Bankruptcy Chapter 7 & 13
What is a Chapter 13?
A Chapter 13 is also known as debt reorganization you can repay your creditors over a 3 or 5 year plan. In many cases, some creditors receive only a fraction of what they are owed or may not receive anything at all. Individuals with small businesses or sole proprietorships can use this chapter to keep their businesses operating with some limitations; you have to seek legal advice from a certified bankruptcy attorney.
Why Would I File a Chapter 13?
Debtors who do not qualify for a Chapter 13 or who are seeking to avoid foreclosure on their home, or who may have other assets subject to being seized under Chapter 7 may opt to file under Chapter 13. Our bankruptcy attorneys will advise you on which option is best for you.
Do I Have to Qualify for a Chapter 13?
You can qualify to file for a Chapter 13 if you are an individual or spouses who file jointly and businesses that are sole proprietorships. You also have to provide a debt management plan with the court when you file or within 15 days of filing. Further, your debt cannot exceed $383,175 in unsecured debt and $1,149,525 in secured debt as of 2014.
If you filed a previous Chapter 7 petition, you must wait 4 years before filing a Chapter 13. If you want to file Chapter 7 in this situation, you have to wait 8 years before filing another one.
You Can Avoid Foreclosure
Debtors who are facing foreclosure or who may even have a pending sale date can still save their homes if they immediately contact us. We can take steps that can avoid foreclosure under Chapter 13, provided you can still make your monthly mortgage payments. By reorganizing your debts, you can have sufficient disposable income to meet your mortgage loan obligations and remain in your home.
- -The Second Mortgage Strip
- -For homeowners with a second mortgage who owe more on their first mortgage than what their home is worth on the open market, our attorney may be able to file a LAM motion in Chapter 13 that effectively strips off the second mortgage. By doing this, the homeowner can now afford to meet the monthly mortgage payments for the first lender. Homeowners with negative equity or which are “underwater” should discuss filing a Chapter 13 with us to see if this can relieve your financial burden and enable you to keep your home.
What is a Chapter 7 Bankruptcy?
Chapter 7 is for consumers or certain businesses that wish to liquidate or dissolve their operations. For individuals, this process gives them a “new start” by allowing them to eliminate, or wipe out, their unsecured debt, such as credit cards, medical bills, payday loans, personal loans and even deficiency claims on repossessed property.
Once you file, your creditors must cease any further contact with you along with any other collection activities including court actions or attempted levies. You can have this debt wiped clean in as little as four months after you file.
Can Anyone File?
- -Not every consumer can file a Chapter 7. Since 2005 when the bankruptcy code was revised, all consumers and businesses wishing to file must meet a Means Test. This is a formula for determining if you qualify based on your income and household size. It was designed to weed out those debtors who had the means or wherewithal to meet their debt obligations but chose not to do so. This method can ensure that you are eligible to get a fresh start and begin your financial life with some breathing room.
- -AAA Law Solutions Inc will examine your income situation and see if you do qualify even if other attorneys have told you that you do not meet the Means Test.
- -What if My Income is Too Large?
- -You may think that your income is too substantial to qualify for Chapter 7. First, let us determine if you do meet the Means Test. We will take your average income based on the previous 6 months and compare that to the state’s median income for a household of your size. You automatically qualify if your income level does not exceed the median for your household. For example, in 2013, a family of four in California qualified if their annual income was below $75,656. These figures are periodically adjusted upwards.
- -But even if your income exceeds the median, you may still qualify. Our attorneys will look at your expenses and see if we can deduct some of them to determine if you have enough disposable income to pay your creditors. We may be able to file for you even if it looks like you do not qualify at first glance so it is essential that you consult with us as quickly as possible before you start making decisions that could jeopardize your financial situation.