Chapter 13 is sometimes called a "wage earner's plan." Instead of wiping out debt in a few months, you make one affordable monthly payment for three to five years. At the end, most of the debt left on the plan can be discharged. For many homeowners in Whittier, Pico Rivera and Downey, it is a way to stop a foreclosure and keep the house.
Whittier cases are filed in the U.S. Bankruptcy Court for the Central District of California, Los Angeles Division.
How a Chapter 13 repayment plan works
You propose a plan, a written budget that tells the court how you will repay part or all of your debts. You pay one monthly amount to a Chapter 13 trustee, a court-appointed officer who sends the money to your creditors.
- Plan length. Plans last three to five years. If your household income is below the California median for your family size, the plan is often three years. If it is above, the plan is usually five years.
- Payment amount. The payment is based on your income, your reasonable living expenses, and what you owe on certain debts that must be paid in full.
- Unsecured debts. Credit cards and medical bills may get only a small part of what they are owed, or sometimes nothing. Whatever is left is usually discharged when you finish.
Stopping foreclosure and catching up on your mortgage
When you file, the automatic stay goes into effect. This court order stops a foreclosure sale, as long as the case is filed before the sale happens. It also stops repossessions, wage garnishments and creditor calls.
The past-due amount on your mortgage is called the arrears. In Chapter 13, you spread the arrears over the life of your plan. Each month you:
- Make your plan payment to the trustee, which includes part of the arrears.
- Keep paying your regular monthly mortgage payment as it comes due.
If you finish the plan, your mortgage should be current. Chapter 13 can also help with car loans, back taxes and past-due support, which can be paid through the plan over time.
If a sale is set for the next few days, read about filing an emergency bankruptcy and call us right away.
Who chooses Chapter 13 instead of Chapter 7?
Chapter 13 is often a better fit if you:
- Are behind on your mortgage and want to keep your home.
- Are behind on a car loan and want to keep the car.
- Earn too much to pass the Chapter 7 means test.
- Own property worth more than California exemptions protect, such as extra home equity.
- Owe taxes or support that Chapter 7 would not erase and need time to pay.
- Have received a Chapter 7 discharge too recently to file Chapter 7 again.
There are limits on how much debt you can have to file Chapter 13. We check this at your consultation.
To learn how exemptions protect property, see bankruptcy exemptions in Whittier.
Getting your plan confirmed
A plan only takes effect after a judge approves, or "confirms," it. Here is what usually happens:
- Filing. We file your petition, schedules and proposed plan.
- First payment. You start plan payments to the trustee soon after filing, even before the plan is approved.
- The 341 meeting. You meet with the trustee and answer questions under oath about your finances.
- Objections. The trustee or a creditor may object to the plan. We often resolve these by adjusting the plan.
- Confirmation hearing. The judge reviews the plan and confirms it if it meets the legal requirements.
What if I miss a plan payment?
Life happens over three to five years. Missing a payment is serious, but it does not always end your case. If you fall behind, the trustee can ask the court to dismiss your case. If the case is dismissed, the automatic stay ends and creditors can start collecting again, including restarting a foreclosure.
If you see trouble coming, call us before you miss the payment. Depending on your situation, options may include:
- Catching up the missed payments within a time the trustee allows.
- Asking the court to modify the plan if your income dropped or your expenses rose.
- Converting the case to Chapter 7, if you qualify.
- In some cases of serious hardship, asking for an early discharge.
Talk with us about Chapter 13
For an overview of all your options, visit our Whittier bankruptcy lawyer page, or see the step-by-step filing process and our bankruptcy FAQs.
Bankruptcy consultations are free. Steven Ibarra will look at your mortgage, your income and your goals and explain whether Chapter 13 makes sense for you. Annissa Henry helps you pull together the paperwork. Contact us or call (562) 612-7806. We are available 24/7. Hablamos español.