Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is an interest free debt consolidation and repayment plan. For some a Chapter 13 bankruptcy is a better option than a Chapter 7 bankruptcy but it isn't for everyone. A Chapter 13 bankruptcy is designed for debtors with regular income that can be used to pay back all or a portion of their debts in a repayment plan over a three to five-year period. In a Chapter 13 bankruptcy, you get to keep your property, but you'll have to prove to the court that you can afford to meet your payment obligations. If your income is irregular or too low, the court might not confirm or approve your Chapter 13 repayment plan.
The Chapter 13 Bankruptcy Repayment Plan
Your Chapter 13 repayment plan will describe in detail how (and how much) you will pay each of your debts. The Chapter 13 plan must include payments to priority debts in full and it should also include regular payments to secured debts for property being kept, such as a car loan or mortgage. The Chapter 13 plan may also include repayment in full of any arrearages on secured debts. Unsecured debts are be paid anywhere from 0% to 100% of what you owe.
Your plan must show that any disposable income you have left after making these required payments will go towards repaying your unsecured debts, such as credit card or medical bills. You don't have to repay these debts in full or not at all in some cases. You just have to show that you are putting any remaining income towards their repayment
Unlike a Chapter 7, you do not receive an immediate discharge of your debts until you complete the payments required under the plan before the discharge is received. While the plan is pending confirmation, the automatic stay is in effect protecting you from lawsuits and other collection actions. While you are making your payments in your plan, your creditors cannot continue any collection efforts against you.
In a Chapter 13 bankruptcy, a trustee is appointed to your case and their role is to collect the monthly payments that you make in your plan and distribute to creditors. You are eligible for a discharge once the plan is complete.
If you want to try and save your or catch up on the arrears be proactive and contact The Washington Law Firm today at 407-982-4130 to discuss your options to break the chains of debt.
Why a Chapter 13 Bankruptcy may be best for You
Even if you are eligible for Chapter 7 bankruptcy, there are few reasons why filing for a Chapter 13 bankruptcy may be best for you.
- - If you are behind on your mortgage or car loan payments you can reinstate the original agreement if make up the missed payments over the plan. You can make up missed payments only in Chapter 13 bankruptcy.
- - If you have a tax obligation or other priority debt that cannot be discharged in a Chapter 7. You can include these debts in your Chapter 13 plan and pay them off over time.
- - If you have non-exempt property that you want to keep. In a Chapter 7 bankruptcy you can only keep exempt property. Non-exempt property becomes property of the bankruptcy and the Chapter 7 bankruptcy trustee has the authority to sell it to pay your creditors. You don't have to give up any property in a Chapter 13 bankruptcy. In other words you can keep your nonexempt property if you can pay for the value not protected.
- - If you have a second mortgage or a home equity line of credit on your homestead and it is worth less than what is owe on your first mortgage, then you may be able to "strip" it and completely eliminate it in a Chapter 13 bankruptcy. When a second mortgage is stripped from your homestead, it is no longer a secured debt and becomes an unsecured debt and the amount owed will then be discharged at the end of your plan.
- - If you own an investment or rental property and want to reduce the balance of the mortgage owed. A Chapter 13 mortgage "cramdown" allows you to reduce the balance on your mortgage to the market value of the investment or rental property securing the loan.
- - If your car is worth less than what you owe on it a Chapter 13 bankruptcy "cramdown" can reduce the balance and interest rate on your car loan.
If you want to try and save your home, catch up on the arrears owed or have questions about stripping a second mortgage or a cramdown contact The Washington Law Firm today at 407-982-4130 to discuss your options to break the chains of debt.