Irvine, California Chapter 13 Lawyer

Do I Have to Pay off All of My Debt in Chapter 13?

One of the biggest draws toward Chapter 13 is that the full value of your debt may not have to be paid off. As long as you fulfill the terms of your repayment plan throughout its duration, you can end up satisfying a significant amount of debt for much less than its value.

That said, not all debt can be reduced, and your creditors will have a chance to provide input on your payment plan before a bankruptcy judge decides to approve it or not. Generally speaking, only unsecured debt such as medical bills, personal loans, and credit card balances can be reduced in Chapter 13.

When it comes to debts secured by collateral, such as a car or home, falling behind on these payments can open you up to collections actions where the repossession of the car or home will satisfy repayment of the loan. If you haven’t fallen behind on secured debt payments, you might not be at risk of losing anything. If you have, filing for Chapter 13 can stop actions like foreclosure to give you a chance to stay current on your payments and catch up on paying off arrears (missed or partial payments).

The Chapter 13 Bankruptcy Process

Chapter 13 may not be the most complex type of bankruptcy, but it’s by no means simple. You should be sure that your Chapter 13 attorney has the experience and skill necessary to understand what to expect and when throughout this complicated process.

In the Beginning…

You will begin by completing some paperwork regarding your bankruptcy and attend pre-filing credit counseling. The latter is a prerequisite to filing, and the purpose is to help you determine if you really need to file for bankruptcy (even if it’s obvious to you that you do). Once this is complete, you will file for Chapter 13.

At the time of filing, an automatic stay goes into effect. This prevents your creditors from trying to collect on your debt throughout the bankruptcy process. The court will then appoint a third-party trustee who will ultimately be responsible for collecting your payments and redistributing funds to your creditors – but that comes much later in the process.

Once your trustee has been appointed, the court will notify you and your creditors of the following matters:

• When the meeting with your creditors will take place
• When your creditors must file their claims
• Whether or not you filed a repayment plan
• When the confirmation hearing (when whether or not your repayment plan will be approved by the court) will take place

At this point, your creditors can file written objections to your repayment plan or even support it if they so choose. At least seven days before you meet with your creditors, you will need to provide your most recent tax return and other financial statements to the Chapter 13 trustee.

About 30 days after you file for bankruptcy, you’ll begin to make payments according to the repayment plan you and your Chapter 13 attorney developed. If it is ultimately rejected by the court, your money will be returned to you with some administrative costs taken out.