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Chapter 13 bankruptcy, commonly referred to as wage earner’s bankruptcy, offers individuals with regular income a way out. Through working closely with both creditors and the Bankruptcy Trustee to develop a payment plan lasting three to five years and discharge any unsecured debts remaining at that point – many filers typically pay only a fraction of their loans owed, often as little as mere pennies on the dollar!
Chapter 13 bankruptcy’s main advantage lies in its ability to address both secured and unsecured debts simultaneously. Individuals can choose to either continue paying their secured debts, such as auto and mortgage loans, or opt to surrender the associated property. As the plan progresses, unpaid debts such as medical bills and credit card balances are discharged.
By utilizing Chapter 13 bankruptcy, individuals have the opportunity to restructure their finances and find relief from overwhelming debt obligations.
During times of housing and foreclosure crises, homeowners facing default and sale notices have options to save their homes. One option is to negotiate with the bank in hopes of finding a solution. The other option is to file for Chapter 13 Bankruptcy. In Chapter 13, the amount you are behind on your mortgage can be repaid over 36 to 60 months through the Chapter 13 Plan. For example, if you are $15,000 behind on your mortgage, you could repay that amount at the market interest rate (including trustee fees) through the plan. This allows you to catch up on your mortgage payments and avoid foreclosure.
One powerful tool available in Chapter 13 is the ability to eliminate a second mortgage through a process called lien stripping. Under certain circumstances, a second mortgage can be “stripped” off your home and treated as unsecured debt. By including the second mortgage in the Chapter 13 Plan as unsecured debt and making all the monthly payments according to the plan, you can completely eliminate the second mortgage along with other unsecured debts. This offers homeowners an opportunity to alleviate the burden of a second mortgage and regain financial stability.
The Chapter 13 plan payment is based on your income, not on how much you owe. The Trustee considers your income and deducts certain expenses according to local and national standards. They will also subtract expenses such as mortgage payments, child support, spousal and child support, tax debts, and auto loan payments. These payments will continue throughout your plan. You will need to pay your Chapter 13 plan every month using your “disposable” income, which is the amount left after subtracting your monthly expenses, required payments, and allowable expenses. The Bankruptcy Trustee will then distribute your payments among your creditors.
Chapter 13 bankruptcy does not require you to surrender any of your property. However, if you cannot afford to pay your debts, you may choose to give up some property. This means that you cannot be sued if the creditor sells your property for an amount less than your debt.
To qualify for Chapter 13 bankruptcy, it’s essential that your income can support a repayment plan with creditors at an equal level to what would have been paid under Chapter 7. If this isn’t possible or you can’t meet these payments adequately through Chapter 13, filing for Chapter 7 might be more suitable.
Some debts cannot be discharged in bankruptcy. Debts for child support, spousal maintenance, or personal injury incurred when driving drunk cannot be discharged. Student loan debt is generally not dischargeable in bankruptcy, except in extreme circumstances.
The automatic stay is a powerful tool that comes with bankruptcy. It protects against collection actions, such as wage garnishment, foreclosure, repossession, and lawsuits. Creditors are required to file their claims in bankruptcy court. The automatic stay provides you with time to organize your finances and ensures that your creditors are treated equally.
Understanding the Chapter 13 process can be challenging. Your payment plan must adhere to specific rules and regulations, and creditors may try to push for additional payments. It’s crucial to find a knowledgeable Chapter 13 lawyer, as not all attorneys are familiar with the complexities of this type of bankruptcy. Your attorney will ensure that your plan meets all requirements and leads to a discharge. We will assist you in determining the best approach to protect your assets, and we will advocate for your rights against creditors who pose a threat. Under Chapter 13, you can cover most of your attorney fees through your payment plan, allowing you to benefit from the expertise of a bankruptcy lawyer without requiring an upfront payment.
Chapter 13 bankruptcy is an excellent option if you are facing debt challenges and have a steady income. Our blog provides further information on Chapter 13 bankruptcy. With years of experience in handling Chapter 13 bankruptcy cases, our team is well-equipped to assist you. We will navigate you through the Chapter 13 bankruptcy process, ensuring you obtain your discharge and can begin anew with a clean financial slate. Contact us today to schedule a complimentary initial interview.
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