Facing overwhelming debt is a stressful experience, and the thought of losing your home or car can feel devastating. For many people in California, Chapter 13 bankruptcy offers a powerful solution that provides a path to financial recovery while allowing you to keep your most important assets. Now, you need to navigate this process with confidence and clarity.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, often called a "wage earner's plan," is a form of bankruptcy that allows individuals with regular income to reorganize their finances and repay their debts over a period of three to five years. Unlike Chapter 7, which involves liquidating assets, Chapter 13 focuses on creating a manageable repayment plan approved by the court. This plan consolidates your debts, and you make a single monthly payment to a trustee, who then distributes the funds to your creditors.
Protecting Your Home from Foreclosure
One of the most significant advantages of filing for Chapter 13 bankruptcy is its ability to stop foreclosure proceedings immediately. When you file, an "automatic stay" goes into effect. This legal action prevents creditors—including your mortgage lender—from taking any further collection actions against you, such as repossession or foreclosure.
The Chapter 13 repayment plan allows you to catch up on missed mortgage payments over time. Instead of having to pay the entire past-due amount at once, you can include the arrearage in your bankruptcy plan. As long as you continue to make your regular monthly mortgage payments and the new plan payments, you can save your home from foreclosure. This provides a structured, long-term solution to get back on track with your mortgage and secure your family's housing.
Saving Your Vehicle from Repossession
Just as it protects your home, Chapter 13 bankruptcy can also prevent your car from being repossessed. If you are behind on your car payments, the automatic stay halts any repossession attempts by your lender.
The repayment plan allows you to address the past-due amount on your vehicle. In some cases, you may even be able to lower your monthly car payment or reduce the total amount owed on the car. This is often possible through a "cramdown" provision if you've owned the vehicle for more than 910 days (approximately two and a half years). A cramdown can reduce your car loan balance to the current market value of the vehicle, with the remaining debt being treated as an unsecured loan, which may be paid off at a much lower rate or even discharged.
A Fresh Start for Southern California Families
For many families in Southern California, Chapter 13 bankruptcy provides more than just a temporary fix. It offers a structured path toward a brighter financial future. The repayment plan helps you get organized and can eliminate a significant portion of your unsecured debt, such as credit card bills and medical expenses. Once your plan is successfully completed, you are discharged from these remaining debts, giving you the fresh start you deserve.
The process of filing for bankruptcy can be complex, but you don't have to face it alone. Our dedicated team at The Sexton Law Firm is here to guide you through every step. We’ll help you understand your options, determine if Chapter 13 is the right choice for your situation, and craft a plan that works for you and your family. If you’re concerned about losing your home or car, please don't hesitate to reach out.
Contact us today for a free consultation at (619) 202-8976 to discuss your unique situation and explore how we can help you protect your assets and regain control of your financial life.