Long Beach Bankruptcy: Chapter 13 Plan
Chapter 13 bankruptcy is a repayment plan that stops foreclosure, repossession, lawsuits, liens and collections, indefinitely!
Chapter 13 allows you to repay past due amounts over time on terms you can afford. In adddition, you to avoid liens, reduce loan balances, reduce interest rates, and discharge bad debt.
I am a Long Beach bankruptcy attorney filing chapter 13 cases throughout Southern California. Come visit my Long Beach bankruptcy law firm for a free consultation and find out if you should file chapter 13.
Do I Qualify For Chapter 13?
To qualify for chapter 13 you have to be an “individual” (corporations cannot file chapter 13), and have regular income sufficient to repay the creditors in your case that have to be paid.
In bankruptcy debts are categorized as ‘priority’, ‘secured’ or ‘unsecured’, and are paid, or not paid, based on that category.
To qualify for chapter 13 you have to be able to propose a feasible plan based on your disposable monthly income.
How Much Will I Have To Pay In Chapter 13?
How much you will have to pay in chapter 13 bankruptcy depends on the outcome of the “disposable income” test. The test takes into account your average 6-month gross income and your personal, family and financial circumstances. In certain circumstances your actual income and expenses may be used instead of the disposable monthly income means test to determine how much you have to pay in chapter 13.
How Long Does Chapter 13 Bankruptcy Last?
Chapter 13 usually lasts between 36 and 60-months. The length of the plan is determined based on your gross income. Above median income earners must propose a 60-month plan, unless the plan pays 100% of unsecured claims in a shorter time. Below median income earners may propose a 36-month plan.
Will The Court Confirm My Chapter 13 Plan?
If your plan meets the requirements of the Bankruptcy Code it will be confirmed by the court.
The Bankruptcy Code requires that the plan (1) be proposed in good faith (“good faith test”), (2) reflect your best efforts (“best efforts test”), and pay unsecured creditors at least as much as they would get if you filed chapter 7 (“best interest of creditors test”).
If the chapter 13 plan does not meet these requirements, confirmation may be denied or the case dismissed.
What Is The Best Interest Of Creditors Test?
The best interest of creditors or “liquidation” test asks whether unsecured creditor will receive as much money in chapter 13 as they would in chapter 7.
If the plan does not meet the best interest of creditors test it will have to be amended to increase the percentage to unsecured creditors.
What Does Filing Chapter 13 Bankruptcy In Good Faith Mean?
Section 1325(a)(3) of the bankruptcy code requires that a Chapter 13 plan be “proposed in good faith and not by any means forbidden by law.”
Good faith is a broad concept and depends on the totality of the circumstances of the case. Some factors that may be considered in determining good faith include: (1) the percentage of the proposed repayment; (2) debtor’s financial situation; (3) the period of time over which payment will be made; (4) debtor’s employment history and prospects; (5) the nature and amount of unsecured claims; (6) debtor’s past bankruptcy filings; (7) debtor’s honesty in representing facts; and (8) any unusual or exceptional problems facing the particular debtor.
What Is The Best Efforts Test?
The best efforts test asks whether the plan reflects debtor’s best efforts. Put another way, the test asks whether all disposable monthly income has been committed into the plan.
For example, if the debtor’s expenses are unreasonably high the bankruptcy trustee or the debtor’s creditors may object to plan confirmation on the grounds that the plan does not satisfy the debtor’s best efforts.
What Happens After My Chapter 13 Plan Is Confirmed?
After the chapter 13 plan has been confirmed by the court, the debtor must continue to comply with the terms of the plan by making the required plan payments. In addition, the plan may require the debtor to send the bankruptcy trustee his tax returns each year and disclose other financial information to the trustee on a recurring basis.
Do I Have To Turnover My Tax Refunds In Bankruptcy?
In the Central District of California some bankruptcy trustees do require the debtor to turnover her income tax refunds for the first 3-years of the plan.
What If I Am Not Able To Make The Chapter 13 Bankruptcy Plan Payment?
If the debtor is unable to make her plan payment she may ask the court to suspend the plan payments, or modify the plan to reduce the amount of the plan payment, or in any other respect. Generally in a chapter 13 bankruptcy in Long Beach as long as the debtor can show a substantial change in her financial circumstances justifying her request to suspend plan payments or to modify her plan, her request will likely be granted.
What If I Start Making More Money After I File Chapter 13 Bankruptcy in Long Beach?
If the debtor’s income increases during the plan period the trustee may file a motion to increase the chapter 13 plan payment based on the debtor’s increased disposable monthly income.
If you are considering filing for chapter 13 bankruptcy in Long Beach and are looking for a Long Beach bankruptcy attorney, contact our office today for a free case evaluation.