Chapter 13 Bankruptcy in California: How to Protect Your Assets and Catch Up on Debt
By James L. Arrasmith, Esq.
Owner and Chief Legal Counsel, The Law Offices of James L. Arrasmith🔗 Explore our full bankruptcy services at JLegal.org
Introduction: Bankruptcy That Lets You Keep What Matters
When facing serious financial pressure—foreclosure, late car payments, or tax debt—many people fear they’ll lose everything if they file for bankruptcy. That’s where Chapter 13 bankruptcy offers a powerful alternative.
Unlike Chapter 7, which focuses on liquidation, Chapter 13 is a court-approved repayment plan. It allows you to restructure your debts, catch up on missed payments, and keep your home, car, and other important assets.
At The Law Offices of James L. Arrasmith, we help Californians use Chapter 13 to:
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Stop foreclosure
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Consolidate debts
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Protect family assets
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Discharge remaining debt after the plan
What Is Chapter 13 Bankruptcy?
Also known as a “wage earner’s plan,” Chapter 13 allows individuals with regular income to develop a 3–5 year repayment plan under court supervision. It’s best suited for those who:
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Have fallen behind on secured debts (like mortgages or car loans)
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Have assets they want to protect (e.g., home equity)
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Don’t qualify for Chapter 7 due to income
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Want to discharge remaining unsecured debt after repayment
Key Benefits of Chapter 13
✅ Stop Foreclosure
The moment you file, the automatic stay stops any foreclosure action. As long as you continue making your Chapter 13 payments, you can cure the default and keep your home.
✅ Consolidate Debts into One Monthly Payment
Chapter 13 rolls most of your debts—credit cards, medical bills, car loans—into one manageable payment handled by a court-appointed trustee.
✅ Protect Non-Exempt Assets
If you have assets that wouldn’t be protected in Chapter 7 (like investment property, business equipment, or high-value vehicles), Chapter 13 allows you to pay your creditors over time without selling your property.
✅ Discharge Eligible Debts
After completing your plan, any remaining eligible unsecured debt (like credit cards or personal loans) is wiped out.
Chapter 13 vs. Chapter 7: What’s the Difference?
| Feature | Chapter 7 | Chapter 13 |
|---|---|---|
| Duration | 3–5 months | 3–5 years |
| Asset protection | May require liquidation | You keep your assets |
| Income eligibility | Must pass means test | Regular income required |
| Type of relief | Immediate discharge | Structured repayment, then discharge |
| Stops foreclosure? | Temporarily | Yes, with cure plan |
Still unsure which is right for you?
📞 Schedule a consultation at JLegal.org
The Chapter 13 Process in California: Step-by-Step
1. Pre-Filing Credit Counseling
Required by law, this course (completed online or by phone) provides financial education and alternatives to bankruptcy. Must be completed within 180 days before filing.
2. File Bankruptcy Petition
This includes:
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Schedules of assets, liabilities, and income
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Statement of financial affairs
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Proposed repayment plan
The automatic stay takes effect immediately, halting collections, foreclosures, and lawsuits.
3. Submit the Chapter 13 Plan
This repayment plan outlines how much you will pay over 3–5 years, who will get paid, and how missed payments (like mortgage arrears) will be caught up.
4. 341 Meeting of Creditors
Roughly 30–45 days after filing, you’ll attend a short meeting with the trustee (not a judge). Creditors may attend but rarely do. Your attorney will attend with you.
5. Confirmation Hearing
The court reviews your plan to ensure it complies with bankruptcy laws. Creditors can object—but objections can often be resolved or overruled.
6. Plan Payments
You make regular payments to the trustee, who distributes the funds to creditors.
7. Discharge of Remaining Debts
Upon successful completion, your remaining unsecured debts are discharged—even if not paid in full.
Who Qualifies for Chapter 13 Bankruptcy?
You must:
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Be an individual (not a corporation)
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Have regular income (wages, business income, pensions)
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Have unsecured debts below $465,275 and secured debts below $1,395,875 (adjusted annually)
Note: Business owners can file personally and include business-related debts under certain conditions.
What Debts Can Be Included?
| Debt Type | Included in Plan? | Dischargeable? |
|---|---|---|
| Credit card debt | ✅ Yes | ✅ Yes |
| Medical bills | ✅ Yes | ✅ Yes |
| Past-due mortgage | ✅ Yes | ❌ No (must pay) |
| Car loans | ✅ Yes | ❌ No (must pay or surrender) |
| Tax debt | ✅ Yes | ❓ Some may discharge |
| Student loans | ✅ Yes | ❌ Rarely dischargeable |
California-Specific Considerations
California’s generous bankruptcy exemptions under §704 and §703 still apply in Chapter 13. However, your plan payments may be influenced by how much non-exempt equity you have.
Example:
If you have $100,000 of unprotected equity in a vacation home, your plan may need to repay creditors at least $100,000 over time to “equalize” what they would have received in Chapter 7.
Real Client Success Story
A Los Angeles homeowner behind $38,000 on their mortgage was weeks from foreclosure. By filing Chapter 13, we stopped the sale, structured a repayment plan, and helped the client save their home and eliminate $45,000 in unsecured debt over five years.
“Without Chapter 13, we would have lost everything. James Arrasmith’s team saved our family.” — Former client
Frequently Asked Questions
Q: Can I pay off my Chapter 13 early?
A: Possibly—but the court may require you to pay creditors in full if you complete it too early.
Q: What happens if I miss a payment?
A: You may have a grace period, but repeated failures may result in case dismissal. We help file plan modifications if income changes.
Q: Can I sell property during Chapter 13?
A: Yes, but you must obtain court permission and apply proceeds per your plan terms.
Q: How does Chapter 13 affect my credit?
A: It appears on your credit report for 7 years, but many clients rebuild their credit within 2–3 years through responsible behavior.
Why Choose Our Law Firm?
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✅ Over 15 years of bankruptcy experience
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✅ Deep familiarity with California trustees and courts
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✅ Customized repayment plans tailored to your goals
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✅ Transparent flat-fee pricing
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✅ Compassionate, judgment-free representation
📞 Take the first step toward financial relief
🔗 Schedule a free consultation at JLegal.org
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Final Thought
Chapter 13 isn’t just about repaying debt—it’s about restructuring your future. If you're ready to stop foreclosure, end creditor harassment, and protect your property, Chapter 13 bankruptcy may be the path to financial stability and long-term peace of mind.
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