Chapter 13 Bankruptcy Attorneys in Encino

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Chapter 13 bankruptcy, often called "wage-earners bankruptcy", provides a person with a way to achieve a new start, but requires the filer to pay off some of their outstanding debts.

What is Chapter 13?

Under the terms of Chapter 13 bankruptcy, your unsecured debts are combined into one category and a payment plan is developed based on calculations of your disposable income. You will still have enough of your income to pay your living expenses, such as house payment, car payment, and utility bills, but the largest part of your income above those expenses will be used to pay off your unsecured creditors over a 3 to 5 year period. Once the agreed payments have all been made, you will receive a discharge for your debts that were included in the bankruptcy, whether or not the payments satisfied the outstanding balance.

Contact an Encino Chapter 13 lawyer online or call (866) 210-1722 for a free initial consultation.
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About the Chapter 13 Filing Process

Filing a Chapter 13 bankruptcy requires you to submit a detailed budget to the court and the trustee. It may take time for you to compile all the records necessary to file a Chapter 13 case. Your Encino bankruptcy attorney will help you evaluate your financial situation and prepare your case for court.

When you file your case, you must begin making payments to the Chapter 13 trustee who will oversee the payment of your debts in the bankruptcy case. If you wish, most trustees will allow you to set up an automatic draft so that payments can be made from your bank account automatically.

Typically debts that you owe to the government are not dischargeable, but including them in your Chapter 13 plan can have many benefits. Chapter 13 bankruptcy freezes interest and penalties on taxes. This will allow your payments to go directly to the principle, greatly reducing your interest and penalty burden. Chapter 13 will stop the government from adding more penalties and interest to your back taxes.

What is a Cramdown in Chapter 13?

Struggling with debt can be extremely overwhelming, and in some cases, it may appear that there is no way to get out of the pit. Chapter 13 bankruptcy specifically is considered to be a debt reorganization rather than elimination like Chapter 7. In some cases, you may have an investment property in which your principal balance of debt (the mortgage you owe) is actually higher than the value of the home itself. In this case, chapter 13 bankruptcies allow the opportunity of what is called a "cramdown" in order to help you reduce that principal payment. Unfortunately, only specific forms of secured debt can be used for a cramdown. What makes your debt secured is that there is a security interest by your lender in the property allowing them the power to repossess in the event that you are unable to make your payments. This can include your car payments, investment properties as well as various forms of personal properties as well.

Chapter 7 Vs Chapter 13 Bankruptcy

Chapter 7 bankruptcy is different from Chapter 13 bankruptcy in that Chapter 7 can be used to eliminate unsecured debts such as medical bills, personal loans, and credit cards. A Chapter 13 plan allows you to repay secured debt, such as a car loan, and liquidate unsecured debt at the same time.

Call an Encino Chp. 13 Lawyer at (866) 210-1722

The process of a cram down can be complicating and for this reason, hiring a trusted Encino bankruptcy attorney in your area is absolutely essential. For more information on the protections available under Chapter 13 bankruptcy, schedule your appointment for a free initial consultation with Price Law Group.