Another option to protect your interests in your home is to file for a bankruptcy under chapter 13 to stop the sale of your property, as well as to be approved for repayment plan for 60 or 36 months. Essentially, chapter 13 bankruptcy is another way to be allowed to repay your arrearages over 3 or 5 years. This is very similar to loan modification. If loan modifications are approved by lenders and are very subjective, a chapter 13 bankruptcy proceeding is commenced under federal law and under supervision of federal judge.
Ultimately, it is the litigation that is going to help you to find the best loss mitigation option that meets your financial potential and is available to you based on your circumstances. Once litigation is commenced we are also able to represent your interests in loan modification process, and, if not successful, to file for chapter 13 bankruptcy.
We maintain a dynamic bankruptcy practice, representing clients in Chapter 13 bankruptcy proceedings, handling bankruptcy related adversary proceedings, loan modification process, eviction and foreclosure litigation.
Whether a Chapter 7 or Chapter 13 bankruptcy is the right choice for you depends on your income, assets, debts, and your financial goals. We will assist you in making the right decision. However, not every debtor qualifies for Chapter 7. In some cases, repaying debt over time in a court-approved Chapter 13 repayment plan provides benefits that are unavailable in Chapter 7.
Chapter 7 bankruptcy will discharge most types of unsecured debt (immediate elimination of most unsecured debt). The trustee will sell any significant nonexempt property in order to repay your creditors. In Chapter 13 bankruptcy, you repay your creditors (some in full, some in part) through a Chapter 13 repayment plan (payment of your debts, in full or in part, over three to five years).
Keep in mind that when you file for Chapter 7 or Chapter 13 bankruptcy, you must compare your family income to the median income in California for the same household size. In Chapter 7, this is an important part of the means test. In Chapter 13, this is important in determining how long your repayment plan will last and also what expense figures you can use.
The Census Bureau publishes annual family median income figures for all 50 states. To compare your current monthly income to the family median income for your state, you’ll need to multiply your current monthly income by 12 (or divide the annual family median income figure by 12). You can find the most recent family median income at the website of the U.S. Trustee at www.justice.gov/ust (select “Means Testing Information” and then choose the correct filing date from the dropdown menu.)
Chapter 13 is one of the tools to protect you during foreclosure, but it isn’t for everyone, because Chapter 13 requires you to use your income to repay some or all of your debt, thus, you’ll have to prove to the court that you can afford to meet your payment obligations. If your income is irregular or too low, the court might not allow you to file for Chapter 13.
If your total debt burden is too high, you are also ineligible. Your secured debts cannot exceed $1,184,200 and your unsecured debts cannot be more than $394,725 (as of April 2016). A “secured debt” is one that gives a creditor the right to take a specific item of property (such as your house or car) if you don’t pay the debt. An “unsecured debt” (such as a credit card or medical bill) doesn’t give the creditor this right.
The most important part of your Chapter 13 paperwork will be a repayment plan. Your repayment plan will describe in detail how (and how much) you will pay each of your debts. There is no official form for the plan, but many courts have designed their own forms. Before you can file for bankruptcy, you must receive credit counseling from an agency approved by the United States Trustee’s office. (For a list of approved agencies, go to the Trustee’s website at www.usdoj.gov/ust and click “Credit Counseling and Debtor Education.”)