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Debt Reorganization Bankruptcy

A Chapter 13 bankruptcy is an interest-free repayment plan for those who have a stable, disposable income. This type of filing can assist you if you want to keep your assets and have the opportunity to pay off your debts over a period of time – usually 3-5 years. This is unlike Chapter 7 bankruptcy, where most of your debts are cancelled but you still may have to surrender some of your property to the bankruptcy trustee to pay your creditors. Because you end up paying off most of your debts over time in Chapter 13 bankruptcy, it is called a debt reorganization bankruptcy.

During the life of your Chapter 13 plan, you are under the protection of bankruptcy and the law forbids creditors from starting or continuing any collection efforts. You will generally pay back only a portion of your consolidated debts, interest free, and the remaining dischargeable debts that are not paid back within the 36 or 60 month payment plan are discharged after completing your bankruptcy plan. Chapter 13 bankruptcies require you to have a regular income sufficient to pay your current expenses, and the Plan Payment is designed to pay back anything from 0% to 100% of your debts.

By filing Chapter 13 bankruptcy you can:

  • Avoid accumulating the monthly interest and penalties that credit card companies require you to pay. Filing Chapter 13 bankruptcy stops the interest and penalties from accumulating on your debts.
  • Stop the foreclosure of your home. Chapter 13 allows you to keep your home while you catch up on the mortgage payments in which you are behind.
  • Remove a second mortgage from your home. If the value of your home is at or below the amount of your first mortgage, then you can strip the second mortgage off your property.
  • “Cram down” your car loan, which reduces the balance of your loan to the current market value of the vehicle.
  • Repay your priority tax liability within your Chapter 13 bankruptcy plan. If you have priority tax debt to the IRS or the State of California, you can repay your tax debt within a Chapter 13 plan.
  • Stop the repossession of your vehicle. Chapter 13 bankruptcy allows you to maintain your vehicle and repay your vehicle loan within a Chapter 13 plan. You can consolidate the past due payments and balance of your vehicle loan into your Chapter 13 plan.

Debts Not Eligible for Chapter 13 Discharge

Some debts are not eligible for discharge under a Chapter 13 filing. These include, but are not limited to:

  • Debts paid outside the plan
  • Debts for alimony and child support obligations
  • Debts for death or personal injury caused by the debtor’s operation of a motor vehicle while intoxicated
  • Tax debts that have been assessed within the prior 3 years
  • Student loan debts
  • Debts for restitution, criminal fines, and fraud
  • Debts incurred while the plan was in effect
  • Debts owed to creditors not given notice of the Chapter 13 filing

Every situation is unique, and our firm can analyze your unique circumstances to see if Chapter 13 is right for you. Relief starts now. Call us at (925) 278-6680.

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