If you’re struggling with debt, a bankruptcy filing may provide you with debt relief. Debtors can choose between two types of bankruptcy to having their consumer debts eliminated – Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy (or liquidation bankruptcy), the bankruptcy trustee sells your nonexempt property and distributes the proceeds to your creditors in exchange for discharging your debts.
On the other hand, a Chapter 13 bankruptcy (also known as wage earner’s plan) allows you to keep both exempt property and certain nonexempt assets while you pay off a portion of your debts in a debt repayment plan. Read on to learn how to file Chapter 13 bankruptcy in California.
1. Take a credit counseling course.
The Bankruptcy Act of 2005 requires that within six months before filing, petitioners must complete a credit counseling course from an approved credit counseling agency. You’ll also need to take a debtor education course after filing to receive your discharge in bankruptcy.
2. Check your eligibility.
Before filing bankruptcy, you need to make sure that you’re qualified to declare bankruptcy in Chapter 13. The bankruptcy means test determines whether you’re eligible to file for Chapter 7 or if you must file bankruptcy under Chapter 13. The means test takes your household income and compares it to the state median income to determine if you can repay part of your unsecured and secured debts. A reliable bankruptcy attorney can help you determine your eligibility to file for Chapter 13 bankruptcy.
3. Prepare your bankruptcy petition and proposed plan.
The bulk of the work lies in preparing your bankruptcy petition. For this step, you’ll need to fill out several bankruptcy forms and provide information regarding your monthly income, living expenses, your secured and unsecured debts, and all of your assets and personal property. You also need to prepare your tax returns for the last two years, along with titles and deeds to any vehicles or real estate owned by you. You can get a bankruptcy petition preparer or hire a local bankruptcy lawyer to make sure that the information on your bankruptcy paperwork is accurate and complete.
You also need to make a debt repayment plan, which is essential to the Chapter 13 bankruptcy process. The payment plan describes how you plan to pay back qualifying debts, and will include details such as the number of monthly payments and how much each creditor will get. Once your petition for bankruptcy and a debt repayment plan is prepared, you need to file it to the bankruptcy court and pay the appropriate filing fees.
4. Send documents to your bankruptcy trustee.
Once the bankruptcy proceedings are underway, the automatic stay takes effect and prevents lenders from contacting you directly. The stay can also prevent repossession and stop foreclosure of your home.
A trustee will be appointed to your bankruptcy case by the court, and they are responsible for verifying the accuracy of the bankruptcy information you provided. In the process of reviewing your assets and liabilities as well as your proposed payment plan, your assigned trustee may ask you to provide additional information regarding your financial situation. Make sure to respond to these requests to help your bankruptcy proceeding move along.
5. Attend the creditor’s meeting.
The first time you’ll need to go to court is for the meeting with creditors. During the meeting, the trustee and your creditors can ask you questions about the information you provided and raise objections regarding the repayment plan. Your bankruptcy attorney can negotiate with the creditor to come up with a compromise. Otherwise, a judge can intervene to resolve the issue.
6. Get your repayment plan confirmation.
When all objections are resolved, a bankruptcy judge will confirm your Chapter 13 repayment plan at the confirmatory hearing. Once confirmed, you can start making payments and work on completing your three to five-year payment plan.
7. Receive your bankruptcy discharge.
After completing your debt repayment plan and taking a financial management course, you will receive your discharge. Trustees and creditors have around two months to challenge the debtor’s right to a discharge. If there are no challenges, you will receive a notice from the court that your dischargeable debts have been discharged within three to six months.
If you’re considering bankruptcy, our experienced bankruptcy attorney at Daniela Romero Law can provide legal assistance in filing bankruptcy. Contact us today and schedule a free consultation with us!