If you have a lot of equity in your home–more than what the California exemption can protect–Chapter 13 Bankruptcy might be an option for you.

If you want to keep your home, filing Chapter 7 Bankruptcy (aka "liquidation" bankruptcy) can result in the force sale of your home by the Chapter 7 Trustee to repay your creditors.  Bankruptcy is not a "do it yourself project".  Pick the wrong chapter and you are in a world of hurt.

In contrast, you can keep your home in a Chapter 13 Bankruptcy (aka "reorganization" bankruptcy) and repay your creditors at 0% interest rate.  Chapter 13 Bankruptcy does not require you to repay all your debt back.  How much you have to repay depends on the amount of your assets that exceed the limits set out by the California exemptions or your household disposable income after reasonable and necessary expenses.  If you are required to repay all your debt back in your Chapter 13 Plan, you are still ahead because the interest rate that you must pay your creditors is the federal judgment rate which is based on the interest rate of the 1-year US Treasury bill, which at the time of this blog is less than 1%.  Credit cards interests rate typically exceeds 20% interest rates.  Personal loans or payday loans typically are much, much higher.  I'm not surprise when I see a personal loan at an interest rate that exceeds 100%.  In short, even if you have to repay all your debt back in a Chapter 13 Plan, usually overall you will most likely pay less than if you try to repay your creditors on your own with their onerous interest rates.  I have clients that cut their monthly credit cards and personal loans payments more than half under a Chapter 13 Bankruptcy Plan compared to when they were paying them on their own.  Needless to say in those cases, my clients financial life was easier and more manageable under a Chapter 13 Bankruptcy repayment plan.  Moreover, the Chapter 13 Bankruptcy repayment plan only last for no more than 5 years.  Imagine a light at the end of a short tunnel compared to repaying all those credit card and personal loan debts on your own with onerous interest rates.

In short, Chapter 13 Bankruptcy allows you to keep all your assets because you are repaying at least some of your debt back.  Chapter 7 Bankruptcy might cause you to lose your assets as the bankruptcy trustee sell your assets that is not protected by the California exemptions to repay your debt.

Moreover, while you are under Chapter 13 Bankruptcy protection, your creditors cannot try to collect your debt from you.  This means that they cannot file a lawsuit, pursue wage garnishments and bank levy, or record a judicial lien on your real estate like your house.

For more information on how Chapter 13 Bankruptcy can help your reorganize your debts while keeping all your assets, call Muoi Chea, experienced Bankruptcy Attorney in Sacramento, Stockton, and Fairfield, California.  For years, she has a very long, successful track record in helping residents and small business owners throughout Northern and Central California resolve their debts.