Many California residents seek debt relief through bankruptcy. Chapter 13 bankruptcy focuses on debt elimination and not debt reorganization like Chapter 7. In Chapter 13, debtors make monthly payments approved by the court, and the appointed trustee then distributes the money to creditors listed under the Chapter 13 bankruptcy plan.
All bankruptcies are subject to laws created by the federal government and are denoted by numbered categories and subcategories. A court-ordered “means” test assesses your ability to sustain a Chapter 13 repayment plan. Once you pass the means test for Chapter 13 bankruptcy, you will be given a repayment schedule for your collateral loans, such as those for a car or house.
Debts like student loans, taxes, money borrowed on a credit card to pay those taxes, child support and alimony are non-dischargeable and not covered under bankruptcy.
If the court finds that you failed to account for property or concealed assets to cheat creditors, these debts might not be dischargeable because of fraud. Criminal fines and debts that exceed the number of payments outlined in the Chapter 13 plan are also non-dischargeable debts.
Chapter 13 bankruptcy
Repayment will include amounts for unsecured debts such as past-due taxes, past-due home mortgage amounts, home or car payments and attorney fees. Chapter 13 bankruptcy reduces your debt and makes monthly payments more affordable. You don’t have to sell your possessions to pay back your creditors; your repayment plan can also cover credit card debt and medical bills.
If a life circumstance develops and affects your ability to pay, you can petition the court to reassess your plan. If the court decides that you don’t have the resources to meet the plan goals, your Chapter 13 bankruptcy case can be dismissed. Once you’ve completed the plan’s conditions and paid off your debts, your case will be discharged.