When a person (as opposed to a business) files bankruptcy, there are two options available to them. Which one you choose depends on things like how much money your make and what you own. The first option is a Chapter 7 bankruptcy, which is the simplified version. If you do not qualify for a Chapter 7 bankruptcy; therefore, you will have to file a Chapter 13 case.
Cases are named based on which chapter you can find the bankruptcy laws in the United States Code. Many people believe they have to file “Chapter 11”, however, this option is usually only used by businesses.
If you have found yourself behind on your bills, it is very important to seek legal advice. Your attorney will be able to look at your individual circumstances and advise which type of bankruptcy you should file.
Chapter 13 bankruptcies last 3-5 years and require you to make monthly payments to the court. You will be required to fill out paperwork that will show the amount of debt that is owed, who it is owed to, your income, your monthly expenses, and your amount of “disposable income” (the amount of money you have left to spend after all your bills are paid). This paperwork will determine the amount of your payment to the courts. From which the court distributes the funds to your creditors.
Your creditors are divided up into three categories:
- Priority – these creditors are usually connected with the government or the courts, like federal taxes.
- Secured – these creditors have collateral that they can take if you default on your loan. For example, if you had a mortgage on your house, the lender would be a secured creditor because if you stopped paying your mortgage the lender could take your house. Another example is a car loan.
- Unsecured – the rest of your debts fall into this category. The biggest examples are credit card debt and medical bills.
Once your case is filed, you will be assigned a trustee. A trustee is not a judge, but is more like a case manager. The trustee reviews all the documentation that is submitted with your case and makes sure that it is acceptable.
The trustee will look over your paperwork and determine if the payment amount is acceptable. It is possible that the trustee may want you to pay more. It can be a number of months before your trustee approves your payment amount and your case. Chapter 13 is a great way to pay down your debt (interest free) and receive a clean slate. After you have made all your payments to the court, any debt that is left is discharged and no longer owed.
Since a Chapter 13 Bankruptcy lasts a few years, it is very important to keep your attorney informed of any changes that occur in your life. If you acquire new property during the bankruptcy, like an inheritance or proceeds from a life insurance policy, you may be required to amend your case and include these assets. If your job changes, let your attorney know immediately because it can greatly affect your case.
If you are drowning in debt, give the highly reputable bankruptcy attorneys in Los Angeles at Vokshori Law Group a call for a free consultation. We will walk you through your options and find the best solution for you. To schedule an appointment please contact VLG at 855.855.2608 or visit www.Voklaw.com for further information.
