San Fernando Valley Chapter 13 Bankruptcy Attorneys
Filing Chapter 13 in San Fernando Valley
If you are drowning in debt, filing a Chapter 13 to re-organize and consolidate your debts may be a good option. This is especially true when your second mortgage can be eliminated and allow you to stop house foreclosure. In California, filing for Chapter 13 debt consolidation is a powerful and legal way to stop the foreclosure process immediately.
Additionally, there are certain debts that may be erasable under Chapter 13 that cannot be erased under Chapter 7. For example, Chapter 13 will stop all interest and penalties being levied by the IRS, and might even be able to eliminate some IRS debts.
A Chapter 13 plan is designed to let you keep what you want and pay as much as you can afford. After a period of 36-60 months, any unsecured debts that you have not been able to pay off are completely eliminated.
Sometimes our clients reach us too late in the foreclosure process and we file a Chapter 13 in order to stop house foreclosure and buy time to exercise any other options, including Loan Modification.
Timing is everything during a financial crisis. The more time we have, the better we can prepare and the more options that are available.
Does Chapter 13 Bankruptcy Allow for Foreclosure Prevention?
Chapter 13 bankruptcy allows individuals to keep the majority of their property. If you file bankruptcy, you will need to pay your creditors as much as possible, and sometimes, personal property is used as a form of payment. If your home is in the process of foreclosure, you must make an effort to keep up with your secured debt payments (ex: car payments, loans, etc.). Simply put, filing Chapter 13 can delay the foreclosure process and allow you to remain in your home.
Does Chapter 13 Bankruptcy Protect Personal Property?
During Chapter 13, you will not be required to put your nonexempt assets into a trust. Instead of liquidating your property, as you would in Chapter 7, you will work with your creditors to create a repayment plan. This allows you to keep both your exempt and nonexempt property as long as you pay your debts. Despite this fact, the more nonexempt assets you possess, the more you will have to pay your creditors back. To ensure that you uphold your end of the payment plan, the court will require you to pay your unsecured creditors in installments equal to or greater than the value of your nonexempt assets.
When a creditor repossesses a property in order to settle a debt, the debt is said to be "secured." These debts are treated differently than unsecured debts, such as credit card bills, where the creditor cannot repossess property to pay off the debt. If an individual misses any payments during Chapter 13 bankruptcy, he or she will be required to make payment arrangements in order to keep his or her property from being sold.
How Do You Qualify for Chapter 13 Bankruptcy?
You can only file Chapter 13 bankruptcy if you meet certain standards. These standards are relatively straightforward, but you will need to fully understand them before you file. To qualify for Chapter 13, the following statements must apply to you. If you do not meet these standards, you may want to consult a credit counseling company or consider debt negotiation.
- You must have filed your federal and state taxes for the last four years. If you are not current, the court may agree to delay bankruptcy proceedings until you can catch up on your taxes. However, if you fail to provide proof of tax payment, your case will be dismissed.
- If your secured debts exceed a certain amount, you will not be able to file Chapter 13. This amount fluctuates from year to year and usually hovers around $1.1 million. Most of the time, your debt will be secured if your property can be repossessed, but there are times when it can be secured by having a lien placed against the property. There is also a minimum amount that the total value of your unsecured debt must exceed. This amount is usually around $395,000, and if you earn less, you will not be able to qualify.
- Chapter 13 is essentially a repayment plan, and it will only work in your favor if you have the funds to repay your creditors over time. During proceedings, you will need to provide proof of income so that the court knows you are capable of paying off your debt.
Chapter 13 Bankruptcy and Your Credit Score
It is possible for a Chapter 13 bankruptcy to remain on your credit report for up to 13 years. This may sound scary to some people, but missed payments, repossessions, and defaults will also remain for some time, and can be equally as devastating as bankruptcy. Having a bankruptcy on your report will also make it nearly impossible to get a loan, and you will probably lose all of your credit cards as well.
Please contact a San Fernando Valley bankruptcy attorney at Nader & Berneman if you need help avoiding foreclosure. We can be reached at (818) 788-5008, and we can provide you with more information about Chapter 13 and foreclosure laws.
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