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defined as a "wage earner" plan to repay debts (in full or a percentage) over a three to five year period from future earned wages.

Our service is restricted to Orange, Los Angeles, San Bernardino, and Riverside counties of California.  We are NOT familiar with the laws of the Bankruptcy Courts in any other areas but those listed.

Who Qualifies for a Chapter 13?  -  Can I save my home?  -  What if I Owe More on my Home Than it is Worth?  -  Can I get rid of taxes?  -  Do I have to pay all of my debt?  -  What does a Chapter 13 entail?  -  What are the normal fees?  -  Will this affect my credit?  -  How long does the process last?  -  When will I be able to get a credit card, car, or home?

If you would like additional questions answered,
please call us 24 hours a day at (800) 557-4511 to speak to a live person who can answer them for you.

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Who Qualifies for a Chapter 13?
- Only an individual (which includes husband & wife) with regular income may file for Chapter 13 Bankruptcy.  Regular income includes 1) operation of a small business that is not incorporated, 2) social security, 3) pension, 4) worker's compensation, 5) disability, and, of course, 6) a paycheck from employment.

As a result of the new bankruptcy law effective October 17, 2005, before you can file for Chapter 13 Bankruptcy, you must take a pre-filing Debtor Education Course.  We arrange for this through our office.  This counseling can be done via the internet from the comfort of your home.  It usually takes approximately 40 minutes to complete.  Once completed a certificate is issued, it must be filed with the Chapter 13 Petition.

You must submit to our office copies of all payroll stubs or other evidence of income for the six months prior to filing.  This process is commonly referred to as the "commitment period."

A series of financial questions will be asked of you concerning your financial status to determine the length of your Plan of repayment.  These questions are fairly straight-forward and the answers are found in your income documents and from the questions asked during the initial telephone interview.  This questionnaire is prepared by our office with your assistance.

You are limited to the amount of debt you may have on the date of filing.  For general unsecured creditors, this limit is $336,900 for non-contingent, liquidated debt.  Secured creditors, this limit is $1,010,650 for non-contingent, liquidated debt.  If you are married, the aggregate total of both spouses' debts must not exceed the above amounts.  These amounts are in effect as of the date of this publication - November 2007.

Can I save my home?
- The answer is a resounding YES!!!  However, a detailed analysis must be performed using your existing income, living expenses, amount of arrearage (past due payments) on the home, and other factors that might effect your ability to repay your debt.  In some instances, contributions from relatives, etc. may be used to supplement your income to qualify for your Chapter 13 Plan.  Generally, the amount of your arrearage is spread over the life of the Plan.

What if I Owe More on my Home Than it is Worth?
- This is a question that must be dealt with on a case-by-case bases.  During the interview process, our attorneys generally discuss with you your intention with regards to not only the home, but also other secured debts for such things as cars, furniture, etc.  In some cases, we have found that the fair market value of the property is less than what is owed to the First Trust Deed Holder [lender].  If you have a Second Trust Deed on the property, we attempt to avoid the Second Trust Deed and treat that creditor as a general unsecured creditor.

Can I get rid of taxes?
- Under the previous laws prior to April 20, 2005, there was a much simpler answer.  Under the new bankruptcy law there are certain limitations on how these taxes are treated in a Chapter 13.

Generally speaking, a Chapter 13 Bankruptcy provides for treatment of Non-priority Taxes (i.e. personal income taxes where the return have been filed for at least two years and the taxes became due at least three years prior to filing Chapter 13).  The taxing authority must have taken legal steps to protect their interests for taxes to be eligible for a discharge of taxes.  In many situations, taxes may not be dischargeable in a bankruptcy.  When taxes are owed, it may be important to obtain a tax transcript from the taxing agency to determine what taxes may be discharged.

Taxes can be a VERY complicated situation in Chapter 13 Bankruptcy.  Make sure you have an experienced attorney working on your behalf.  Please call us to discuss your situation in detail.

Do I have to pay all of my Creditors?
- Generally speaking, in a Chapter 13, you must contribute all of your Disposable Income (the amount left over after payroll taxes, insurance, union dues, 401K withholdings, 401K loan repayments and reasonable expenses) to the repayment of the Debt.  This amount will then determine, along with the financial analysis discussed above, the length of the commitment period for the Plan Payments.  The amount of your monthly payment and the length of time will determine the amount that each unsecured creditor (who timely files a proof of claim) will receive under the Plan.

The financial analysis is an extremely important aspect of all Chapter 13 Plans developed by our staff.  Our attorneys will use this analysis in determining whether or not you qualify for a Chapter 13 Bankruptcy and the percentage of debt you must pay to your general unsecured creditors.

What does a Chapter 13 entail?
-  Our is unique in that one of our attorneys spends from 40 minutes to an hour (and sometimes longer) interviewing you via the telephone.  We gather information as to your assets, finances, number of people in your home, etc.  We also attempt to find out what you want to achieve by the Chapter 13 Bankruptcy and whether or not you are attempting to retain your home, cars and/or other assets that may be collateral for certain loans.

At the conclusion of this interview an attorney will discuss a recommendation as to your ability to file for Chapter 13 Bankruptcy and your available options.  In some cases, we make this analysis later in the day and re-contact you with our opinion.  We also advise which documents are required , i.e. tax returns for 2004, 2005 & 2006, payroll stubs for preceeding six months, bank statements for preceeding six months, loan documents, creditor letters, collection letters, etc.

Once you have indicated a desire to go forward, you are invited to the office to bring the above referenced documents for review.  After the retainer agreement has been signed and a down payment is made, we proceed to prepare the documents, including the development of a Plan, that are necessary to file with the Court.  After the documents are prepared, reviewed and signed by you, the Chapter 13 Petition, Schedules, Plan and related documents are filed with the Court.

Prior to filing, costs must be paid in full and a down payment towards attorney fees must be made.  In most cases, we only ask for a modest down payment, with the balance of the attorney fees to be paid through the Plan.  In most cases, since you are only paying a portion of your unsecured debt, the balance of the attorney fees are essentially being paid from the money that would otherwise be going to general unsecured creditors.

Next, the First Meeting of Creditors is held before a Trustee.  The Trustee will ask you to attest to the truthfulness of your documents filed with the Court and your ability to comply with the terms of the proposed Plan.  This usually takes place approximately 4 to 6 weeks after the case is filed.

Assuming the Chapter 13 Trustee is happy with the terms of the Plan and all required payments have been made, the Trustee states for the record that the case will be on the consent calendar, meaning that your case may proceed.  There may be minor glitches that can be easily cleared prior to the Confirmation hearing.  Occasionally, for a variety of reasons, the First Meeting of Creditors will be continued to allow you and our attorneys to clear up the problem areas.

If objections to the proposed Plan are made by the Chapter 13 Trustee and/or creditors, the Court will hear those objections and any reply you make at the time of the Confirmation Hearing.

Once your plan has been approved by the Court, and you have made all of your proposed plan payments, you are then entitled to file for your Discharge.  Any debts not paid through the Plan will be discharged at that time.  If past due child support is provided for in the Plan, the Plan must include provisions for the payment of interest on these amounts or you could end up with a substantial remaining liability at the end of the Plan that still would have to be paid.  Similar problems can result with student loans and taxes that are not fully paid through the Plan.

What are the normal fees?
- Attorney fees can vary from as little as $2,000 to $4,000 by provisions of the Local Bankruptcy Rules.  Currently, we charge $2,500 for a straight-forward Chapter 13 case.  Additional fees are owed beyond our control; these would be $28 Credit Report Fee [$50 if for a Husband and Wife], $55 for the pre-filing Debtor counseling course, and $274 for US Bankruptcy Court filing fees.

If the Chapter 13 includes creditors in excess of 20, including, collection agencies, etc, we reserve the right to increase these fees.  We are upfront in our policies and, if applicable, we will discuss with you our reasons why the fees may be higher in your situation.  On business cases, the minimum fee is $3,000.  Do not be intimidated, ask your proposed Counsel how much his/her fees are for your case.  You will find, that the majority of attorneys who practice bankruptcy will not discuss fees with you prior to the time you are asked to sign the retainer agreement.

Will this affect my credit?
- Yes, your credit will be effected by filing a Chapter 13 bankruptcy.  It may have a positive effect on your FICO score by reducing your overall debt after they've been discharged.  At the end of the commitment period for your plan, your Trustee is a great reference as to your handling of your credit during the period of your Bankruptcy.  It is extremely important that you make each and every payment in a timely manner during your Chapter 13.

Creditors understand that you cannot file another Chapter 7 case for 8 years

Your Bankruptcy will remain on your credit report for ten years.  However, in today's economy, it is much easier to obtain credit after you receive your Chapter 13 Discharge than it was even five years ago, so they feel somewhat comfortable in lending to you, even though they may compensate by charging a higher rate of interest.  You are eligible to file another Chapter 13 after 4 years of a prior case wherein a discharge was received.

Many of our Clients report to us that they receive credit offers soon after they receive their discharge.

How long does the process last?
- Generally, the Chapter 13 process takes approximately 36 to 60 months to complete, depending on the applicable commitment period for your case.  Generally, once you have made that decision to file a Chapter 13, it can take our office a week or so to complete all of the paper work.  How long it takes to file is often determined by your timeliness in presenting to our office all of the requested documents and payment of your fees and costs.

When will I be able to get a credit card, car, or home?
- In the Central District of California, where we practice, during your Chapter 13 Bankruptcy, in order to obtain confirmation of your Plan, you are restricted to obtaining new debt greater than $250 without permission of the Court, unless an Emergency occurs.  Once you have completed your Chapter 13 Plan and received your Discharge, you are free to obtain credit in any amount that a lender will approve you for.

During your Chapter 13 Bankruptcy, obtaining credit to purchase a new car or a home, requires a Motion to be filed with the Court and served on all creditors.  If the proposed refinance or purchase seems to make sense, generally, approval is easy to obtain.  However, if the proposed refinance or purchase will adversely affect your plan, then it is harder to obtain approval.  In some instances, approval cannot be obtained.  We cannot know for sure, but if we believe that such a motion would not be approved, we will discuss with you our opinion and recommended course of action prior to filing the motion.  Ultimately, it is your decision how to proceed.

If you would like additional questions answered,
please call us 24 hours a day at (800) 557-4511 to speak to a live person who can answer them for you.

 | Home | Question of the Month | Publications | Meet Our Staff | Contact Us | Driving Directions |
copyright 1996-2002 Law Offices of James L. Huffman - Disclaimer - site design by Affinity Business Solutions