Chapter 13 bankruptcies typically provide the greatest amount of benefits and the best bankruptcy option to individuals with household income greater than the median income for their state of residence and the ability to make minimal payments to creditors. As guided by a Los Angeles bankruptcy attorney, those who benefit to the highest degree are the households with significant assets, due to greater flexibility in terms of keeping those assets versus a liquidation in a Chapter 7 filing. Chapter 13 bankruptcies are known as “reorganizations” and allow filers to keep a wide variety of real and personal property after the conclusion of the bankruptcy process. The benefits resulting from Chapter 13 bankruptcies are derived from extremely effective forms of debt relief which can significantly reduce balances owed on assets such as homes and vehicles that will be retained by the filer.
After an assessment of the creditors listed in your petition and the balances owed to them, your Los Angeles bankruptcy lawyer will create a proposal for the repayment of a portion of the debt owed. This proposal must be approved by both the creditors and the bankruptcy court. If the payment plan is approved, end result of your Chapter 13 bankruptcy process will be a court approved payment plan based on your ability to make payments over an extended period of time. This benchmark is usually set at 25% of balances due which usually means that balances will be steeply discounted or discharged completely by the court. The monthly amount payable as set in the plan is based on disposable income remaining after a list of court approved expenses.
One aspect of the Chapter 13 bankruptcy code which Los Angeles bankruptcy attorneys are using to save filers who qualify tens of thousands of dollars is the allowance of an action called “lien stripping”. Lien stripping is a part of the bankruptcy code which enables a homeowner to have all subordinated debt on the home re-classified as unsecured debt if the value of the home drops to a level below the balance owed on the first mortgage. Under these circumstances, the court then treats these loans (second mortgages, home equity lines of credit, etc.) in the same manner as balances owed on credit cards, medical bills, and other unsecured balances. The subordinated loans are then either included in the repayment plan where they’re paid off with pennies on the dollar or discharged completely.
An additional benefit that Los Angeles bankruptcy lawyers can navigate in a Chapter 13 is known as an auto loan “cram down”. This benefit is available to filers who have purchased a vehicle at least 910 days prior to filing the bankruptcy petition. The second prerequisite is that the vehicle must have an appraised value lower than the balance owed on the car. If these conditions are met, the court can reduce the balance owed to the creditor to the current value of the car. The payment schedule can also be extended significantly. The combination of paying down a reduced balance with a longer time to pay it off can reduce the monthly payment on the car by over 75%.
Chapter 13 bankruptcy proceedings can result in the surrender of assets to satisfy creditors, requiring intensive planning prior to the filing by your Los Angeles bankruptcy attorney. Prior to filing a Chapter 13 petition, the attorney will consult with you regarding all aspects of the filing including your assets, income, expenses, and liabilities. As the process gets going your Los Angeles bankruptcy attorney will provide guidance on justifying asset valuations, creating a payment plan to submit to the court, and taking advantage of every opportunity provided by the Chapter 13 bankruptcy code. http://www.bankruptcyattorneyincalifornia.com
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