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How does Chapter 13 bankruptcy work?

Stop foreclosure with a Chapter 13 bankruptcy petition. You can also stop repossession of your cars, stop garnishment of your wages, and consolidate your medical debts and any other debts you have into one repayment “plan.” Chapter 13 bankruptcy, or reorganization bankruptcy, allows the filer to restructure his or her debt into a three to five-year repayment plan. With this option, the filer could end up discharging some debts while obtaining more time to pay off others. A debtor may not qualify under the means test required to file for Chapter 7 bankruptcy, but they will likely be eligible to file under Chapter 13.

Additionally, Chapter 13 offers many benefits to a debtor, such as stripping mortgage liens and doing “cramdowns” on car loans. A cramdown allows you to force the lender to accept a cramdown of the loan, wherein you ONLY owe the retail value of the vehicle. This saves our clients thousands of dollars! Remember, this only works where the car loan is more than two and a half years old. Another reason someone may choose to file Chapter 13 instead of Chapter 7 is to pay back their tax debt over a 3-5 year period. This can be really helpful for people when the IRS is about to garnish wages, lien--up bank accounts or seize assets.

What are the major benefits of Chapter 13 Bankruptcy?

  • Allows a person to repay their debt over the course of 3 to 5 years.

  • It can be used to stop a foreclosure sale.

  • It can be used to help a person get current with car payments.

  • It can be used to pay back less than the amount owed on a vehicle, if the vehicle is worth less than what is currently owed.

  • It can be used to reduce the interest rate of loans to a market rate of interest.

  • It can be used to remove judgment liens.

  • It can be used to stop wage garnishment.

  • If you are upside down on a car loan, you may be able to reduce the amount owed to market value.

  • If you are leasing your vehicle, you can choose to keep the vehicle or terminate the lease and return the car.

  • If behind on car payments, you have the ability to re-arrange your payment schedule in order to get back on top of your payments. 


Protect your assets, protect your property.

  • Ch 13 Bankruptcy can help protect your assets by creating a payment plan in order to gradually pay back creditors.

  • Ch 13 repayment plans allow you to pay off some debts in full, while only paying a portion of others.

  • 3 to 5 year repayment schedules buy homeowners time to protect their properties and stop foreclosures. Many homeowners are able to pay their debts in full at the end of their Ch 13 bankruptcy and keep their possessions/property entirely.


How do I know if Chapter 13 bankruptcy is right for me?

Although Chapter 13 Bankruptcy is a very powerful tool, it is not always the best choice for everyone. Speak with a Los Angeles bankruptcy attorney today to determine if filing for Chapter 13 Bankruptcy is the right option for you.

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