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Lockhart, Britton & Koch

Grossmont/La Mesa:
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7777 Alvarado Road
Suite # 622
La Mesa, CA 91942
(I-8 at Fletcher Parkway)

619-698-6800

Email: lblaw@lockhartandbritton.com

Appointments are available
Monday-Friday 8:30 a.m.-5 p.m. and
Saturday (except holiday weekends)
9 a.m.-noon.

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CHAPTER 7 BANKRUPTCY

bankruptcy attorney servicesA Chapter 7 is commonly referred to as a "straight" or "total" bankruptcy. It is designed for individuals who cannot pay their debts. It cancels or discharges most of your debts. The most common debts discharged in a Chapter 7 are credit card bills, finance company loans, medical/hospital bills, automobile repossession debts, foreclosure debts, and judgments from lawsuits. There are some debts that cannot be discharged in Chapter 7 cases, such as child/spousal support obligations, student loans, most taxes, court fines and restitution orders, debts for damages caused while driving under the influences of alcohol or drugs, and fraudulent debts. Certain taxes and some student loans can be discharged in bankruptcy; however, the standards for discharge are quite complex and require a review by one of our attorneys.

Immediately upon the filing of a bankruptcy petition (either Chapter 7 or Chapter 13) the Court issues a restraining order called an "Automatic Stay," which prohibits all creditors from contacting you or proceeding with any collection action against you, including foreclosures, levies, and wage garnishments. Any such actions that may have already begun prior to the filing of your case are immediately halted.

The Chapter 7 process takes about 3 ½ months. There is usually only one required hearing about a month after your case is filed (called the First Meeting of Creditors). This hearing is very quick and informal-- usually less than 5 minutes. It is not held in a courtroom, but rather in the office of the U.S. Trustee. Everything else is handled by our office. Approximately 3 ½ months after the filing of your Bankruptcy Petition, the Court will mail the Discharge directly to you. This signifies the end of your case and is a permanent order prohibiting creditors from taking any collection actions against you.

A Chapter 13 Plan, commonly called a "debt repayment plan," consolidates all of your monthly bills. You pay one monthly payment to a court-appointed administrator known as the Trustee. The Trustee disburses payments to the creditors based on the provisions of your plan. Only individuals with regular income may file Chapter 13 cases. Chapter 13 Plans must commit all of your net disposable income for at least 3 years; however, most plans run for 5 years--the maximum time allowed.

The Chapter 13 offers you a great deal of protection from creditor actions. Immediately upon the filing of your Chapter 13 case, all of your creditors are restrained by a Bankruptcy Court Order from harassing you or taking any actions against you such as wage garnishments, lawsuits, foreclosures and repossessions. A Chapter 13 Plan can consolidate all of your debts, including real estate arrearages, automobile payments, past-due taxes, student loans, and past-due support obligations.

The monthly plan payment is determined by your income, your monthly living expenses (rent, utilities, food, etc.), and the amount of debt that is to be paid back within the allotted five-year plan. In many cases, if you cannot pay all of your debts, a plan can be proposed to repay your unsecured creditors less than the total amount owed.

The following are a couple of examples of families that can benefit from a Chapter 13 plan of reorganization:

Example 1: The Jones Family
Example 2: The Smith Family

These are just two case scenarios in which a Chapter 13 plan can make a dramatic improvement in a family's financial situation. Remember, because there are so many variables related to income, living expenses, and debt to be repaid, every case is different and must be specifically calculated by the attorney. Most taxes, child support, and student loans must be paid in full during the 5-year plan period. Your plan payment must be at least as much as your monthly net disposable income, which is defined as the amount of money remaining after you pay all of your living expenses (excluding your debts).

About two weeks after your Chapter 13 case is filed, you will receive a notice informing you of the first meeting of creditors. All of your creditors receive the same notice at this time. Although they are all invited to appear, most do not. The hearing takes place about six weeks after your case is filed. Your first plan payment is due thirty days after your Plan is filed (prior to the hearing). The Trustee wants to verify your ability to make plan payments. The hearing is informal. It is not held in a courtroom and there is no judge present. The purpose of the hearing is to allow creditors and the trustee to ask questions about your debts, assets, income, and the proposed Chapter 13 Plan.

In a very few cases, a creditor or the trustee will object to the Chapter 13 Plan. If a creditor or trustee does object, the case will then be set for a hearing before a Bankruptcy Judge to review your case. If your Chapter 13 Plan complies with the law and you have made all of your Plan payments, the judge will normally approve your plan despite the creditor objection. An attorney will be present with you at all hearings. When your Chapter 13 Plan has been approved, the Trustee will begin paying the creditors’ the amounts called for in the plan. It is the responsibility of the creditors to file a claim and prove the amount owed to them. The Trustee will only pay creditors who file claims within the time allowed. The debt to any unsecured creditor who fails to file a timely claim will be discharged (canceled), provided you complete the Chapter 13 plan.

At the conclusion of your Chapter 13 Plan (no more than 5 years after the petition was filed), the Court will issue a Discharge. The effect of the Discharge is that your debts are considered either paid or canceled. Creditors in your plan are forbidden from collecting any more money from you. In the case of an automobile creditor which has been paid through the plan, you will receive the "pink slip" or other ownership document to the vehicle.