California's economy was hit extremely hard when the housing bubble burst in 2007, and unfortunately its effects are still being felt today. For example, according to California's Employment Development Department, the state's unemployment rate has recently been as high as 10.9 percent - nearly 2.5 percent higher than the national numbers reported by the U.S. Department of Labor.
Additionally, banks have reignited their foreclosure departments because more and more people have fallen behind on their mortgage. In fact, the Los Angeles Times reports that over 71,000 properties received a notice of default during the third quarter last year. If these trends continue, hundreds of thousands of California citizens might lose their home in the 2012.
Chapter 13 Bankruptcy: California Statistics
The U.S. Bankruptcy court reports that Californians filed over 250,000 bankruptcy petitions from Sept. 2010 to Sept. 2011, roughly 25 percent of which were filed under Chapter 13. Many of these people are hardworking individuals with families, but had a home payment they could not afford and were desperately seeking something to kick-start them on the road to financial recovery.
Qualification and the Repayment Plan
Chapter 13 bankruptcy is also known as the "wage earners" plan. Rather than selling one's assets to repay creditors (like in Chapter 7), Chapter 13 allows a debtor to keep all of his or her property - including the family home - after a three to five year repayment plan has been negotiated and approved.
A debtor must first qualify for Chapter 13 before they are allowed to file for its protection. In order to qualify, a debtor must owe less than $360,475 in unsecured debt and less than $1,081,400 in secured debt. Next, a debtor must show he or she has enough disposable income to pay all amounts due under the repayment plan. Assuming a debtor qualifies and fully abides by his or her plan, then all eligible debts will be discharged at the end of the repayment period.
Finally, filing for Chapter 13 bankruptcy offers immediate help as well. For example, creditors must cease all collections activities as soon as the petition is filed, including:
- Foreclosure proceedings
- Harassing calls or letters
- Lawsuits
- Liens
- Garnishments
Anyone who is facing foreclosure or struggling financially should contact an experienced bankruptcy attorney to discuss his or her options and whether bankruptcy is appropriate tool for his or her situation.
