What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy allows you to reorganize your debt. This is the bankruptcy option for you if you are temporarily unable to pay your debts, but would like to pay them in installments over a period of time.
The biggest difference between Chapter 7 and Chapter 13 is that a Chapter 13 takes longer, and debts not discharged. They are repaid in monthly installments over a period of years. Filing any bankruptcy chapter is a big decision, so you should ask your Citrus Heights bankruptcy attorney to learn about the options available to you.
How Do I Know Whether Chapter 13 Bankruptcy Is Right for Me?
This type of bankruptcy is the best option if you are behind on secured debts, but you want to keep the collateral. It is also a good option if your income allows you to make the monthly payments. Your attorney can review your income, assets, and taxes with you to help determine whether Chapter 13 is right for you.
If You Fail the Means Test
If your income is too high to file a Chapter 7, you have no choice but to file a Chapter 13. In recent years, the courts have made it much more difficult to qualify for Chapter 7. Now, debtors must pass the means test if their income is more than the median for their state.
The means test takes into consideration your monthly expenses, such as:
- mortgage loans
- car payments
- child care
It then places them in a formula that will determine whether you pass or fail the test. If you want to file Chapter 13, you have to make sure that you make enough income to make the monthly payments. Missing a payment can cause the court to dismiss your case.
If You Want to Protect Your Assets
A Chapter 13 bankruptcy allows you to keep all of your property. This is a benefit that Chapter 7 does not provide. In a Chapter 7, most of your debts are discharged. However, you may have to surrender assets that are not covered by bankruptcy exemptions. In a Chapter 13, you have to repay your debts. However, you get to keep your assets.
And if you do have to buy back assets you couldn’t fully exempt, you have some time to do so, since a Chapter 13 is a three to five-year process. That means that the monthly payments will be easier to handle since they are spread over several years.
If You Want to Save Your Home
You have a much better chance of keeping your home if you file a Chapter 13. Your Citrus Heights bankruptcy attorney can inform you mortgage mediation programs that can help you work something out with the creditor and protect your home from foreclosure. Here, again, the three to five-year timeline of a Chapter 13 bankruptcy gives you time to repay the balance owed on your mortgage.
If You Owe Taxes
If you can’t discharge your taxes under a Chapter 7, a Chapter 13 may be a better option for you. It can save you a significant amount of money because it could toll any interest owed during the bankruptcy.
Contact Our Citrus Heights Bankruptcy Attorney
Chapter 13 bankruptcy is complicated. With any bankruptcy filing, there is a lot at stake. Before making a decision about which chapter to file, make sure you enlist the help of a legal professional who can analyze your case and recommend an option that will work best for you. Call the Law Offices of Diane Anderson at (530) 626-6441 today for a consultation.