Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is commonly thought of as a court approved repayment plan, where a debtor repays some debts in full and repays other debts for only pennies on the dollar. A Chapter 13 bankruptcy lasts either three (3) or five (5) years, with the debtor making a payment to the Chapter 13 Trustee each month. Even if a debtor’s income is high, the debtor can file for a Chapter 13 bankruptcy, but the amount he/she may be required to pay may be significant. The amount a debtor is required to pay each month depends on a variety of factors including: income, eligible expenses, actual expenses, non-exempt property, type of debt, amounts of certain debts, etc.
Most debts can be dealt with and potentially discharged in Chapter 13. A Chapter 13 Bankruptcy can allow a debtor to become current on a mortgage if he/she has missed payments, to pay for back tax debts without incurring additional interest or expenses, to become current on student loan missed payments, to pay portions of and subsequently discharge medical bills, credit card bills, and other general unsecured debt.
Frequently Asked Questions
Isn't a Chapter 13 very expensive?
Yes, but we can work with our clients to make it affordable. The total costs for the standard Chapter 13 case totals $4,000 ($3,500 for pre-confirmation services and $500 for post-confirmation services). Depending on the circumstances that you are facing, and the feasibility of your case, we may only require a small portion (as low as $1,100) of the fees up-front (prior to filing your case) and put the remainder of the fees (as much as $2,900) into the total cost of your plan. This is highly advantageous to the client, as most of the time this means that their plan payment each month doesn't even increase - it just reduces the amount distributed to the unsecured creditors. Each client is responsible for the out of pocket expenses, such as the filing fee with the court and the cost of serving creditors. Feel free to contact the firm for a free consultation and a quote of the fees associated with your filing.
I've heard I can get rid of my second mortgage, is that true?
What you've probably heard about is what is called 'stripping off a mortgage.' If you have more than one mortgage on your property, and that one mortgage puts the house underwater, the second (and possibly third) mortgage(s) can be 'stripped off.' The second (and third) mortgage(s) can be reclassified as an unsecured debt through a Chapter 13 Plan. This debt will be added to the other unsecured debt (such as credit cards, medical bills, and personal loans) and these debts will all be treated the same (meaning that they will all receive the same percentage - anywhere from 0%-100%).
Are my student loans dischargeable?
Generally no, student loans are discharged only in rare situations where the debt puts an 'undue hardship' on the borrower. This standard is extremely high. However, if you have having trouble with your student loans, please contact the firm to set up an appointment with one of our professionals. Student loans can be dealt with in a Chapter 13 Bankruptcy. If you've received notice that one of your student loan creditors has filed suit against you for non-payment, it is possible a garnishment will occur within 20 days. An emergency Chapter 13 filing can stop this.
I was considering a Chapter 13, but then my car got repossessed. Is it even worth it anymore?
If you've recently had a car repossessed and want the car back - call immediately. We can work with you to file an emergency Chapter 13 Plan within 20 days of the repossession and demand the return of the car. You will not have to pay the repossession company or financing company anything to get the car back if we're able to file the Chapter 13 within 20 days of the repossession. Your missed payments and repossession fees will be paid for through your Chapter 13 Plan, which is much easier to manage.
What happens to the pending debt collection suit against me?
The Automatic Stay will stop this suit. Usually these debts are discharged in the Chapter 13, and collection (in the form of a lawsuit or otherwise) cannot be attempted after the bankruptcy discharge.
If I file a Chapter 13 bankruptcy, what happens if I lose my job or can’t otherwise afford the monthly payment set by the court?
A Chapter 13 bankruptcy has the added element of time. In most scenarios, things change during the years of the bankruptcy (for better or for worse). As such, a debtor is allowed to do three things to adapt to these scenarios: 1) amend his/her plan to allow for a lower monthly payment; 2) convert his/her case to a chapter 7 for a discharge of certain debts without further payment; or 3) dismiss his/her bankruptcy filing outright.