Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy allows debtors who have enough disposable income pay off certain debts over a period of three to five years. The goal of this type of bankruptcy is to obtain a discharge of certain debts after you successfully complete the repayment plan. Debt reorganization is a large part of filing for Chapter 13 bankruptcy. Experienced Los Angeles bankruptcy attorney Devin Sawdayi can help you reorganize, file your petition, and advise on other aspects of bankruptcy relief. Someone who is able to reorganize debt appropriately and successfully complete a repayment plan will have opportunities to save his or her home from foreclosure, protect a vehicle from being repossessed, and keep various assets.How Does Reorganization Work?
Your Chapter 13 bankruptcy proceedings start when your attorney files a bankruptcy petition. This will include information about your assets and liabilities, your financial affairs, proof of credit counseling, and a debt repayment plan that you developed during credit counseling.
The credit counseling you receive must be from an agency approved by the United States Trustee's office. They can counsel you for free or at reduced rates if you are unable to pay their fee. Among other things, they will help you look at how much you earn. If your income for the six months prior to your bankruptcy filing date is more than California's median income, you will have to reorganize your debts to repay them over a five-year period. If your income falls below the California median income, you can reorganize your debt to repay creditors over a three-year period.
A trustee will administer your bankruptcy case. His or her first task will be to look over your debt repayment plan. The debt repayment plan will reorganize your debt into three types of claims: priority, secured and unsecured.
Priority claims have to be paid in full unless the creditor agrees to a modification. They include spousal support, child support, and taxes. Secured claims are those in which property, such as a car or furniture, acts as collateral that can be repossessed if you don't pay off the debt. Unsecured claims are those that are not "secured" by property. Examples include credit card and medical debts. Usually, the reorganization does not require you to repay the full amount of your unsecured debt, but these creditors will need to receive about as much as they would if your non-exempt assets had been liquidated in a Chapter 7 bankruptcy.
How your unsecured debts will be reorganized and how much you have to repay depends on how much disposable income you have and your ability to claim exemptions. For example, if you own a beachfront condo as a vacation home, you can keep it in Chapter 13 bankruptcy, but owning it can have a significant impact on the amount you have to repay creditors.
One benefit of reorganization is that you will be able to make a single payment, rather than juggle numerous debts as you did before filing for bankruptcy. The trustee will examine your record and debt repayment plan to make sure that you can realistically repay your debts according to the plan you've made. The plan will be adjusted every year depending on your ability to pay and changes in your living expenses. The trustee collects a single payment every month and distributes the payment to creditors.Legal Guidance for Los Angeles Residents Facing Bankruptcy
Chapter 13 bankruptcy has many complex rules, so it is critical to work with an attorney who has experience helping debtors through this process. A trustworthy Los Angeles bankruptcy lawyer can help make sure that you get the greatest possible relief for your debts through reorganization. Contact Devin Sawdayi at 310-475-9399 or via our online form for a free consultation.