Chapter 13

Advantages of Chapter 13

Repay creditors over time
Not everyone qualifies

Chapter 13 Bankruptcy

Services by Equal Justice Law Group

Equal Justice Law Group provides complete Chapter 13 Bankruptcy services to individuals just like you. Our team has decades of experience in this field and has served thousands of clients.

Chapter 13 bankruptcy is designed to give you the opportunity to reorganize your finances, pay off creditors over time, and return to financial health without the liquidation involved in Chapter 7. Here's how it works:

Chapter 13 bankruptcy is designed for people who receive a qualifying income. When you have a regular income (such as from a steady job, pension, Social Security, family assistance), the court sees this as an ability to make regular debt-maintenance payments – even if your pay is insufficient to pay all of your acquired debt.

When you file Chapter 13 bankruptcy, you provide the court with a plan to repay your creditors over a period of three to five years. At the end of your payment period, any unsecured debts that remain unpaid are extinguished. Some debts cannot be discharged at the end of the plan, including alimony child support, most student loans, and some taxes. 

It's important to note that not everyone qualifies for Chapter 13 bankruptcy.

To find out if you are eligible for Chapter 13 bankruptcy, or if Chapter 7 makes more sense for you, we invite you to contact us at Equal Justice Law Group. With offices in Sacramento, Sutter Creek and Placerville, we're nearby and ready to serve you.And as always, your case evaluation and initial consultation are both confidential and absolutely free.

Eligibility and Repayment

The bankruptcy court will not approve Chapter 13 for a debtor who has too low of an income, or too irregular of an income.

In addition, debtors with too much debt will be excluded from Chapter 13 by the court.

You must submit either a 3 or 5 year repayment plan to the court as part of Chapter 13.

Advantages of Chapter 13

Although you can eliminate mortgages and auto loans in Chapter 7 cases, a chapter 7 does not provide a mechanism to bring past due payments current.  Because home loans and auto loans are secured, if they are not kept current, the lender will eventually be able to foreclose or repossess its collateral even though delayed by a Chapter 7.

NOT SO IN CHAPTER 13!  In Chapter 13 a successful repayment plan can give you up to five years to bring past due payments current so you can protect your home from foreclosure and your car from repossession. 

In addition, in some circumstances you can completely eliminate junior liens on your home (i.e. a second or third mortgage), reduce the interest rate and possible the payoff balance on your car loan, or even protect assets that could subject to a liquidation ("sale") in a Chapter 7.  A qualified attorney can help you navigate these complexities and develop a strategy that makes sense for your needs.

Because Chapter 13 requires a repayment plan, those filing this way are required to take a California Means Test. The two outcomes are:

  • Your income is greater than the state's median income; you must propose a 5-year repayment plan
  • Your income is less than the state's median income; you may propose a 3-year repayment plan

Inability to Make Payments

If unforeseen issues prevent a Chapter 13 debtor from making his or her agreed-to payments, Equal Justice Law Group will try to convince the court of one of the following options:

  • Modify your repayment plan
  • Discharge the remaining debt
  • Convert to a Chapter 7 bankruptcy

Bonus Content: What You Should Know About The Means Test Before Filing

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