There are several options for someone who is interested in filing for bankruptcy. Among them are to file for a chapter 7 or 13 bankruptcy. Both of these options allow a filer to hit the ‘reset’ button on his or her overwhelming debts. The following will focus on the basics of a chapter 13 bankruptcy and how it can help you make a fresh financial start.
Chapter 13 Bankruptcy and a Plan
In chapter 13 bankruptcy, not all debts are wiped away at the end of the day, but not all assets have to be forfeited, either. Typically, a person who is a wage earner and can expect to continue earning money in the future will use chapter 13 bankruptcy to restructure his or her debt and figure out a way forward without losing everything he or she owns.
Under the provisions of a chapter 13 bankruptcy, a debtor will file a petition with the court declaring all of his or her debts, liabilities, income, and assets. Then the debtor will work with the court, attorneys, and others to figure out a plan for repayment and discharge of certain debts. In this scenario, it is important to remember that a plan must be carefully worked out by all involved.
Bankruptcy Plan and Approval
There are several important aspects to a chapter 13 bankruptcy repayment and restructuring plan. One of the first steps is determining which debts must be restructured and how much each creditor will be paid within the plan. The trustee in the case will generally represent the interests of creditors, but come up with a reasonable plan to pay back as much as is reasonable.
Another important aspect to the repayment plan is the amount of money and assets the debtor has before and during the petition. Of course, the reason a debtor is looking for bankruptcy protection is because of financial pressures, so it is important to ensure that a new repayment plan does not simply replace one pressure with another.
Finality of the Plan
In a recent case out of the 9th Circuit, a federal bankruptcy judge wrote an opinion following a petition to revisit a payment plan. In that opinion, the court had to cite some important legal principles. One of those is that “once a bankruptcy plan is confirmed, it is binding on all parties and all questions that could have been raised pertaining to the plan are entitled to res judicata effect.” Now, res judicata is a legal term that essentially means that a party only gets one bite at the apple, and only one chance to make a case.
This finality is comforting to debtors and creditors alike because it allows each party to know where they stand. It prevents parties from bringing up old claims that should be brought in the first place, and allows peace of mind. This can work both ways, which is why coming up with the best plan first is optimal.
Your California Bankruptcy Law Firm
At The Bankruptcy Law Center, we are your chapter 13 attorneys in California. We will help you understand what your options are, and which types of bankruptcy best fit your needs. If you are considering filing for bankruptcy, contact us today.
(image courtesy of Madison Kaminski)