How is a Chapter 13 Plan Drafted in Sacramento, CA?

Chapter 13 bankruptcy allows individuals in Sacramento, CA who have steady incomes to repay their debts over a certain period. The plan to do so is created in a document known simply as the “Chapter 13 plan”. Here’s how a Chapter 13 plan is drafted.

Firstly, an individual should consult with an attorney to determine if Chapter 13 is the best path for them. This involves a careful evaluation of the individual’s debt, income, and assets. At Liviakis Law Firm, our knowledgeable attorneys can provide important insights and advice during this phase.

After deciding on Chapter 13, the debtor works with their attorney to draft the repayment plan. It includes details on how the debtor plans to handle secured and unsecured debts. Secured debts must be paid in full, while unsecured debts will be paid based on the debtor’s income and expenses.

Meaning, the debtor must devise a budget that determines how much income is available for debt repayment after covering necessary living expenses. This disposable income will be distributed among the debtor’s unsecured creditors.

The length of the repayment plan depends on the debtor’s monthly income, and it can usually be between three to five years. If the debtor’s income is below the state’s median income, the plan can be three years, but it can be extended to five years with the court’s approval. If the debtor’s income is above the median, the repayment plan must be five years unless a full repayment can be accomplished in less time.

Subsequently, the debtor must appear at a creditors hearing where a bankruptcy trustee evaluates the plan. Creditors may also attend this hearing and raise objections. If the trustee finds the plan to be fair and in compliance with bankruptcy laws, they will ask the bankruptcy judge to confirm it. If not, the debtor may have to amend the plan.

Under Chapter 13 bankruptcy, even after court approval, the debtor must maintain consistent payments as per the proposed plan. If they fail to do so, the court may dismiss the case or convert it to Chapter 7 bankruptcy.

At Liviakis Law Firm, our attorneys are well-versed in bankruptcy law and can walk you through the entire process of drafting a Chapter 13 plan. We understand that each individual’s financial situation is unique, and we strive to provide personalized solutions. If you are considering filing for Chapter 13 bankruptcy in Sacramento, CA, contact an experienced bankruptcy lawyer for a free consultation.