San Jose Chapter 13 Bankruptcy Attorney

Reclaim Financial Stability With Chapter 13 Bankruptcy

Are you earning a consistent income but are still unable to get out of debt? You may want to consider filing for Chapter 13 bankruptcy. Chapter 13 allows you to reorganize your debt through a court-supervised payment plan that lasts three to five years. Once all the payments are made, the remaining debt will be discharged. 

At The Fuller Law Firm, PC, our bankruptcy attorneys can help you become financially free. We offer our potential clients in San Jose, Oakland, and Salinas a free evaluation to determine their best solution. Contact our Chapter 13 bankruptcy attorney in San Jose today to get started on your journey to financial recovery. We provide personalized advice tailored to your unique debt situation.

Reasons to Choose Our Law Firm

• Flexible availability
• 4,000+ cases filed
• Free one-hour consultations
• More than 20 years of experience
• Quick turnaround time for drafting your petition

Choosing the right legal support can be decisive in managing bankruptcy outcomes. With a proven track record shown by thousands of cases handled, our firm brings a depth of experience and knowledge in Chapter 13 filings. Our practice is shaped by a client-first philosophy, ensuring every case receives the attention and care needed to navigate complex legal terrain effectively.

Call The Fuller Law Firm, PC today at (408) 465-4472 or contact us online to schedule a meeting with our Chapter 13 bankruptcy attorney in San Jose!

What Is Chapter 13 Bankruptcy? 

A Chapter 13 bankruptcy is called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." 

(1) If the debtor's current monthly income exceeds the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. (11 U.S. Code §1322(d)) During this time, the law forbids creditors from starting or continuing collection efforts.

Common Misconceptions About Chapter 13 Bankruptcy

One common misconception about Chapter 13 bankruptcy is that it requires debtors to repay all their debts fully. In reality, Chapter 13 allows debtors to restructure their payment terms, focusing primarily on secured and priority debts, often paying little to nothing on unsecured debts. This misunderstanding often discourages individuals from exploring Chapter 13 as a viable debt relief option.

Another misconception is that filing for Chapter 13 bankruptcy will permanently ruin one's credit. While it does impact credit scores, Chapter 13 offers a structured way for individuals to improve their financial health and rebuild credit over time. Many find that successfully completing a Chapter 13 plan allows them to qualify for credit at favorable terms more rapidly than originally anticipated. It's important to consult with knowledgeable Chapter 13 attorneys at The Fuller Law Firm, PC, who can provide accurate information and guide clients through the nuances of Chapter 13 bankruptcy in San Jose.

Benefits of Filing for Chapter 13 Bankruptcy

Chapter 13 offers individuals several advantages over liquidation under Chapter 7. Perhaps most significantly, Chapter 13 allows individuals to save their homes. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must make all mortgage payments due on time during the Chapter 13 plan. 

Another advantage of Chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan. Doing this may lower the payments. 

Chapter 13 also has a special provision that protects third parties liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, Chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a Chapter 13 trustee, who then distributes payments to creditors. Individuals will have no direct contact with creditors while under Chapter 13 protection.

As discussed above, some benefits include:

• minimize or eliminate debt
• stop creditor harassment
• save your home
• Stop wage garnishment and bank levies
• automatic stay

By filing for Chapter 13 bankruptcy, all debt collection attempts are required to stop.

Chapter 13 provides a structured pathway for those facing economic difficulties, offering hope for future financial recovery. Besides safeguarding residential properties, it empowers debtors by allowing them to prioritize debts without the constant pressure of creditor harassment. With Chapter 13 bankruptcy, individuals can streamline their debt repayment, avoiding the pitfalls of default and potential asset loss while progressively regaining fiscal security.

The Chapter 13 Plan

Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed. (Fed. R. Bankr. P. 3015) A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee—typically biweekly or monthly. The trustee then distributes the funds to creditors according to the plan, which may offer creditors less than full payment.

There Are Three Types of Claims: 

• Priority Claims are those granted special status by bankruptcy law, such as most taxes and the costs of the bankruptcy proceedings. 
• Secured Claims are those for which the creditor has the right to take back specific property (i.e., collateral) if the debtor does not pay the underlying debt. 
• Unsecured Claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

The creation of a Chapter 13 plan is a collaborative effort between the debtor and their Chapter 13 bankruptcy attorney, designed to balance the debtor's capability to pay with the need to satisfy creditor requirements. A well-structured plan can facilitate a debtor's economic resurgence, assisting in the gradual restoration of creditworthiness while maintaining essential asset ownership. The guidance of knowledgeable legal counsel is invaluable in developing a realistic repayment schedule that encompasses all relevant financial aspects.

Priority Claims

The plan must pay priority claims in full unless a particular priority creditor agrees to a different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all "disposable income" to a five-year plan. (11 U.S. Code § 1322(a))

Secured Claims

If the debtor wants to keep the collateral securing a claim, the plan must provide that the holder of the secured claim receives at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within specific time frames before the bankruptcy filing, the plan must provide for full payment of the debt—not just the value of the collateral (which may be less due to depreciation). 

Payments to certain secured creditors (i.e., the mortgage lender) may be made over the original loan repayment schedule, which may be longer than the plan, so long as any arrearage is made up during the plan. The debtor should consult a Chapter 13 bankruptcy attorney in San Jose to determine the plan's proper treatment of secured claims.

Unsecured Claims

The plan need not pay unsecured claims in full as long as it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period." Unsecured creditors should receive at least as much under the plan as they would receive if the debtor's assets were liquidated under Chapter 7. (11 U.S. Code § 1325) 

In Chapter 13, "disposable income" is income (other than child support payments received by the debtor) minus the reasonably necessary amounts for the maintenance or support of the debtor or dependents and charitable contributions up to 15% of the debtor's gross income. If the debtor operates a business, the definition of disposable income excludes those amounts that are necessary for ordinary operating expenses. (11 U.S. Code § 1325(b)(2)(A) and (B)) 

The "applicable commitment period" depends on the debtor's monthly income. The applicable commitment period must be three years if the current monthly income is less than the state median for a family of the same size and five years if the current monthly income is greater than that of a family of the same size. (11 U.S. Code § 1325(d)) The plan may be less than the applicable commitment period (three or five years) if unsecured debt is paid in full over a shorter period.

Understanding the distinction between secured and unsecured claims is vital in drafting an effective Chapter 13 plan. Secured claim repayments protect assets like homes and vehicles from repossession, whereas unsecured debts, typically consumer-related, are handled based on available disposable income. A strategic approach can optimize the plan's balance between debtor relief and creditor repayment.

Making the Chapter 13 Plan Work

The provisions of a confirmed plan bind the debtor and each creditor. (11 U.S. Code § 1327) Once the court confirms the plan, the debtor must strive to make the plan succeed. The debtor must make regular payments to the trustee directly or through payroll deduction, which will require adjusting to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee because additional debt may compromise the debtor's ability to complete the plan. (11 U.S. Code §§ 1305(c), 1322(a)(1), 1327.)

A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and the debtor will complete the plan. If the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under Chapter 7 of the Bankruptcy Code. (11 U.S. Code § 1307(c)) The court may also dismiss or convert the debtor's case if the debtor fails to pay any post-filing domestic support obligations (i.e., child support, alimony) or fails to make required tax filings during the case. (11 U.S. Code §§ 1307(c) and (e), 1308, 521)

Maintaining the discipline to adhere to a Chapter 13 plan can be challenging but is essential for reaching a successful discharge. Continuous communication with financial and legal advisors can facilitate adjustments as necessary, keeping the debtor on track. Addressing challenges proactively by understanding financial limitations and opportunities will contribute to a stable, post-bankruptcy life.

Chapter 13 Confirmation Hearing

No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation outlined in the Bankruptcy Code. (11 U.S. Code §§ 1324, 1325) Creditors will receive 28 days notice of the hearing and may object to confirmation. (Fed. R. Bankr. P. 2002(b)) 

While a variety of objections may be made, the most frequent ones are: 

• Payments offered under the plan are less than creditors would receive if the debtor's assets were liquidated.
• The debtor's plan does not commit all of the debtor's projected disposable income for the three- or five-year applicable commitment period.

If the court confirms the plan, the Chapter 13 trustee will distribute funds received under the plan "as soon as is practicable." (11 U.S. Code § 1326(a)(2)) If the court refuses to confirm the plan, the debtor may file a modified one. (11 U.S. Code § 1323) The debtor may also convert the case to a liquidation case under Chapter 7. ((4) 11 U.S. Code § 1307(a)) If the court declines to confirm the plan or the modified plan and dismisses the case, the court may authorize the trustee to keep some funds for costs. Still, the trustee must return all remaining funds to the debtor, other than funds already disbursed or due to creditors. (11 U.S. Code § 1326(a)(2))

Occasionally, a change in circumstances may compromise the debtor's ability to make plan payments. For example, a creditor may object or threaten to object to a plan, or the debtor may inadvertently have failed to list all creditors. In such instances, the plan may be modified before or after confirmation. (11 U.S. Code §§ 1323, 1329) Modification after confirmation is not limited to an initiative by the debtor but may be at the request of the trustee or an unsecured creditor. (11 U.S. Code § 1329(a))

The confirmation hearing is a critical juncture in the Chapter 13 process, as it represents the court's formal approval of the debtor's repayment plan. Effective preparation by the debtor and their Chapter 13 bankruptcy attorney is key to addressing potential creditor objections and demonstrating the plan's viability. Understanding and anticipating the possible grounds for objection can significantly increase the likelihood of a successful confirmation.

Understanding the Local Context: Chapter 13 in San Jose

Chapter 13 bankruptcy in San Jose is not just about managing personal debts; it’s about understanding the unique economic climate of Silicon Valley. With the local economy driven by technology industries, many individuals find themselves under financial strain due to volatile employment markets and high living costs. San Jose residents may benefit from Chapter 13 by debt restructuring without losing valuable assets like homes and vehicles. This approach offers a sustainable path to financial recovery tailored to the dynamic local economy.

The local bankruptcy courts in San Jose are familiar with cases that deal with varied complexities due to the economic diversity of the region. Understanding local laws and court trends is crucial. At The Fuller Law Firm, PC, we pride ourselves on staying updated with these regulations, ensuring that our clients receive informed legal advice based on the latest legislative developments. When dealing with Chapter 13, having a San Jose Chapter 13 bankruptcy lawyer who understands regional challenges can significantly enhance your bankruptcy filing's effectiveness.

Contact The Fuller Law Firm, PC today to learn more about Chapter 13 bankruptcy! 

FAQ About Chapter 13 Bankruptcy

Is Chapter 13 Right for Me?

Our firm can help determine whether Chapter 7, Chapter 13, or another debt solution suits your situation. Many individuals find Chapter 13 to help them return to an upbeat financial track. This type of bankruptcy is generally best suited for individuals or households with income assets, such as homes, businesses, or cars, that they want to keep. It is also beneficial for those who have incomes too high for Chapter 7. If you have failed the means test, you may wish to consider filing for Chapter 13!

Choosing to file for Chapter 13 is a significant decision that could transform your financial status and future opportunities. Thorough evaluation of your assets, income, and financial commitments with legal assistance can clarify the most advantageous path. Emphasizing protection rather than liquidation could serve your long-term goals better, reinforcing stability and growth while satisfying creditor obligations.

Do All Debts Have to Be Paid Back in a Chapter 13 Plan?

Probably not! There is a common misconception that debtors in Chapter 13 must propose a plan to pay back all of their debts. In the overwhelming majority of cases, this is not true. In most Chapter 13 bankruptcy cases, a skilled Chapter 13 lawyer can successfully propose a plan that pays close to nothing to unsecured debts—typically, credit card debts, medical bills, deficiency balances on cars, or foreclosed homes. 

Once the bankruptcy plan is completed, these debts will be discharged.

Your Chapter 13 bankruptcy attorney in San Jose can often propose a plan that provides for no payments to non-priority unsecured creditors. This type of bankruptcy plan is often called a "zero-percent plan." Your attorney can use the Chapter 13 plan to pay certain debts otherwise not discharged in bankruptcy. For example, certain taxes that are not dischargeable can be paid back without interest or penalties in a Chapter 13 plan.

Understanding that Chapter 13 may not require the repayment of every debt can alleviate much of the financial stress typically associated with bankruptcy. It allows for strategic financial planning, focusing on essential financial obligations while offering relief from consumer debt burdens. This flexibility often surprises debtors and serves as a crucial benefit of the Chapter 13 process, significantly altering one's financial outlook.

What Are My Monthly Payments in a Chapter 13 Plan?

Multiple, sometimes complex, legal issues determine the exact amount of the monthly payments in a Chapter 13 bankruptcy. An experienced Chapter 13 bankruptcy lawyer will perform a careful analysis to determine the lowest amount the debtor would have to pay.

Some of the Factors That Determine the Monthly Amount Include:

• Household Income: The bankruptcy code requires that the debtor's "disposable income" be paid into the Chapter 13 plan. Generally, higher disposable income increases the probability that higher payments must be made in a Chapter 13 plan. However, determining "disposable income" can be complex. The bankruptcy code requires that debtors analyze their income for six months before filing the petition and, in certain circumstances, consider standardized expenses, costs associated with paying car debts, home mortgages, child support, back taxes, and other items. Furthermore, at least one recent Supreme Court decision has introduced further complications in this analysis.
• Assets: Debtors who have more assets may have to propose higher monthly payment plans.
• Recent Transfers & Payments: Debtors who have recently transferred assets or made significant payments to certain creditors may have to propose higher monthly payment plans.
• Priority & Secured Debts: Debtors with higher debts to certain priority creditors or higher secured debts may have to pay higher monthly payments.
• Bankruptcy Location: Different courts and trustees have different requirements. A skilled Chapter 13 bankruptcy lawyer will have a better chance of successfully confirming a Chapter 13 plan that pays zero to non-priority unsecured creditors.

Analyzing potential monthly payments in Chapter 13 requires a detailed exploration of the debtor's total financial circumstances. An accurate assessment ensures the feasibility of the repayment plan and its long-term success. Collaboration with your Chapter 13 attorney allows for comprehensive budgeting, anticipation of challenges, and adaptation to change, ensuring the sustainability of your financial recovery.

When Do I Need to Start Making Plan Payments?

Within 30 days after filing the bankruptcy case, the debtor must start making plan payments to the trustee, even if the court has not yet approved the plan. (11 U.S. Code § 1326(a)(1)) If any secured loan or lease payments come due before the debtor's plan is confirmed (typically home and car payments), the debtor must make adequate protection payments directly to the secured lender or lessor, deducting the amount paid from the amount that would otherwise be paid to the trustee. 

Prompt commencement of plan payments demonstrates the debtor's commitment to financial restructuring and secures favorable interactions with the bankruptcy court. Meeting these payment obligations is crucial for avoiding plan disruption and potential conversion to Chapter 7. Developing a collaborative working relationship with legal advisors can ensure timely and accurate payment logistics.

How Does Chapter 13 Bankruptcy Impact My Credit Score?

Chapter 13 bankruptcy will impact your credit score, but it does not have to be a permanent setback. Initially, your score may drop as the filing appears on your credit report for up to seven years. However, the ability to reorganize and consistently pay off debts through a court-approved plan can eventually lead to improved financial credibility. Many individuals find that after completing their repayment plan, they may qualify for new credit opportunities much sooner than expected. A key advantage is that Chapter 13 allows you to start rebuilding your creditworthiness while still managing debt responsibly. Over time, as you meet payment obligations, your score can recover, reflecting your renewed financial stability and increasing lender trust.

What Happens If I Miss Chapter 13 Payments?

Missing a payment under a Chapter 13 plan can pose significant challenges, as the plan’s success depends on maintaining regular payments. If you anticipate missing a payment, it's crucial to contact your attorney immediately. Options such as requesting a temporary payment suspension or plan modification may be available, but these require court approval. Ignoring missed payments can result in the dismissal of your case or conversion to a Chapter 7 liquidation. It’s essential to work proactively with your attorney to explore alternatives and maintain open communication with the trustee to avoid jeopardizing your bankruptcy protection.

Can I Sell My Home During a Chapter 13 Plan?

Yes, selling your home during a Chapter 13 bankruptcy is possible, but it requires court approval. The sale must benefit your creditors, and the court ensures that the home's equity is directed according to your repayment plan. Upon receiving an offer, your Chapter 13 bankruptcy lawyer must file a motion with the court outlining the sale terms and demonstrating its advantages. Proceeds typically go toward paying off the mortgage and possibly other debts within your Chapter 13 plan. Always consult with your bankruptcy attorney before making such decisions to ensure compliance with legal procedures.

What’s the Role of a Chapter 13 Trustee?

The Chapter 13 trustee plays a crucial role in your bankruptcy process. This individual is responsible for reviewing your repayment plan, collecting your monthly payments, and distributing funds to creditors as outlined in your plan. The trustee acts as a liaison between you and the court, ensuring compliance with bankruptcy laws. They may also lodge objections if they feel the plan is unrealistic or unfair to creditors. While the trustee does not represent your interests, maintaining good communication and transparency can help facilitate a smoother process. They ensure that your financial disclosures are complete and accurate, allowing for effective plan execution.

Is Chapter 13 Bankruptcy Public Knowledge?

Bankruptcy filings, including Chapter 13, are public records, meaning they can be accessed by anyone who wishes to search for them. However, these records are not typically advertised, so it's not common for details to circulate widely. Your personal and financial information will be part of public court records accessible through online databases or in courthouse records. Although the public nature of filings might seem concerning, the reality is that most people do not actively search for this information. Moreover, discharges in bankruptcy are a tool for rebuilding financial health, providing a pathway to overcoming personal financial challenges with dignity and integrity.

Contact The Fuller Law Firm, PC, today to schedule a meeting with our Chapter 13 bankruptcy lawyer in San Jose!