Thomas B. Hjerpe, Esq.

Kenneth J. Collins, Esq.

Jocelyn M. Godniho, Esq.

Catherine M. Koshkin, Esq.

Of Counsel

350 E Street, First Floor

Eureka, CA  95501

Telephone:  707 442-7262

Law Office of

Hjerpe & Collins LLP

We are a debt relief agency.  We help people to file for bankruptcy relief under the Bankruptcy Code

Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy allows consumers to enter into a payment plan where you pay what you can afford to pay to unsecured creditors rather than what you actually owe.  After a five year term the remaining unpaid debts are eliminated.  

A Chapter 13 Bankruptcy is a “payment plan” bankruptcy.  Payment plans can be as short as three years or as long as five years [most plans are five years].  In theory, the Chapter 13 Bankruptcy provides an opportunity for someone with regular monthly income to pay creditors what they can afford to pay during the term of the plan with the remaining unpaid balances being eliminated at the end of the payment plan.  In practice, a Chapter 13 Bankruptcy hardly ever works out that way.  It is far more common for particular creditors to be paid in full, such as vehicle lenders and taxing authorities, with other creditors such as credit card companies and medical care providers being paid nothing and having their claims eliminated at the end of the payment plan.

Once a Chapter 13 Bankruptcy case is filed the automatic stay will prevent collection efforts by creditors.  Lawsuits must stop.  Foreclosures must stop.  Wage garnishments must stop.

One common use of a Chapter 13 Bankruptcy is to stop a foreclosure.  Whereas filing a Chapter 7 Bankruptcy will temporarily stop a foreclosure, the Chapter 13 Plan allows you to set up a payment plan of up to 5 years to get caught-up on the bank mortgage payments.  You must also resume the regular monthly mortgage payments.  In such cases it is often possible to eliminate credit card debt and medical debt with little or no payment to those creditors.  

It is sometimes possible to eliminate a 2nd mortgage [or line of credit] in a Chapter 13 Bankruptcy.  If the market value of your home is less than the balance owing on the 1st mortgage, it may be possible to remove and eliminate the 2nd mortgage.  This is an excellent tool for someone who is past-due on the 1st mortgage - perhaps in foreclosure.  In such a case you could stop the foreclosure, repay the past-due mortgage payments through the Chapter 13 Bankruptcy plan, remove and eliminate the 2nd mortgage and eliminate unsecured debt.  This can only be done in a Chapter 13 Bankruptcy.

Another use of a Chapter 13 Bankruptcy is to set up a payment plan for repayment of tax debts that could not be eliminated in a bankruptcy while paying little or nothing to other unsecured creditors such as credit card companies and medical care providers.  The amount you pay to unsecured creditors would depend on what you can afford to pay.

During the term of the bankruptcy plan you are under Court supervision.  For the most part this will not affect your day-to-day financial affairs.  You would need to get permission from the Bankruptcy Court to sell any assets worth more than $1000 or to make purchases over $1000 or to incur debt.  There is an exception for transactions that are part of the ordinary course of any self employment.

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