Chapter 13 Bankruptcy Attorney in Los Angeles, CA

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Filing for bankruptcy is a scary process, especially if you have a lot of assets and don't want to give it all up via liquidation. In a Chapter 7 bankruptcy, that's what happens: your assets are liquidated or sold to pay off some of your debts. In a Chapter 13 bankruptcy, however, you can keep your assets – like your home, vehicle, jewelry, etc. – so long as you have an adequate repayment plan and stick to it. 

Mohsen Parsa is a trusted attorney in Los Angeles and Orange County. Contact his office to learn more about Chapter 13 bankruptcy and if it's the right thing for you. 

Who Qualifies for a Chapter 13 Bankruptcy?

You could be debt-free within three to five years. That sounds pretty good to someone who has more debt than he or she can pay but who doesn't want to lose a home to foreclosure or a car to repossession. Chapter 13 bankruptcies, however, are not for people who would otherwise qualify for Chapter 7 bankruptcies. To qualify, your:

  • secured debt must not exceed $1,184,200; or
  • unsecured debt must not exceed $394,725.

These amounts periodically change, and the above-amounts came into effect in April 2019. 

Further, to qualify, you must be able to provide proof of the following to the court:

  • You make enough income to pay creditors according to a payment plan.
  • The income you use to pay creditors may include wages, salary, self-employment wages, unemployment benefits, Social Security checks, and/or disability checks, among other sources of income. 
  • You filed your taxes for the last four years immediately before the date you file for bankruptcy.

You can be an individual or a sole proprietor but small businesses and corporations cannot apply for bankruptcy using Chapter 13.

What Can Be Included in a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, as mentioned, required a payment plan. This plan is typically set for 3 to 5 years, depending on the amount of debt you have. If you stick to the plan throughout its duration, then after the plan expires, all remaining debt is discharged.

There are some types of debt that must be paid in full, and this includes:

  • Priority unsecured debt, like child support and alimony that need to be brought current, bankruptcy filing fees, or non-dischargeable taxes;
  • Secured debt like tax liens or judicial lines; and 
  • Secured debt that must not necessarily be paid in full (because that's not applicable) but must be kept current throughout the payment period, like mortgages and auto loans.

Non-priority unsecured debt of non-exempt property you plan on keeping, like household appliances or furniture, doesn't always have to be paid in full. You do, however, have to pay the value of this property. For example, if you placed a refrigerator on a credit card and still owe interest on it, you only need to pay the actual value of it.

How Do You Determine a Repayment Plan?

Developing a repayment plan can be complicated. The first step is the Chapter 13 means test. During this process, you will add up all sources of household income and compared it to California's state median income based on how many members are in your household and your marital status. If your average monthly income falls below the median, then your repayment plan can cover three years. If it's higher, then the plan will be set for five years. 

Next, you must determine what your disposable income is. This amount will be used as a baseline to determine how much you can pay creditors on a monthly basis. You can include a number of deductions for things like health care, food, and clothing. The IRS has set out how much you can deduct in each category – taking guesses could lead to problems in court.

Contact a Bankruptcy Attorney in Los Angeles, CA

If you are struggling financially but want to keep the bulk of your assets, Chapter 13 bankruptcy may be your best option to start fresh. Contact Mohsen Parsa, Inc., A Professional Law Corporation, at (949) 394-6930 to get started today. Attorney Mohsen Parsa will help you understand which bankruptcy is right for you and guide you through the process.

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