Bankcruptcy Law

Chapter 13

What is Chapter 13 Bankruptcy?

Chapter 13 differs from other bankruptcy methods as involves a debtor filing a payment plan with a bankruptcy court. This payment plan, once approved, allows the debtor to repay creditors over a period of years. It is an alternative form of bankruptcy for those who possess income that is too high to qualify for Chapter 7, or for those who wish to protect non-exempt assets from the liquidation process. In order to qualify for Chapter 13, an individual must have a regular income that can cover the cost of the payment plan, either through employment, the operation of a business, or some other source.

Qualifications for Filing Chapter 13

A person may not file for Chapter 13 if:

  • He or she has filed for bankruptcy in the preceding 180 days; and
  • The bankruptcy case was dismissed by a court due to a willful failure on the part of the person to abide by the orders of that court; or
  • The person dismissed their bankruptcy after a creditor asked for relief from an automatic stay

A person will also be denied Chapter 13 protection if they possess unsecured debt that exceeds $360,475 in value, or secured debt that exceeds $1,081,400 in value.

In order to file for Chapter 13 bankruptcy in California, you must be a California resident for at least 90 days before you file. In addition, you are only allowed to file for bankruptcy in the state where you have resided for a majority of the prior 180 days. Once your case is filed with the appropriate bankruptcy court, the court will issue an Automatic Stay order that prevents creditors from continuing any legal action to collect debt from you. All of the creditors listed on your petition will receive a notice from the court about your bankruptcy case, and you will immediately start to benefit from the protection that bankruptcy provides.

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