your assets from liquidation?
• Do you not qualify for Chapter 7 bankruptcy due to your current level of disposable income?

If you answered “yes” to any of these questions, Chapter 13 bankruptcy may be right for you. 

Chapter 13 vs. Chapter 7

Chapter 7 bankruptcy may be a better choice for you if you have little to no means of repaying your debts. In order to be eligible, your current average income for the preceding six months must be less than California’s current average median income for your household size, or you must have sufficiently low disposable income after accounting for qualifying expenses. 

Chapter 7 bankruptcy comes with its own caveats, however, including the liquidation process. Non-exempt assets will be liquidated in exchange for a debt discharge. Chapter 13 bankruptcy will make more sense if you do not qualify as a result of your income or you have non-exempt assets you wish to protect. Filing for Chapter 13 relief can be extremely useful if you wish to avoid foreclosure and keep your home, for example.

Our Los Angeles Chapter 13 bankruptcy attorneys will carefully evaluate your circumstances and advise what type of bankruptcy is right for your situation. We will give you the information you need to make an informed decision and can help you understand what to expect if you choose to file.

How Chapter 13 Bankruptcy Works

Chapter 13 bankruptcy is a form of debt reorganization, so it is important that your finances be succinctly and accurately presented to the court. We will provide these services as part of our representation and will complete all accompanying paperwork in full on your behalf. 

As soon as you file your petition, you will be protected by bankruptcy’s automatic stay. This court order keeps creditors from initiating or continuing damaging collections against you, and in most circumstances, the automatic stay will protect you for the duration of your bankruptcy case. 

As a result, you will be potentially protected from foreclosure, repossession, collection lawsuits, and wage garnishments. You will also be safe from creditor harassment, as debt collectors are prohibited from contacting you once you file. 

When you file for Chapter 13 bankruptcy, you propose and commit to a debt restructuring plan that lasts between three and five years. All of your outstanding obligations will be consolidated into a single monthly payment. These payments will work to address all of your debts, and you will only be required to pay what you can currently afford. 

So long as you continue to make your court-approved payments, your assets will be safe from repossession.