Chapter 13 Bankruptcy Riverside & San Bernardino
Chapter 13 Bankruptcy provides many benefits not available in a Chapter 7 bankruptcy. Chapter 13 bankruptcy can help you retain property and protect your from creditor action including foreclosure and repossession. Some of the benefits that Chapter 13 bankruptcy has over Chapter 7 include:
- Mortgage Arrears Repayment Plan-If your are behind on your home mortgage or an investment property you can repay those arrears in a Chapter 13 bankruptcy for up to 5 years. Below is a simplified example of how this would work:
- Thomas and Susie have fallen behind on their home mortgage and currently have $30,000 in mortgage arrears. Their monthly mortgage payment is $1320. The mortgage company has set sale date for May 25. Susie and Thomas file for Chapter 13 bankruptcy on May 5 prior to the sale date of their home. In their Chapter 13 plan they offer to repay the $30,000 arrears and to start making their regular mortgage payments. The $30,000 mortgage arrears would be repaid over a 5 year term plus an additional 10% for trustees fee which would be approximately $555 a month for 5 years. If they can make their regular mortgage payment and the Chapter 13 plan payment then they will be able to protect their home from foreclosure while they remain in their Chapter 13 bankruptcy case.
- Repay the Retail Value of Your Vehicle– Chapter 13 bankruptcy can allow you to repay the retail value of your vehicle back and not what is actually owed on the loan. This applies if you obtained the car loan more than 2.5 years ago prior to filing your bankruptcy case. You may also be able to propose a lower interest rate to the lender then what you are currently paying. How does this work:
- Sam and Olivia purchased a car in December of 2017. Their monthly payment on the car loan is approximately $650 a month with a 14% interest rate. They are having difficulty making payments since they purchased the car. It is now December of 2020 and they still have a car loan amount balance of $22,000 and 3 years remaining on the loan.They have fallen several months behind on their car and the lender is threatening to repossess the vehicle. Due to the mileage and condition of the car the retail value if now $6,500. They decide to file for Chapter 13 bankruptcy and they propose to pay the car lender only the value of $6,500 plus propose a lower interest rate based on the prime rate of interest with some adjustments. They also propose to spread their car payment over a 5 year term. Based on paying the retail value of the car of $6,500 plus estimated 4.5% proposed interest rate and trustee’s fee. The payment for this vehicle is reduced to an estimated $136 a month.
- Keep Assets That Would Have Been Sold In a Chapter 7 Bankruptcy– In a Chapter 7 bankruptcy there are bankruptcy exemptions that allow you to retain property. Many of these exemptions have limits as to the amount of equity that you can keep in some types of property. Chapter 13 allows you to retain the property and repay creditors the value of what they would have received if the item had been sold in a Chapter 7 bankruptcy. How does this work?
- Tim and Lisa have run into financial difficulty due to Tim being unable to work because of medical problems. They own a truck that is paid off and is worth currently $35,000 and sedan that is worth approximately $20,000 and also paid off. They have approximately $60,000 in credit card debt. They can no longer afford to keep up with the monthly payments that total $1,700 a month to these creditors. They decide to file for bankruptcy. Since they do not own a home, under section 703 of the bankruptcy code they can use the wildcard amount totaling $30,825 , plus the vehicle exemption totaling $5,850, which gives them a total of $36,675 that they can utilize to protect the equity in their cars. The total equity in their cars is $55,000 which is above the equity amount they can protect in a Chapter 7 bankruptcy by $18,325. If they filed for Chapter 7 bankruptcy the trustee would likely sell one of their vehicle to pay some debt back to the credit cards. Instead they opt to file for Chapter 13 bankruptcy which will allow them to keep their cars. In the Chapter 13 bankruptcy they would have to propose to pay back what creditors would have received in their Chapter 7 bankruptcy which would be $18,325 minus an estimated 10% cost of selling the $35,000 vehicle and the Chapter 7 trustees fees. Making these adjustments they will propose to pay back creditors $12, 592.50 plus trustee’s fees of 10%. If they propose a 5 year plan they can propose $233 a month.
The above examples are simplified for explanation purposes. The plan payment can vary based on a number of other factors including your disposable income, priority debts such as tax debt and child support. It is important that you talk to a local bankruptcy attorney to get a better estimate of what your Chapter 13 plan payment would look like.
Chapter 13 Trustee Instructions for Riverside and San Bernardino
When you file for Chapter 13 bankruptcy you are assigned a Chapter 13 Trustee. For cases that are filed in Riverside County the case is assigned to Chapter 13 Trustee Rod Danielson. You will be required to submit documents prior to your 341 hearing to the Chapter 13 Trustee. The Chapter 13 Trustee has several staff attorneys that generally vary depending on the Judge your case is assigned to. The current staff attorneys for Riverside are:
The documents that need to be submitted to their office depends on whether you have a business, are self employed and the type of income you earn.
Specific Instructions on where to send your Chapter 13 Plan payments and how to prepare for your 341 hearing can be found here Chapter 13 Bankruptcy Booklet