Your Property in Chapter 13 Bankruptcy

Filing for Chapter 13 allows a debtor to reorganize their debt and pay off what they owe over time. Once approved by the court, a debtor will be required to make monthly payments to his or her creditors over a period of 3 to 5 years before their debts are discharged.

Since filing for Chapter 13 involves a repayment plan, many people are relieved to hear that they are able to retain most of their property and personal assets.

Further, debtors filing for bankruptcy in California may utilize two procedures that will protect much of what they own during the repayment period- the automatic stay and exemptions.

Automatic Stay

By filing for bankruptcy under Chapter 13 a debtor automatically stays or stops all collection activities against him or her as well as against the debtor’s property. The stay is automatic and requires no judicial order before taking effect.

The bankruptcy court gives notice to all of the creditors the debtor has listed that a bankruptcy case is pending and the credits may not initiate or continue lawsuits, wage garnishments or telephone calls demanding payment. This includes foreclosure actions and car repossessions.

Property Exemptions

In Chapter 13, a debtor may keep his or her property and repay debts over 3 to 5 years. Chapter 13 is a great option for debtors will a lot of equity in a home they would like to hold onto. Further, Chapter 13 exemptions can help a debtor hang on to valuables like jewelry.

Exemptions will play a role in the monthly amount a debtor pays to its creditors. In terms of unsecured property, the amount a debtor would owe monthly depends on how much of the debtors property is exempt. If most of the debtor’s property falls under an exemption, he or she will owe less to unsecured creditors each month.

When it comes to secured property like homes and cars, Chapter 13 exemptions can protect this property as well. A debtor may be able to reduce the amount of a secured loan to the current value of the property, sometimes referred to as a cramdown. Also, it is possible that a second or third mortgage on property can be removed.

California’s bankruptcy exemption laws allow most debtors to keep much of their property. A debtor has a choice of two exemption systems to choose from. Generally, a debtor with substantial equity in their home prefer System 1 and System 2 is best suited by those who have a lot of cash on hand or in the bank and other valuable personal items.

In order to protect your property and assets, you will need a qualified attorney to help you navigate California’s exemption system. Attorney Melanie Tavare can help you compare each system and choose the one that works best in your unique situation.

If you are considering filing for Chapter 13 bankruptcy and want ensure that your assets are protected, contact our offices today for a free consultation.